If you consider all that has happened over the past week, past month, and past 6 months, it is likely that many of us have never seen before the kind of turning point we have just seen.
American Home Mortgage bit the dust
Accredited Home Lenders is teetering on insolvency
Indymac pulled core products
Numerous other lenders are also pulling their main products as well
If we take the logical next steps to what this means for the overall housing market, where does it leave us?
While Gary Watts would like you to believe that all that has to happen is that the FED needs to lower interest rates, the problem is not that easily solved… and I’m not sure we want to solve a problem that the market is currently working on solving anyway.
In addition, many in the housing market will fail to see the turning point and are going to be suspended in the air for another six months like Wile E. Coyote. It won’t be until next year that we really see the freefall in values.
Nowhere in the Constitution does it offer the right of ever appreciating real estate in this country. Neither does it promise that you won’t get hurt for your own stupid decisions.
This is the end of the housing market as it has been for the past 7 years. It is a changed market, and we will likely not see the end of the housing bust for at least 3 or 4 years from now at the very soonest. With all of the lending losses, it will be very unlikely that lending would approach the reckless abandon it achieved over the past few years any time in the forseeable future. Even the FED can’t save this now. It would be as they say “Pushing on a String”. lenders do not need to lend money if they do not want to, or if they percieve the risk to be too high. Lenders are not worrying about interest at this point, they are worried about principal.
Homesellers, I warned you, if you didn’t listen, it was your own fault, and now you are stuck.
No, the best thing for this market, and for the economy overall is a monumental housing crash. All houses immediately marked down 30-40% throughout SoCal would just about put us right with where we should be considering household formation, interest rate risk, personal incomes, affordability, and consumer debt load.
Sadly, it won’t happen that way. No, today’s sellers agents are as delusional, and as thick-skulled as they come. Transactions will likely come to a screeching halt from their already stymied location. The only thing that will move this market is need-to-sell inventory by the way of foreclosure forced sales and short-sales. Now it’s time to get down and dirty with the housing bubble.
Collectively, we could have all avoided this point, but individually, we did what each thought was the best for us and it has failed. No amount of public preaching from a blog telling people to ready themselves for the coming crash would have changed many people’s minds. I only hope that some readers have read, understood, believed, and acted upon the recommendations. You have been saved. The lemmings coming after you have only the cliffs of insanity, and the cold, hard rocks of reality below.
On the other hand, depression about (not) owning a home in Southern California occasionally grips even me. Even knowing all of the pain to come (it was a certaintly last year and the year before, so it’s still a certainty), I’m not confident that I’m interested in waiting it out here. Many of the people our age have left the area, leaving a swath of people 5 years older or 3 or 4 years younger than us. The older ones don’t understand the predicament since they don’t have it, and those younger don’t have the pressures of a peaking career and growing family. The ones before us are “over the hump”, and those younger haven’t begun looking at the hump. Periodically, I just want to throw in the proverbial towel and say “bag it”, it’s not worth the wait and just work somewhere else. If I weren’t in the middle of some big things at work and I could walk away without harming the company I work for, I would. Alas, by the time my projects slow enough for me to leave, we may already be in a recession with a difficulty finding a new job out of state. I’ll just have to see at the beginning of next year.
My wife is not oblivious to the pressures, she feels them as well. On the other hand, it has made us realize what we don’t like about Southern California (or at least L.A. and O.C., not including S.D. or Ventura), the self-righteous, self-centered, selfish home-trust-fund babies that inhabit not only the dark corners, but the visible ones, and frankly, much of the cry-me-a-river-my-house-lost-10K-but-went-up-400K-before-that crowd that is 90% of all OC. It all but sickens us with the idiotic drivel that escapes their lips. My god, what a bunch of whiny bitches! And their wives are even worse.
Luckily, our children don’t sense the pressure, or at least not at 3 and 1. Ever feel like a failure? Just spend a few hours with your preschool kids, and it’ll change your opinion. (disclaimer, I’ve heard this only works until they are teenagers)
No, at this point, we are basically in it for the long haul. We’ve gotten over the hardest part being former owners and renters… the back side of the slop is in front of us, and it’s hardly worth leaving at this point with family here, a good job, and security… although that would change with the right job offer. I suppose that we’re not the only ones in this situation, except that if an employer needed us next week, we can break our lease. Most around us would need to sell a house in probably the worst housing market since the Great Depression.
So, all in all, I consider what I have just witnessed, and suppose that there are a number of people just like us. We will get our house someday… regardless of what the “priced out forever” crowd of real estate agents have told us. It is sad to see so many houses in our area begin to fall into an untended mess, but there’s no escaping that many of our neighbors just can’t afford their houses. I can’t imagine anyone wishing ill to them, but when they were driving H3 Hummers and bragging about how much their house was worth, I had to remember that all things would return to the way they were. The financial lessons people are learning now are hopefully strong enough to prevent a repeat, but easy enough to not sink our economy.
If you have any thoughts on staying put/leaving, leave them here.