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You know...I was talking to a GC realtor the other day that I know fairly well. He was telling me the market is much better now than at this time last year. He said he had a 6 party bidding war on a house in GC and that the price was getting pushed up past asking price.
I was shocked. Either he's telling me a lie, or the Wall St. bonuses are so good this year that people have completely lost it and forgotten everything in one years time.
I'm sure here and there you might get a bidding war between a few rich people on a house in Garden City, but for the most part there is a lot of inventory that isn't moving very quickly. I don't think it's going to get much worse, maybe a little bit, but I don't see it getting better until the employment situation improves, which I'd like someone to explain to me exactly how and when that will happen.
A lot of realtors and home owners still fantasize about the days when banks were handing out loans to people for 5-6 times their annual incomes when the benchmark has always been 3, and hence people who paid 150K for a house in 1992 were getting 500K in 2006 and swimming in it. You still have people who can't absorb that fact that those days are over. Even a couple making 150K can only really afford a 450K mortgage strictly based on ratios, and that's with clean credit and little or no debt.....people are still listing 4 bedroom splits in middle of the road areas with 20 year old "updates" for that much..the numbers just don't add up for what people are expecting to get when they sell.
There will be a long period of stagnation in housing prices. There are mainly two reasons for that: 1) the unemployment picture makes those with jobs uneasy and less likely to make long term commitments with all the uncertainty. Those without jobs are unable to even contemplate purchasing a home due to lack of income and financing. 2) The banks are being prudent with lending. Approximately 97% of all conforming loans ($417,000 and lower) are being sold to Fannie Mae and Freddie Mac. Most banks will not hold mortgages on their books at these low rates. Also, those days of getting a mortgage with no money down are over. The bare minimum is 3.5% with FHA and even those require mortgage insurance to be taken out, in addition to minimum income requirements. All other mortgages require a minimum of 20% down. The real question, is how many prospective buyers have $100K in cash to do a $500K deal? Actually, they'd need more when you count incidentals like closing costs and minor repairs, moving expenses. Let's just say $125K.
There will be a long period of stagnation in housing prices. There are mainly two reasons for that: 1) the unemployment picture makes those with jobs uneasy and less likely to make long term commitments with all the uncertainty. Those without jobs are unable to even contemplate purchasing a home due to lack of income and financing. 2) The banks are being prudent with lending. Approximately 97% of all conforming loans ($417,000 and lower) are being sold to Fannie Mae and Freddie Mac. Most banks will not hold mortgages on their books at these low rates. Also, those days of getting a mortgage with no money down are over. The bare minimum is 3.5% with FHA and even those require mortgage insurance to be taken out, in addition to minimum income requirements. All other mortgages require a minimum of 20% down. The real question, is how many prospective buyers have $100K in cash to do a $500K deal? Actually, they'd need more when you count incidentals like closing costs and minor repairs, moving expenses. Let's just say $125K.
That's the real killer. I know a bunch of people with stable jobs and good income and no debt..but I know very few people who have that kind of cash saved, and even if they do it's tied up in 401K or something. .
Even a couple making 150K can only really afford a 450K mortgage strictly based on ratios, and that's with clean credit and little or no debt.....people are still listing 4 bedroom splits in middle of the road areas with 20 year old "updates" for that much..the numbers just don't add up for what people are expecting to get when they sell.
I'd be interested in your real world math for a 450k mortgage on a 150k salary... specifically when you factor in LI taxes, utilities, insurance, etc, etc. Even if that couple had the 90k cash (serious LOL) for a 20% down payment, I'd be concerned floating a 360k mortgage on that salary. Specifically because you need to maintain an emergency savings, you want to save for your kid's education, go on family vacations, etc... I'm talking quality of life where everything isn't based on meeting the housing payment and keeping the lights on every month.
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