We purchased our home in Houston, THE NATION'S 4TH LARGEST CITY, in 2005. We made a wise purchase and got a 5,000 sq ft 19 room estate home on 1/3 acre with inground pool for $198,500. We just got our mortgage modified and were able to negotiate 5.6% for the remainder of the loan. Part of this process included an appraisal which came back at $315,000. Like most of the metro area our home has seen an increase. Fortunately unlike the oil bust and S&L crisis of the late 80s and early 90s, Houston is seeing homes hold steady or increase and as the city is adding 100,000 plus jobs a year growth is projected into 2012. Finally we were in the right place at the right time.
Realty Denial?
Homeowners are optimistic, but the forecasts are bleak.
Aug 14, 2008 | Updated: 12:16 p.m. ET Aug 14, 2008
Member Comments
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Posted By: greasemonkeyfreak @ 10/20/2008 9:18:24 PM
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Posted By: Auzziebird @ 10/17/2008 6:38:25 PM
We bought our house last year at an auction, right at the beginning of the housing crises. The good news is that we got a price on the house and a terrific mortgage rate. The bad news is that we now owe more than our house is worth. If we had waited until this year to buy, we wouldn't be paying that much less for a similar house, but we probably wouldn't be getting a good mortgage rate either. You win some - you lose some! We are not selling anytime soon and can wait out the crisis. The market will come back, eventually.
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Posted By: mcguinn1 @ 10/15/2008 8:39:21 PM
pearsoncrz: I think most folks are in agreement with your statements. However, regarding your statement #4, Arnold Schwarzenegger was elected on Oct. 7th, 2003. Enron filed for bankruptcy in late 2001. I believe you're referring to Governor Gray Davis when you speak of the deregulation of the states energy.
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Posted By: Mwalimu @ 08/18/2008 10:19:36 AM
The problem with realtors is that they cannot see reality. They need to do some simple math. First of all they need to figure out the median income of their local area. They need to figure out what sort of 30 year fixed mortgage that median income could afford with a 20 % down. That is what the price should be. However, there are additional factors to consider.
1. Thanks to massive budget cuts in higher education, sky-rocketing tuition, and cuts is students grants and scholarships, many young people face a staggering educational debt that limits the sort of mortgage they can afford.
2. If McCain gets elected and institutes his medical plan, young people will face staggering health care costs, simply because most health insurance companies want to maintain a 30 to 40 % profit margin. They do so either by raising premiums or by cutting off people went they get sick.
3. Privatizing public schools is the big chatter among the right wing nowadays. If young people have to send their children to private schools, they face an annual tuition bill of somewhere between $5,000 to $ 20,000 a year.
4, Gasoline prices will continue to soar, partially because any gasoline from off-shore drilling will take about 22 years to get on the market (according to a fact check conducted by Newsweek.), young people will have to consider this when they buy a house - as well as heating bills and electricity. In addition, oil companies will ???game??? the market, just like Enron energy traders gamed the de-regulated California energy market several years ago - and got away with it - thanks to Governor Arnold Schwarzenegger.
5. Oh yes, I forgot. Thanks to the global economy and Republican economics, the median income is gong down not up. Young people will either have to accept longer working hours and lower wages, or their jobs will be either off-shored - or cheap labor will be imported from abroad under special visa programs. The downward spiral in wages is great for corporate profits - but means fewer eligible home buyers.
These are just some of the factors in the new math for mortgages. The traditional formula that realtors used before the idiocy of APR???s needs revision. The average cost of a home should at best be only 2 or three times the average income of any given area.
With this in mind, in terms of making, price of housing still needs to go down, down, down. Expecting to get $ 500,000 for a home in a place like Los Angeles where the median income is about $45,000 a year is living in La-La Land. Realtors need to realize that the housing market is down - permanently and plan accordingly.-
Posted By: pearsoncrz @ 08/19/2008 9:57:48 AM
Realtors don't want to see reality, their take is a percentage of the price, so the price going down means a cut in pay.
And by the way, with the dollar down, the US becomes the cheap labor market for skilled workers. This has been proven with the construction of many new production facilities in Alabama and Georgia.
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Posted By: Mwalimu @ 08/18/2008 10:19:13 AM
Dear empirecoach,
Is the world flat? Is the earth in the center of the solar system? If you've answered yes to both of these questions, global warming is a hoax.
But the entire scientific community disagrees with you, and in terms of global warming, I'd favor scientists over coaches any day. Incidentally all those stupid regulations about nuclear power facilities are not really that stupid. If you don't believe me - take a trip to southern Belarus to see the lasting legacy of Chernobyl. -
Posted By: losthal @ 08/15/2008 12:46:23 PM
Application of modern hi tech forecasting techniques such as Box-Jenkins , exponential smoothing and a host of others, might show that home prices WILL go up just as they have over the last 100+ years.
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Posted By: Horse_Fly @ 08/15/2008 12:11:58 PM
Maybe if the media didn't remind us every day that the economy was bad it would recover. People are afraid to spend money because every single day there is some sort of article like this that put the thought in their head to hold on to their money for dear life. I refuse to succumb to media fear mongers. If I had a little more money, I'd buy some rental property and help out these unfortunate people losing their homes.
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Posted By: mountainman57 @ 08/15/2008 11:22:49 AM
If you do not have to sell, you can imagine your house is worth anything that makes you feel good. Most people do not have to sell and the true value does not really matter.
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Posted By: seesnowy @ 08/15/2008 10:27:22 AM
Propaganda besides we are all a nation of depressed people which is why the economy looks bleek and by loading us up on propaganda then perhaps we won't blame the goverment especially with election around the corner.
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Posted By: malz1265 @ 08/15/2008 10:21:48 AM
I live in a nice subdivision where most of the residents have college degrees and are working in white collar jobs. I know two families who are going through foreclosure right now. Both were in unskilled blue collar jobs (one is custodian at a school and a the other is employed by the city's department of public works as a laborer). Both had ARM's with great teaser rates and both were stretched to the extreme with their house payments when they were paying lower rates. People just don't seem to have the foresight to realize that if something seems too good to be true it probably is too good to be true.
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Posted By: malz1265 @ 08/15/2008 10:21:18 AM
I live in a nice subdivision where most of the residents have college degrees and are working in white collar jobs. I know two families who are going through foreclosure right now. Both were in unskilled blue collar jobs (one is custodian at a school and a the other is employed by the city's department of public works as a laborer). Both had ARM's with great teaser rates and both were stretched to the extreme with their house payments when they were paying lower rates. People just don't seem to have the foresight to realize that if something seems too good to be true it probably is too good to be true.
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Posted By: k_jarrett @ 08/15/2008 9:48:25 AM
If you have owned your home since 2000, it has probably more than doubled in value. If it falls 10% in value over the past year, you still have a 90% gain. Most people should be very happy with a 90% gain, unless, they used their home as an ATM over the past few years. Also, if you move, you might get a little less on the selling side, but you will make up for it on the buying side.
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Posted By: smitty1000 @ 08/15/2008 9:43:12 AM
I'm in the process of relocating jobs and selling my house in the Chicago area. It's brutal out there , only up side is no line of credit on the house and will get the same break in price when we eventually purchase and settle.
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Posted By: acriticalthinker @ 08/15/2008 7:26:53 AM
Common Sense: Housing prices more than doubled and then some in many areas of the country to the point where most people could not afford to pay the mortgage - so why is everyone so surprised that the prices are dropping? A16% decline in value is nothing considering how ridiculously inflated housing prices became prior to the decline. I had been looking for a house approximately 5 years or so ago and stopped because of the ridiculous prices (and the prices went up from there). At the same time, I could not understand how most people were affording the astronmical prices, as my salary is higher than many two income families and I have no debt, children to support, etc. It makes me laugh that so many people look to the media, etc. for their information when all they have to do is use their own common sense to assess the situation (it seems that many home buyers did not realize that mortgage companies are selling a product and tend to inflate the amount of home one can afford based upon salary). Problem is - Americans no longer think for themselves - they follow the herd mentality and then the rest of us are stuck bailing them out.
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Posted By: arbucle @ 08/14/2008 6:45:56 PM
Heath schiiler index never shows Houston the 4th largest city in the US.My values have done nothing but go up and up the last few years.
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Posted By: greasemonkeyfreak @ 10/20/2008 9:18:00 PM
We purchased our home in Houston, THE NATION'S 4TH LARGEST CITY, in 2005. We made a wise purchase and got a 5,000 sq ft 19 room estate home on 1/3 acre with inground pool for $198,500. We just got our mortgage modified and were able to negotiate 5.6% for the remainder of the loan. Part of this process included an appraisal which came back at $315,000. Like most of the metro area our home has seen an increase. Fortunately unlike the oil bust and S&L crisis of the late 80s and early 90s, Houston is seeing homes hold steady or increase and as the city is adding 100,000 plus jobs a year growth is projected into 2012. Finally we were in the right place at the right time.
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Posted By: greasemonkeyfreak @ 10/20/2008 9:17:39 PM
We purchased our home in Houston, THE NATION'S 4TH LARGEST CITY, in 2005. We made a wise purchase and got a 5,000 sq ft 19 room estate home on 1/3 acre with inground pool for $198,500. We just got our mortgage modified and were able to negotiate 5.6% for the remainder of the loan. Part of this process included an appraisal which came back at $315,000. Like most of the metro area our home has seen an increase. Fortunately unlike the oil bust and S&L crisis of the late 80s and early 90s, Houston is seeing homes hold steady or increase and as the city is adding 100,000 plus jobs a year growth is projected into 2012. Finally we were in the right place at the right time.
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Posted By: LIKEITIS @ 08/15/2008 9:14:02 AM
MINE IN LAREDO AS WELL.................THAT IS BECAUSE THE VALUES WERE NEVER OVER INFLATED.
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Posted By: desertson @ 08/14/2008 5:46:54 PM
High gas prices are patriotic! They are our shared sacrifice to pay for W's war in Iraq and it's comcomitant deficit spending and dollar devaluation. Good patriots like umpirecoach should be proud to do their part for George's War.
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Posted By: pearsoncrz @ 08/19/2008 9:54:49 AM
hey, at the time it was authorized, it was everyone's war, all except a few of us who were labeled unpatriotic wimps.
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Posted By: desertson @ 08/14/2008 5:44:00 PM
Correction umpirecoach....the "energy crisis" was not caused by "liberals" it was caused by W's war, his obscene deficit spending that led to dollar devaluation and Republican inaction and inattention to the global economy. The high price of gas is patriotic...it's our contribution and sacrifice for the Iraq war. You should be happy to pay your fair share for keeping us safe from terrorism.
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Posted By: umpirecoach @ 08/15/2008 3:33:02 PM
desertson, counter correction,,,,,,,Please check the facts about the abundance of energy reserves that reside in this county and then intelligently and objectively ask yourself why we need anybody else's oil??? That is why the energy cirisis is self imposed, mostly by liberals, backing the environmental wacko's agenda. The global warming hoax is cited as a reason to discontinue fossil fuel usage, again intelligently and objectively ask yourself why the global temperature is reducing, instead of increasing as the "liberal" MSM continues to push. Ask yourself why the dust bowl occurred before the expansion of the combustion engine, The facts do no support the liberal hoax of global warming or ban on retrieving our own energy resources. In regard to W's war, that war is not oil related and the dollar devaluation is a direct result of our congressional failue to expand our own energy resources, off shore and ANWAR oil exploration, building more refineries, more nucluer power facilities, etc. Why does it take the liberal governmental regulators 4 years to review an application to request consideration to build new plant? That does not include the litigation that the energy companies must endure before the first shovel full of dirt can be turned. ....... I am proud to be pay my share to support our troops and miltary to secure the right of freedom, just think of how much better America could be with more employment opportunties, more global independence, more taxable products, if we only would consume our own resources. Seems like a no brainer!!!! ..... Contrary to what NObama and the liberals apparent solution to this energy crisis is (hot air for our tires), I can only hope you are smart enough to realize that expanding our own energy production is the first step and only way to stimulate the economy. Have you noticed the drop in the retail price of gas, quickly following W's revoking the presidental ban on drilling? Notice how the $,50 drop in gas has stimulated the economy already and nothing has occurred yet. So, Desetson, please check the facts before blaming W, that is the easy way out!!!!
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Posted By: lseder @ 08/14/2008 4:30:16 PM
Perhaps those "optomists" are just a bit tired of all the media doom and gloom!
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Posted By: rangerone314 @ 10/21/2008 10:03:48 AM
Oil dropped because the price had gotten too high ($147) causing the speculation bubble to pop, and has further dropped more recently because the demand is going down because the economy sucks.
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Posted By: lseder @ 08/14/2008 4:29:38 PM
Maybe the folks that responded are just tired of the media doom and gloom approach!
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Posted By: katjones37 @ 08/14/2008 3:52:58 PM
One of the biggest frustrations I have with the whole discussion of home prices/valuations/bubbles/busts/etc. is that WAYYY too much attention is being placed on the issue of whether valuations are up or down. It's as if house buying is just another form of playing the stock market.
Most homeowners couldn't care less about the valuation of their homes. We don't buy homes to "make money." We buy homes to LIVE in them -- and in a lot of instances, paying a mortgage is cheaper per square foot than renting. We have been in our current home for 10 years now and have no interest in moving. That kind of attitude should be encouraged and discussed, because we provide stability to the neighborhood and we fight to keep our streets safe and sane. But it's a lot more sexy to discuss valuations/bubbles/busts and a lot easier in a lot of ways.
One thing further -- In a lot of instances -- like mine -- we feel a bit of relief that valuations are going down because that actually means that in a year or so, we'll see some reductions in our property taxes.-
Posted By: umpirecoach @ 08/14/2008 4:37:12 PM
In regard to property taxes, I am continually amused at the MSM template that all is bad with the economy, i.e. the mortgage crisis, the self imposed (by liberals) energy crisis, the rising unemployment rate, etc, when in reality, they are killing the goose that lays the "golden eggs" (property values). If the property values continue to erode, the governmental entities entitlements will soon be drastically reduced to reflect true current value, the local city, public school, ambulance, fire, library, road/bridge funds will feel the pinch. Personnaly, the value of my properties do not matter to me until I am ready to sell, but the government(s), and their lap dog media, should be concerned about enhancing these values every year to continue to fund the ever expanding government with their silly regulations. My question, when will the lap dog MSM figure this out??? They continually feed us "bad news" to deflate our expectations, when, in reality, most of their views are very slanted and mostly false. They need to be positve about the economy to continue to expand the bloated bureauracy. They have constructed a contradictory premise. Please help me understand how the constant "negative stories" regarding the economy is beneficial to anybody, except politicians wanting to acquire more power?
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Posted By: jnakhoul @ 08/14/2008 3:32:02 PM
i think the real moral of this article is most people are dumb
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Posted By: aulemar @ 08/14/2008 3:14:00 PM
Most folks live reality, what does that mean. Since most folks don???t buy or sell there home they don't know what the market value for there home is. During the boom prices were unrealistically high, so those prices (even if a few folks actually sold houses) aren???t real and don't mean anything. A real example, In 2004 I had a home appraised at $220,000, in 2005 a realtor told me I could sell it for $330,000 (like a neighbor did) I did sell it in 2008 for $275,000. Does that mean I lost $55,000 on the value of my home? Absolutely not I actually gained $55,000 over the 2004 appraised value, and $177,000 over the originally purchase price of $98,000 in 1990. That is I didn???t loose anything other than the unrealistic expectation of getting $330,000 for the home.
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Posted By: SS1968 @ 08/14/2008 3:13:12 PM
It is a market correction not a sudden drop in home values. If you have ever watched any of the shows on HGTV for example of people selling their houses you can see the greed that is the partial cause of this. You will see someone who pait 120,000 for a houst in the midwest 3 years ago, put in 5,000 worth of shoddy upgrades, and now want to sell it for 220,000 so they can buy the nicer, newer and bigger house a few miles away. The problem is as long as someone pays 220,000 for that house, now all similar houses in that area are now in that range even though the value isnt based on anything but the fact that someone was willing to overpay. It was bound to happen, with prices going up as fast as they have and all of the new construction etc eventually you will have more houses than people that can reasonably afford them, this creates a surplus and thus values go down. The worst hit cities are those where the prices have gotten to the point where it is virtually impossible for the median income family to afford a house. Dont look for values to go up any time in the near future. We got too greedy for our own good.
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Posted By: aulemar @ 08/14/2008 3:11:14 PM
Most folks live reality, what does that mean. Since most folks don???t buy or sell there home they don't know what the market value for there home is. During the boom prices were unrealistically high, so those prices (even if a few folks actually sold houses) aren???t real and don't mean anything. A real example, In 2004 I had a home appraised at $220,000, in 2005 a realtor told me I could sell it for $330,000 (like a neighbor did) I did sell it in 2008 for $275,000. Does that mean I lost $55,000 on the value of my home? Absolutely not I actually gained $55,000 over the 2004 appraised value, and $177,000 over the originally purchase price of $98,000 in 1990. That is I didn???t loose anything other than the unrealistic expectation of getting $330,000 for the home.
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Posted By: aulemar @ 08/14/2008 3:10:58 PM
Most folks live reality, what does that mean. Since most folks don???t buy or sell there home they don't know what the market value for there home is. During the boom prices were unrealistically high, so those prices (even if a few folks actually sold houses) aren???t real and don't mean anything. A real example, In 2004 I had a home appraised at $220,000, in 2005 a realtor told me I could sell it for $330,000 (like a neighbor did) I did sell it in 2008 for $275,000. Does that mean I lost $55,000 on the value of my home? Absolutely not I actually gained $55,000 over the 2004 appraised value, and $177,000 over the originally purchase price of $98,000 in 1990. That is I didn???t loose anything other than the unrealistic expectation of getting $330,000 for the home.
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Posted By: LIKEITIS @ 08/14/2008 2:57:10 PM
THE HOUSING MARKET ISSUE IS MANY FOLD.
1) PEOPLE WERE MADE ABLE TO AFFORD SOME HOMES BY OVER INFLATED ESTIMATES OF THE HOUSES VALUE THAT MADE THE LOAN DOABLE.
2) CERTAIN MARKETS (CALIFORNIA, FLORIDA, ARIZONA, NEVADA..ETC) WERE SO OVERBLOWN ON THE INFLATED PRICES THAT IT WAS ABSURD FOR ANYONE TO BELIEVE THAT THE TREND WOULD HOLD(FOR INSTANCE PHOENIX HAD A 400% INCREASE IN HOME VALUES IN LESS THAN 5 YEARS).
3) BECAUSE OF THOSE OVERINFLATIONS, BUILDERS SPECULATED THAT THEY COULD MAKE A TON OF PROFIT BY MASSIVE COMMUNITY CONSTRUCTION (OOPS).
EVERY OTHER TIME(ALTHOUGH THIS TIME WAS MONUMENTAL) THAT HOME VALUES REACHED THE LEVEL WHERE REPLACEMENT VALUE WAS LESS THAN ACTUAL VALUE(TAX ASSESSMENT VALUE), THERE HAS BEEN HORRIFIC REALITIES TO BE REAPED BY THOSE CAUGHT WITHOUT A SAFETY NET OF EXTRA CASH(CALIFORNIA IN THE EARLY 90'S, COLORADO IN THE 80'S).
ALMOST 97% OF ALL OUTSTANDING MORTGAGES ARE AT THIS TIME BEING PAID ON TIME( A FULL 30% OF ALL HOMES IN THE U.S.A. ARE PAID FREE AND CLEAR), SO THAT WOULD LEAD US TO BELIEVE THAT THE ENTIRE COUNTRY IS NOW PAYING FOR A TINY MINORITY THAT HAS THROUGH WHATEVER REASON SEROUSLY OVEREXTENED THEMSELVES AND NOW THROW THEMSELVES ON THE MERCIES(MORE LIKE IDIOUSY) OF THE GOVERNMENT TO BAIL THEM AND THE BANKING INSTITUTIONS THAT ALLOWED THIS TO HAPPEN FOR NOTHING LESS THAN WORLD CLASS GREED!
WE WILL CLIMB BACK OUT OF THIS HOLE IN ABOUT TWO YEARS................THE QUESTION IS: DID WE LEARN ANYTHING OTHER THAN THE GOVERNMENT WILL TRY TO MAKE ITSELF LOOK LESS STUPID BY THROWING OUR TAX MONEY AT IT, INSTEAD OF ADRESSING THE ORIGINAL PROBLEM? -
Posted By: mark22155 @ 08/14/2008 2:47:02 PM
I am like jr10 below...2 incomes in the mid 150's and I can't afford a house. I sold my house in a smaller community and so did my wife, both after our divorces. We have both rented since 1999..when we were both single. Now that we are married and we have 2 incomes, the houses where I live in California are STILL being offered at $800k, and they were only at $300K in 1999 when I had one income and did not want to risk it alone. The property taxes alone at 1.3% of the purchase price is a real issue too...the we would have homeowners's insurance, plus maintenence, plus groceries, plus gas, plus utilities, plus car payments, plus cell bill, plus phone bill, plus cable bill, plus car insurance, plus clothing, plus school costs, plus medical insurance premiums and deductables, plus dental insurance and deductables, plus trying to save anything we can, plus credit cards, plus car repairs, plus home yard expenses....how has anyone thought they could do this on any kind of regular salary?
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Posted By: slsaenz @ 08/14/2008 2:24:55 PM
My family bought a house before all of this "crisis" started. We saved money, lived right, didn't buy a house beyond our means, and have no intention of selling in the next 10-20 years...if ever. If I went looking for a house in the past few years, there is no way I would have purchased. People want too much more than what they paid for a profit. Before, If you bought a house 2 years ago and expect a $20,000 profit, you better have put down a BIG downpayment. That is and always has been unreasonable. A house is bought to live in. To invest in by living there for YEARS. The price of my home hasn't fallen....know why? Because I didn't pay a jacked up amount for it to begin with like the previous poster mentioned is a problem. Why can't they buy a house when they are doing everything right? Because stupid people getting stupid loans jacked up the market for the responsible home buyer. Good luck to you jr10 and I hope someday all this stupidity ends and you CAN buy a resonable house that you are working so hard for. I just got lucky on the timing. Barely.
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Posted By: jr10 @ 08/14/2008 2:05:01 PM
Of course they are in denial. We're a young family, live within our means, no debt, save money, and we can't afford a house. I'm priced out. How is it that it was ok for housing to double in price over the past 8 years? That's not reasonable. Wages don't increase that much. The same house rents for a fraction of the cost of buying, and yet still the houses sit on the market. But I can wait ... meanwhile paying cheap rent, and no property taxes,and having no maintenance fees.
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