If you read the papers, it looks like real estate is coming back, prices are rising. The inventory is “drying up.” But look a little deeper. According to Zillow 31 percent of homeowners are underwater. And CNN Money reports, half of mortgage borrowers under 40 are under water. That kind of makes some of this “inventory shortage” a tad bit soggy.
I don’t see anyone lining up for a “Liar Loan,” anymore. The rush to buy before you are priced out of the market is gone. The median housing price is rising for a very simple reason. There are no low priced homes in the statistics to bring the average down. Do you want the 300k 1500 sq ft starter home? Or for 75k more you can buy a McMansion with 2400 sq ft?
Sources are reporting that a large portions of sales 30% are cash only. Kind of boggles the mind unless you figure when a bank wins the bid on a home in foreclosure (by bidding the amount owed by the borrower), that’s considered a cash sale. As a real estate transaction, you have a new owner, the bank, and it is a cash sale. Of course, throw in the words “foreign buyer” and everyone nods, they must be doing the cash sales. That many foreign sales ought to set of sirens at the office of immigration.
Out here in California, earthquake insurance isn’t really affordable, so you let the bank own most of the house and you make payments --- if a quake wrecks the house, give the bank the keys. Paying off a home in this economy isn’t too smart, especially if you lose your job. Banks won’t do a home loan if you’re unemployed.
The economy is just peachy keen, and no one is worried about losing their job, and real estate is doing just great. “Now is the time to buy a home, ” interest rates will never be this low again. I hear that shouted in my ears all of the time. Do you get the feeling that there is inventory out there that they need someone to sign for on the dotted line? If you buy a 300k home in California, you can’t flip it. It isn’t appreciating and the 18K in Realtor commissions is staring you in the face.
There is the normal crowd of people buying homes as there has always been. But the speculative zip is gone. The demand is only about 1/2 of what it was in bubble times. And getting financing is a real chore. When I read these headlines that the housing market is coming back, I have to wonder, coming back to what? 6 cars in front of every home, doesn’t suggest to me that housing is booming.
The one thing that really bothers me, I can’t see any bank in the country writing 30 year loans at 3 percent -- 5 years maybe. Can we believe what we read in the newspapers? Is real estate back like it was in 2006 with a full punch bowl? Did the recession really end in 2010? The election is over, maybe it’s time to take off the rose colored glasses.
Copyright 2012 by Jim Brubaker