Why the housing industry will not rebound anytime soon

[SoCalDem]

Home ownership is the ultimate leap of faith.. Faith in the future, and more specifically the individual futures of many people.

To take on 30 years of debt, often the largest debt any one person (or two, if it's a couple) will ever tackle, is just such a leap.

Buying a home is much more than just gaining "equity" and the cessation of paying someone else's mortgage, through rent.

Renting is seen as a failure by our society. People who rent, are seen as not quite "there". They are the people who cannot afford to own..they are less-than.

The whole image of ownership is the ultimate goal. It says you have "arrived"..you are a grown up..you have goals.....you have roots in your community.

Home ownership itself has morphed into an odd beast. People used to buy a home when they were secure, and settled into their career & their community.

Home ownership was about providing a home that would welcome your children home from the hospital when they were born, a home that would be the place where they brought their Trick or Treat goodies, where the pre-Prom pictures would be taken, where the Thanksgivings & December holidays would be celebrated, and weddings planned.

A home was where people saw themselves babysitting their grandchildren. It was their place in space & time, and then when they no longer were around, it was a valuable asset they left to their children.

What we have become , is a rootless society. We are just a better-dressed version of the Depression-era vagabonds who traveled from place to place, looking for work. They wandered around, carrying all their worldly goods with them. We park ours in the garages of family or in ugly garage-doored storage facilities, as we move from town-to-town..job-to-job, always chasing the dream.

When people try to become homeowners in such a climate, they are held hostage by the "housing market", always praying that when they "have" to move, they will sell in a "seller's market" , and then re-buy somewhere else, in a "buyer's market".

We have been turned into gamblers, always wagering for the next "win"..the big job, the big house, the next move.

There are always people in every era who like that life, but being unencumbered is what makes that lifestyle work. When people are still wanting the homeowner's lifestyle, and they are on-the-move all the time chasing jobs, the only "winners" are the people doing their paperwork and collecting commissions on the moves.

If a society loses faith in its own ability to provide an income for the family, where will the faith come from; faith that's needed to sign up for 30-40 years-worth of debt for a home?

When millions of people who "leapt", ended up in a crumpled heap at the bottom of the cliff, it sent a powerful message. The lemmings of the 80's & 90's ignored the message, but maybe the message is getting through now. When mortgage rates are at a 60 year low, and housing prices have declined steeply, and people are still not buying, there's a bigger reason.. a massive loss of faith in the future.

[jody]

1. Commercial real estate market has not reached bottom. I believe none of the job recovery crap. n/t

[zipplewrath]

2. Not the original model

Home ownership became a popular fixation after WWII. But the progression was through the "starter home", a low cost, low maintenance house that young couples could afford. That was usually ultimately sold within 10 years to move into a larger home for raising of the children. Mortgages were typically 15 years. People actually paid them off. They used to hold "mortgage buring parties". Ultimately that house would be sold, the equity used to purchase a smaller "retirement" home, and some of the equity used to live. It was really only in the '80s and beyond that this concept of buying progressively bigger homes, with huge mortgages that one never really expected to pay off got started. People still paying mortgages into retirement, and using the equity before they ever moved out with "second" mortgages or home equity loans.

We can get back to that. We can buy homes we can "afford". They aren't going to look like some Malibu mansion, but they'll be affordable to buy and own. As such, we can sell them at the appropriate times to others who can afford them. It's when we expect them to become our 401K that the real trouble starts.

[pipoman]

3. I agree

here is a post from another thread earlier today..

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=8773328&mesg_id=8773718

[zipplewrath]

7. The 20% should be written into law

20% down payment probably should be a constitutional amendment. Yes, I'm being a bit dramatic, but really even roughly 5 - 10% would mean that we could get back to the concept of the starter home and 15 year mortgages. It would also end this insanity of having to have the 3700 square foot home with the 3 car garage and italian marble master bath for your first home. 1500 square feet with linoleum floors until you make enough to move up.

[TwilightGardener]

9. Nope. It shouldn't be. I bought my first two houses with zero down--God bless the VA loan program.

And guess what? We did fine, didn't default, built a little equity, got our money back out on both when we moved. There's no one-size-fits-all rule.

[zipplewrath]

11. I know

I know I was being a bit dramatic. Unfortunately, it does inflate the market to have those zero down, 30 year mortgages. But I am aware that some can use them quite responsibly. You do run the risk with them though of being "under water" quite quickly with small shifts in the markets. But it does allow some people to avoid certain "more expensive" options while they save up the down payment.

[pipoman]

18. Unless something has changed

there are many rules for compliance and qualification for VA, from a quality of property standpoint, a value standpoint, a percentage of income perspective, etc...all things which are no longer factors in conventional mortgages any longer. zipplewrath was commenting on my post at the link above.

Edit..Further, the 20% used to be guaranteed to the lender who actually carried the VA mortgage.

[TwilightGardener]

20. I think it's the opposite, for the most part. The VA doesn't hold to

strict DTI ratios (I think back ratio is over 40%?), I don't think they're strict on FICO score--only thing they're strict about from my experience was eligibility for participation in the program, condition of the property, and they prohibit PMI. Hell, half of buyers who are buying homes right now are doing it thru FHA/USDA/VA (or so I've read)--I attribute that to the fact that housing prices have just not come down that much from their peak (CA and FL and NV notwithstanding), no one wants to gut their entire savings account on a downpayment even if they have it (which I think is smart), and credit scores have probably dipped. I would hate to see the housing market WITHOUT low-downpayment programs. Would be much worse. I recently sold my home to someone who had a low-downpayment loan--and believe me, I am grateful to have simply had a buyer that qualified and was able to close on the loan, don't care how much they put down.

[elehhhhna]

22. VA loans are what really made the middle class buy homes after WWII

[Warpy]

4. Demographics also need to be considered

While a prolonged depression at the bottom will result in pent up housing demand, the supply will continue to far exceed it as we Boomers die off, leaving our properties behind.

[taught_me_patience]

6. This is right on

The demographics for long term housing prices is terrible. Inflation, job creation, low interest rates, and women entering the work force propelled housing prices in the 70's, 80's, 90's, 2000's. All four are now working against housing prices: inflation is low, there is no job creation, interest rates cannot get lower, and boomers are leaving the workforce as they retire.

[SoCalDem]

8. that's true, but the "model" the government uses is the "new homes" permits

and I see a diminishing market for these for a very long time. and that's where the jobs are.. While this is a good thing for the vanishing open spaces, it's a bad thing for people working in construction..

This is what was so evil about the housing bubble.. It created a false market...ever-increasing prices, combined with liar-loans for people who really should have never bought a house..and then it all crashed ..

The glut of pre-owned homes are going to be gobbled up by *P.W.C. who will then rent them or sit on them until they can create a new bubble..



* people with cash

I hope the outcome of this all, will be a return to sane-housing, but then how would the granite countertop & the 3 person glass steam shower people survive:(

[Warpy]

10. Builders will have to turn to renovation and conversion

of overlarge houses into multi family units. Likely much of the exurbs will end up being razed as the cost of commuting becomes prohibitive for everybody but the executive class.

There will be jobs for former builders, but those jobs will definitely be fewer and far different from the glory days of slapping up huge tracts of ticky tacky suburban boxes.

[SoCalDem]

12. Brand new homes bulldozed..

no buyers.. defunct builder...and no money to "secure" them..so bring out the dozers:(


.........................
http://www.google.com/#hl=en&source=hp&q=new+homes+bulldozed&aq=f&aqi=&aql=&oq=&gs_rfai=C_eR7z6hETPr6F4v8jQPCjsj3DQAAAKoEBU_Q4aZF&fp=6fa76c6bcc02a340

#
New homes scrapped in midst of housing crisis in Victorville ...
Jun 17, 2010 ... A bank in San Bernardino County decides to scrap homes instead of selling ... Housing crunch: New homes bulldozed. Tuesday, May 05, 2009 ...
abclocal.go.com/kabc/story?section=news/local/inland... - Cached - Similar


Unwanted New Homes Bulldozed | Housing Doom
Apr 28, 2009 ... I was forwarded this YouTube video by L. Apparently a lender found that the new homes it had received back from a builder that had defaulted ...
housingdoom.com/2009/.../unwanted-new-homes-bulldozed/ - Cached - Similar



Are Bulldozers Now The Best Neighbor? - CNBC
May 5, 2009 ... So this is what it has come to. A bank in Texas is bulldozing four brand new homes and twelve nearly finished homes in Victorville city, ...
www.cnbc.com/id/.../Are_Bulldozers_Now_The_Best_Neighbor - Cached



US cities may have to be bulldozed in order to survive - Telegraph
Jun 12, 2009 ... Dozens of US cities may have entire neighbourhoods bulldozed as part of drastic ... Flint's recovery efforts have been helped by a new state law passed a few ... no trace remaining of the homes that once stood there. ...
www.telegraph.co.uk/.../US-cities-may-have-to-be-bulldozed-in-order-to-survive.html - Similar - Add to iGoogle

[eridani]

24. So let's funnel those construction workers into green retrofitting n/t

[leftofcool]

5. Already recovering here

Sales are up a bit in the Annapolis/DC area. Still a buyers market but we were not hit as bad here with foreclosures.

[Yo_Mama]

16. Largely because of government employment

And unfortunately that's not going to be the case across the country.

The problem with the housing market is hangover from the insanity plus jobs. We can slowly work off the hangover, but without good jobs and decent wages, the next gen of first-time buyers, who really support the entire market, will be very slim.

[EFerrari]

13. We had just been approved for a construction loan

to build an assisted living facility on one of the lots up here. Guess what -- the bank pulled out. And now, of course, there are no loans. If we hang onto to this place until we find a loan, it will be a miracle.

[shanti]

14. my home

in 2005, it was worth 3x what i paid for it. now after reassessment (just done), it's worth 12,000 more, but i'm 1,000 underwater. if i'd been in a position to sell in 2005, i'd have made out like a bandit, but the timing was off. oh well, that's the breaks....:shrug: it was never intended to be a bank, just a home.

there are lots of deals to be had now, if you have cash in hand.

[SoCalDem]

15. same here.. same old ugly house since 1982..but she's getting a facelift

two walls come down on Wednesday ../new tile throughout next month and then new kitchen in Sept:)..only took us nearly 30 years:rofl:

our master plan to sell & pay cash for a new manufactured 2 br home, ended..and now we're stuck in the old 4 bedroom house..but we are resigned to our fate, and are making it a bit nicer of our declining years:)

[shanti]

23. i heard that!

i'm sure you'll love your new kitchen! i remodeled in 2004 (pergo, bathroom, doors, windows, gutters, etc.). still have the kitchen left to do, the most expensive thing. have fun, it's very stressful!

i would have loved to cash out and buy some land and a mobile out in the country in oregon or washington and have no mortgage. now i'm stuck, oh well, i shall make the best of it.

[RT Atlanta]

17. a little off topic

but that picture in your signature line is crazy... talk about a clear-cut neighborhood.

[SoCalDem]

19. that development was supposed to have 750 homes

we can assume that at least 4 of those were the model homes, so very few chumps bought into that "community"..and the whole town was at one time considering bankruptcy.. there's a big article with many more pics online..I googled "abandoned housing developments" and came up with this and many more:(

[RT Atlanta]

21. there are plenty of sites like that in and around ATL

where the infrastructure (roads, utilities, plumbing stubs, etc.) were put in, but aside from that you, just have open space.