Is the current housing market sustainable?

[Triforceofcourage]

Housing prices have sky rocketed while wages have stayed the same. Thinking logically do you think the current boom is sustainable?

Triforce

 

[sohcrates]

yay interest only mortgages

 

[kranky]

I don't think it's sustainable in certain areas of the country. An interest-only mortgage is like renting, but has the additional danger of having the home value drop which would trap people in their homes unless they can come up with the difference to pay off the mortgage.

Perhaps some clever mortgage broker will come up with a way to let people roll over their loss onto another home that costs less, but that will simply prolong the agony.

In some areas, it will be sudden and drastic. I read an article a couple months ago where people are flipping homes in hot areas because they feel it's the way to get rich. They have no ties to the community, no interest in maintaining stable real estate values. They don't know anything except buy now, sell in six months, make money.

That has never been, and never will be, a sure road to wealth.

 

[JinLien]

"sustainable" no. The question is when it come down. Housing cost droped 20~30% in the early/mid 80s due to Newton's law (what goes up must come down).

 

[acemcmac]

Originally posted by: kranky
I don't think it's sustainable in certain areas of the country. An interest-only mortgage is like renting, but has the additional danger of having the home value drop which would trap people in their homes unless they can come up with the difference to pay off the mortgage.

Perhaps some clever mortgage broker will come up with a way to let people roll over their loss onto another home that costs less, but that will simply prolong the agony.

In some areas, it will be sudden and drastic. I read an article a couple months ago where people are flipping homes in hot areas because they feel it's the way to get rich. They have no ties to the community, no interest in maintaining stable real estate values. They don't know anything except buy now, sell in six months, make money.

That has never been, and never will be, a sure road to wealth.

QFT

I can't believe how many people have the spare change around to actually get into flipping....

 

[spidey07]

Originally posted by: acemcmac

Originally posted by: kranky
I don't think it's sustainable in certain areas of the country. An interest-only mortgage is like renting, but has the additional danger of having the home value drop which would trap people in their homes unless they can come up with the difference to pay off the mortgage.

Perhaps some clever mortgage broker will come up with a way to let people roll over their loss onto another home that costs less, but that will simply prolong the agony.

In some areas, it will be sudden and drastic. I read an article a couple months ago where people are flipping homes in hot areas because they feel it's the way to get rich. They have no ties to the community, no interest in maintaining stable real estate values. They don't know anything except buy now, sell in six months, make money.

That has never been, and never will be, a sure road to wealth.

QFT

I can't believe how many people have the spare change around to actually get into flipping....

risk = reward. That's always true so I still can't fathom how people don't understand this.

 

[ElFenix]

the average house price in houston has decreased in real terms over the past decade or so.

 

[spidey07]

Originally posted by: ElFenix
the average house price in houston has decreased in real terms over the past decade or so.

But that doesn't mean there isn't serious money to be made. That's just the average price of a house.

I still want somebody to find a market where housing appreciation is negative (on a county or larger area). I'm sure they exist, but rarely.

 

[mugs]

No.

 

[MikePanic]

the median price for a new house in my neck of the woods is on the rise, but mortgage rates are on the rise... this is evident in simple things like my ING bank accoung which has gone up a full .5% in intrest in less then 4 months

 

[kranky]

Another aspect to the risk in skyrocketing housing prices is that people who are living beyond their means - interest-only mortgages, for example - might choose to just walk away if prices drop and/or their ARM increases to the point they can't afford it. Once that happens, the banks that have forclosed will sell the homes without a lot of worry as to what they get. They don't want to own the homes, maintain them, etc. They just want to be rid of it.

Since most of those homes will sell for less than a private owner might hold out for, it will affect all the homes in the area. Those neighbors who were counting on uninterrupted appreciation might choose to bail as well. Once that ball starts rolling, it will be trouble.

After all, why would a buyer pay a lot for a home when they can be choosy and grab a foreclosed home for a lot less? The people who want to sell will have to drop their asking prices to find buyers.

 

[Zenmervolt]

Originally posted by: spidey07
risk = reward. That's always true so I still can't fathom how people don't understand this.

No, risk = potential reward. If risk = reward then there's no risk at all.

As risk increases, the amount of rewards decreases but the size of each individual reward increases.

ZV

 

[PlatinumGold]

Originally posted by: spidey07

Originally posted by: acemcmac

Originally posted by: kranky
I don't think it's sustainable in certain areas of the country. An interest-only mortgage is like renting, but has the additional danger of having the home value drop which would trap people in their homes unless they can come up with the difference to pay off the mortgage.

Perhaps some clever mortgage broker will come up with a way to let people roll over their loss onto another home that costs less, but that will simply prolong the agony.

In some areas, it will be sudden and drastic. I read an article a couple months ago where people are flipping homes in hot areas because they feel it's the way to get rich. They have no ties to the community, no interest in maintaining stable real estate values. They don't know anything except buy now, sell in six months, make money.

That has never been, and never will be, a sure road to wealth.

QFT

I can't believe how many people have the spare change around to actually get into flipping....

risk = reward. That's always true so I still can't fathom how people don't understand this.

yes and that reward can be bad or good. i still can't fathom how people don't understand this.

 

[PlatinumGold]

btw, no it's not sustainable.

the problem with the NY/NJ/CT area is (and to a lesser extent Philly) that home prices are already high (probably second highest after the southern cal area) and yet, we have five MAJOR projects all to start in the next 3 to 4 yrs, Giants/Jets stadium in NJ, Yankees stadium in the Bronx, Nets building in Brooklyn, Mets stadium and the Twin Towers. other than the Nets building i believe the other 4 projects have all been approved. these are projects that mean hundreds of thousands of jobs and thousands of small businesses all seeing an increase. all 4 projects in the same time frame means millions of jobs will be benefited positively. how could housing see a huge drop in this area in the next 8 to 10 yrs?