Housing Bubble Starting to Lose Air?
We don’t usually get around to the Op Ed page ’til later in the day so we missed Krugman’s piece yesterday on everybody’s favorite topic, the housing bubble. Among the signs he points to that the bubble is already losing air are: The bubble doesn’t burst with a bang–inventory builds as sellers hold out for…
We don’t usually get around to the Op Ed page ’til later in the day so we missed Krugman’s piece yesterday on everybody’s favorite topic, the housing bubble. Among the signs he points to that the bubble is already losing air are:
Is there any hard evidence that properties in New York are sitting on the market for longer?
That Hissing Sound [NY Times]
Her arm is around 6, and she owes student loan debt, which while you are lucky you don’t, not everyone is that lucky. I don’t know what her time frame is but it’s not all that long and she’s nervous.
Anon at 1:12- how huge is your friend’s ARM? How many years is the fixed period? At what rate? What is the cap? She sounds spread pretty thin if she ALREADY cannot handle the payments.
I am someone who has an ARM but do not see myself as completely screwed as some drama queens make it out to be. You have to look at the big picture! We are double-income of about 175K, put down 10%, our place was 620K, we had no debt whatsoever and even now our only debt is the mortgage… we chose to do the 10-yr ARM over a fixed for several reasons (which I will spare you the long explanation of) and have already been paying down additonal principal every month since we’ve had the mortgage. We feel that we are doing it very responsibly.
So, moral of my post is – not all ARM-holders are screwed! There’s too many factors involved to lump us all together.
Very good point that New Stoner makes: by buying a multifamily, especially in a lower-priced neighborhood, you can hedge against a disparity between rents and buying prices. If rents are out of whack and, as some here have said, there will need to be a long period in which rents catch up with sales prices, then, that whole time, New Stoner will benefit from that catching up. Before long, he/she will be living rent-free or profiting.
And it sounds like New Stoner’s deal is one that Wannabe could afford. Now, Wannabe may not want to live in that neighborhood, or may not want to be a landlord, but that’s her choice.
Yay, Barbara’s back!
Be careful there, New Sloper – maybe brownstones won’t depreciate in price, but you can never say never – you certainly have a good thing going (and 500Gs of mortgage debt in NYC is nothing, sorry), but prices in NY condos went down by half in the early 90s. Again, is it likely? No. You’ve done a smart thing and have nothing to worry about – but there are a ton of people who have overpaid and overleveraged for places that will not appreciate like a brownstone. I’m sorry, but it’s just insane that people making in the very low 6 figures are qualifying for mortgages between 600 and 800Gs because of an ARM or IO. Maybe their incomes will go up and they’ll be able to afford new, higher payments in the future, but it’s definitely a risk for many people. Maybe you don’t know anyone who’s done this, but I do. I have a friend who worries daily over the giant ARM she took out – she can barely afford the payments now and is dreading when rates rise.
Places like Park Slope, being less than 1 mile from the Atlantic Ocean should really be worried about Global Warming! Didn’t anyone see Waterworld? I just bought an ark for 0% financing and cash back, I think the hissing sound you are hearing is Long Island sinking.
Hold on… I remember CLEARLY When interest rates were in the high teens… I’m only 35 but I still remember.. I also don’t discount that I got a pretty good deal. (which is relative because I still have trouble swallowing the fact that I have Half a MILLION BUCKS on the debt side of my balance sheet.) But assuming someone got a 5 or 7 year ARM..(because it wouldn’t have been that much of a benifit to get a 3) and you bought in the last year… You’ve got 4 to 6 years b/4 you have to worry about a change in your interest rate. And even then the rate is Capped by how much it can go up in any quarter…
You still aren’t going to be crying broke and can anyone really assume that in 4 to 6 years that a brownstone is going to be worth Considerably less than they are today???
There’s another 3 family brownstone on my block being sold for $620. IF someone bought that @ 5.375% int.rate.. They’d still only be paying $1,300 a month w/ $2300 in rental income. And thats including TAX and home insurance.
This ain’t rocket Science.
I am now living in a Duplex, paying $700
Duh! The reason many people take out two mortgages is quite simple: Interest payments on mortgages above $1 mln are not tax deductible. Plus there are mortgage taxes that make it worthwhile to split up the financing between the first mortgage and a home equity loan.
Due to my job’s activities, I read a *lot* of the financial press and keep my eye on the federal funds rate. The financial press does tend to run toward Chicken Little territory – alternating between “the sky is falling!” and “housing prices will never ever stagnate! Go USA!”.
I have read enough about ARMs to know that they scare the hell out of me. In 2000 I had to consolidate my student loans when the rates were at 8%, and have been smirked at ever since by those who lucked into 3-4% rates. No one can sanely tell me that mortgage rates will be in Happy 5-6% Land in 2010, and I can’t help but see the parallel.
I don’t think Wannabe will have to rent “forever” either, but right now it seems like you can get a nicer place for your money renting rather than buying, a complete shift from the way things were when we decided to buy an apt. That’s not the norm and I don’t think it will last. Keep in mind what all the hundreds of condo units now being built will do to the market once they’re all completed. There are large-scale projects going up in every viable neighborhood in Bklyn – taken all together, I wonder how much impact they’ll have on the prices of all “starter” co-ops/condos in the borough.