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The big R

8031 Views 94 Replies 15 Participants Last post by  fishinfoolz
With both sides of the House and the President in agreement that the country needs a boost do you think the country is headed for recession. They are talking about it over here and blame it all on the sub prime loan fiasco.

I was also surprised to hear that your banks are selling shares to Middle East Countries/India/China and Tiawan(sp). They are doing this to keep their heads above water. I bet you would be upset if China took over some of your banks.
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Webo, you know the housing market isn't tanking everywhere in the country. Here in this state it is holding its own but you wouldn't know that by watching the talking heads. According to those on TV in the know, the sky is falling and the end is upon us. We aren't seeing appreciation like what was seen in the previous 3-5 years but home prices are still rising 3-7% depending on what area you are in. There are some areas of the country that are hurting but some of that is also attributed to over building too. The sub prime market is getting blamed for everything that is wrong with the economy and that is kind of typical. Recessions are a fact of life and they cannot be prevented, maybe delayed a little is all. We haven't had one in 6-7 years and it is about time for another to occur.
SJ, we can't sell Alaska as it is the last place in this country that you can catch really big fish. I think we should make Mexico take California back. Wouldn't that be something, all the illegal immigrants wake up one morning right back in Mexico without the long walk.
Viperman, I appraise homes in 4 counties, King, Pierce, Thurston and Kitsap. And I will on occasion travel as far as Lewis and Mason, but I predominately stay in Pierce and King. For every appraisal I perform I compute the appreciation in that area for the previous year and all the appreciation data I use is from the Multiple Listing Service's data that they post on their web site. The greater Puyallup area, since you mentioned it, which encompasses areas 79-89 (your girlfriend will recognize the area numbers) rose 3% from a median price of $276,720 at the end of 2006 to $285,000 at the end of 2007. Now in those same areas there were 3,115 home sales in 2006 and that dropped to 1,973 sales in 2007. That is a large drop but in 2006 we were still in the crazy period and you mentioned the drop from a peak number being 10 to 20%. Remember, the peak was a record time, something that hadn't happened in something like 40 to 50 years, if ever. Homes are taking longer to sell with the average days on market in those areas being reported at 113 days where a year ago it was 78 days. The Orting area increased 1% for that same time period. North Tacoma went up about 5%. University Place, where I live, increased 4%. The Green Lake area of Seattle increased 8%. Now obviously some areas have faired much better than others and typically the farther out you get from the major metro areas prices slow there first. One other thing to keep in mind: traditionally the real estate market slows down after school starts and plods along until about November where there is a modest uptick and then it dies off again through the first of the year. As we get into spring things start to pick up and reach a peak in June, July and August. Another theory that I have is that so many people bought homes and large numbers of people were able to upsize into bigger homes that there is now a natural shortage of buyers, ie, everyone that wanted a home got one and they aren't ready to move again just yet. Sounds simple but it makes sense to me. Finally it has also been widely reported in the local newspapers that even though numbers of sales have declined, prices have continued to creep up.

As for agents leaving the profession obviously I don't know everyone's reasons for doing what they do but I can say this based on my limited experience: A very large percentage of Realtors are actually part time and in the previous 5 years everyone and their brother got into selling real estate or writing mortgages. You would have been amazed at the amount of people that were contacting me to become trainee appraisers during that stretch. Like everything else we are in the middle of a cooling period/market correction, what ever you want to call it and when that happens the people that aren't really serious about real estate and that haven't established themselves in the industry move on to something else or return to their primary jobs. Your girlfriend probably knows who Grace Hutloff is. Ms. Hutloff specializes in very high end homes but I am now seeing her signs on much more modest homes, homes 3 years ago she probably wouldn't have bothered with. The big dogs adjust and the rest starve. wink:

I obviously don't know how your girlfriend or her broker is computing their figures and she is correct that sales of homes has slowed as compared to the previous 3-5 years but those 3-5 years were a special time and not normal and that gets overlooked quite often in the discussion. Tell her to hang in there, I think things will improve in the spring but they won't be what they were not long ago.
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Sir John, I haven't heard about homes being lumped together and sold as a package around here but I suppose that could be happening somewhere. If I had to guess I would say that maybe down in parts of Arizona or around Las Vegas where new construction has outpaced demand but I don't know that for sure. As for the time it takes to close a transaction, typically it is about 30 days as long as there aren't any problems along the way. As for low income housing, I don't know of any local governments buying up homes to rent to low income people and I doubt that cities really would want to get into the business of being land lords.
One of the arguments that was made at or around the time of the S & L crisis was that credit was too hard for lower income people to obtain. Since then we made it much easier for lower income people to get credit and now we are surprised and shocked that they can't make the payments that they signed up for. I agree that there are bad lenders out there and that there are predatory lending practices going on but they do not make up the majority of the loans that are going into foreclosure. At the end of the day, who is responsible for your own actions? Also there is a 3 day right of refusal on a mortgage to help protect people from making bad decisions. You just can't hold everyones hand all the time.
Where you are wrong is that this issue is one of the very few Bi partisan efforts in the previous 7 years and it has pretty strong support from both sides of the aisle, not just the Pres and the Repubs. I am personally not in favor of it but I'm not going to send the check back either. I'll just re-direct it to one of my creditors like most people probably will.
The sub prime mortgages get blamed for everything right now. Look in the last few years a red hot real estate market propelled the economy to great heights despite the rising price of oil. Now that the real estate market has cooled off, the price of oil is still high and it is slowly pulling the economy down. The sub prime condition is just a scapegoat for what is really going on.
You crack me up Webo!! As I'm sure you are aware, it is much more fashionable and popular to publicize the negative versus the positive. For instance, unemployment is still low and interest rates are still very low. That is good stuff there. If the price of oil were lower things would be going gangbusters. I'm not sure that I am really in favor of cutting everyone a check this summer as I don't like it when the government decides they need to try and fix economic things. They typically make things worse. As I have said before, cutting spending, particularly on entitlements, and making tax cuts permanent would do more to help keep the economy running strong. I get a kick out of politicians like Chuck Schumer this weekend saying things like what we need are more federal funded public works programs to strengthen the economy.
Do you honestly think if oil dropped this would all go away? How do you explain avg. credit card balances jumping $2000 since credit tightend 6 months ago? The analyst say it happened because people were robbing peter to pay paul because their number one asset devalued. Also how do you explain the PNW not being hit buy this bug since our gas prices are among the higest in the US?. Home values are strong here comparesd to the rest of the US. Not to worry we always lag by 6 motnhs to t year and stay down longer.
I think that there is a problem with perception versus reality. I also think that all the talk of recession has taken the place of doom and gloom in Iraq. Do I think that if oil dropped this would all go away? Not all, but it would have a very good effect on the national economy. As for credit card balances jumping, I don't know about everyone else, I can only relate how that effected me. I have a Capital One card and have had it for around 6-7 years. This card balance was typically fairly low but last summer the wife's transmission went out and we had a clothes dryer failure so there was a higher balance then normal. During the initial credit crunch C1 raised the rate from 9.9 to 15%. I got on the phone and told them that if they didn't return my rate back to 9.9 I would transfer the balance. They changed it immediately because I have a good credit rating and a good track record with them. I realize a lot of people don't have that option but just raising the interest percentages would contribute quite a bit to the raising of balances. Also the holiday season has something to do with the average balance climbing also. And finally, yes there are quite a few people that have used their homes as ATMs but there isn't much that can be done about that.

As for why the PNW hasn't been hit harder, I only have a theory or two. One is that we have a higher educated population here then a lot of other parts of the country and our employment opportunities have diversified quite a bit in the last 20 years or so. A big Boeing downturn isn't the crisis that it was years ago now and people are still moving here from other parts of the country due to our wide range of employment opportunities. Since the workforce is better educated they earn more money and therefore are better equipped to deal with rising fuel costs. How many guys on this board have newer boats?

It isn't all roses right now but it isn't really that bad either. There are quite a few areas of the country, including here, where real estate prices are stable to rising, and there are some areas where they are declining like Miami, NY and California. Is the glass half full or half empty? :D
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What about those young families who sought the "American Dream" of home ownership... but because they lived in a high value area (like western WA) they could never afford the $450,000 it costs just to buy a 3 br 1 bath 1000 sf sh!thole within the Seattle city limits? Some of those 'deals' sounded like the ONLY way a young working couple could afford to buy their first house. Can you honesly blame them for tryin'?
I don't blame them one bit but the smart ones didn't buy in Seattle, they went south where they could get the same 3 br 1 bath 1000 sf sh!thole for $150,000 to $175,000.That is why Pierce and Thruston counties were appreciating at 15% to almost 25% while in the same period King was appreciating at around 10% You can buy a whole lotta fuel with the savings right there and commute. And the bonus is you don't have to live under the regime of Mayor Nickel and Dime. :D
You can't really compare the 50's to today for one very important reason, IMO. At the end of WW2 we had bombed everyone flat. England, Germany, Russia, and Japan were all about 10 years into their rebuilding infastructure and industry and we were the only manufacturing power in the world. Now there is way more world competition on the world market to build and sell goods. So you can't really compare today with the 50's as it is a totally different economic climate. As for Reagaomics, it isn't being practiced today. Reagan was pretty big on spending cuts and tax cuts. We only see tax cuts occasionally these days. Until someone wants to get really serious about reforming government spending and revamping the tax code, we will continue to have deficit spending.

Webo has hit on something in his previous posts pertaining to the mortgage crisis being the fault of predatory lenders but there is a bigger reason for the current credit crunch then unscrupulous mortgage officers. Most of the major banks do not use standard real estate appraisals for a large percentage of their residential loans. In the last 10 years or so, most large lenders have gone to a system called an AVM (Automated Valuation Model). In a nutshell it is a computer generated value for your home and the banks love them because it saves them about $400 per loan. That's a lot of cabbage. Another habit the banks got into was ordering what we call a 2055 Drive By appraisal. In this appraisal there is no interior observation of the home, it is from the street only. So in their attempts to save money the banks have probably cost themselves more in the long run.
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FF. you are right drive buy appraisals aren't free and I didn't mean to give that impression. That was my mistake. Truthfully, the amount of drive by appraisals we do now have declined because all of the appraisal forms have been redone and the only difference between the drive by and the full is the physical inspection. Fees are very nearly the same. There are some other differences but it isn't worth trying to explain. If you guys want to know more about it here is a link to an article. For the most part the article is right on.
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