Is anyone else excited to see home values dropping?
Answer:
First off, a small correction: Home prices are dropping, not their values. Has anybody seen a decrease in property taxes because their home has been appraised at less than last year?
Home values are what the government says a home is worth. Home prices are what a buyer says the home is worth, big difference!
Sellers are lowering the prices on their homes because the buyers are less able to meet those prices and because there is an excess of inventory available in many areas. The fact that interest rates have risen 17 times in a row does not help the market at all. The big change in the market is that prices are dropping back towards the real market values established by the assessors rather than the wishful thinking prices set by the sellers (and in some cases recommended by agents)
ya i am need to buy my fist House to
i wouldn't get too excited. the strength of the economy is based on consumer spending not exports. and that consumer spending is fuelled by borrowing secured against the equity in property. if house prices drop too much the economy will nose dive and we'll all be out of a job.
This is rarely ever good. There is usually a correlation between the dropping of housing prices and the increase in interest rates. This is the case with the housing market now. Last year, as a first time home buyer, you could get a 200K house at a rate of 6% for a principal& interest payment of $1200 per month. Let's say that house has dropped to 180K now. Well, now the interest rates are 7.5%, so your P&I payment would actually be higher.. $1260 monthly
I agree with the other guy; I'm worried that the housing market will take the rest of the economy down with it. Since I already own a house and I'm not in the market for another one, falling home prices don't do anything for me. But we've got plenty of equity, so we probably won't be in deep doo-doo like some recent buyers.
If you're hoping the price declines will allow you to buy your first house, watch out. Nobody can predict when the market will stop falling. You might buy when you think it's low, and then watch the prices drop out from under you. Your mortgage could quickly become "upside down", meaning the house is worth less than the amount you owe on the mortgage.
Trying to buy in at the bottom of a price drop is known in financial circles as "catching a falling knife". I think that conveys a bit of the risk involved.
Maybe you will, maybe you won't. Interest rates are on the rise, as are utility costs so even with a lower "price tag" that new home might still be out of reach!
I'm glad because it means you can buy a house closer to what it should be worth. I'm sad because a lot of people I care about may be hurt when the crazy, adjustable mortgages they got so they could afford an overpriced house go up and they suddenly can't afford their payments, and won't be able to get out for what they owe.
I used to live in Silicon Valley and I've seen people badly burned before, some times to the tune of more than $100K.
I understand where you are coming from. But you need to realize as soon as you become a homeowner, you will be eligible to become a home seller and you will want values to increase.
If you are talking about houses in the US - home values dropping than by all means I know I am moving south to come live there. But, if you are speaking of Canada, forget it. The house values here are still mean and expensive as heck. I would rather wait till the value swoops down a bit.
Not if you are a home owner trying to sell.
If you're a homeowner, you'll want to see home values rise, it's a big investment!
The market was due for a correction. I am happy for you. You are buying at a great time, and many will still make money except for those who bought in the past year or two.they will have to wait it out.
Does this mean my taxes will go down. Oh please make it mean that.
nope I am pised off that they got so far out of wack. This web site tell how the scamed you and everybody els.
http://www.breakingbubble.com/index.htm.
this is good and bad- if the houses prices drooping- interest rate go up and people can afford less house with the same money, but everything will come back to normal in couple years, i hope.
I am excited. The estimate is 20% correction.
How to value a property during market downturn?
Housing market continues to slump. Now we can calculate true value of a property easily. As price decline, we don't need to guess and factor in the potential price appreciation while calculating home value. Without the guesswork, figures are more accurate.
Let's use following example:
Today, a typical 15 years old, two bedrooms condo/townhouse is priced around $500,000 and $550,000 in Sunnyvale, California. Rent for similar condo/townhouse is $2000/month.
If you are a home owner, $2,000/month in rent means $20,000 a year in profit ($24,000 per year in rent, minus $4,000 maintenance costs). A $20,000 income is equilevant of owning $400,000 bonds or CDs, because current yield of 30 Years U.S. treasuries are 5% (5% of $400,000 is $20,000). Bank CDs have similiar yields.
In our example, the two bedrooms condo/townhouse is 20% to 25% overpriced. They should be priced at $400,000.
It is interesting to note that if we redo the calculation from buyer's perspective instead of seller's perspective, the figures are even more shocking.
Mortgage payment consists of two parts: mortgage interests and mortgage principal. The interests portion is similar to rent. If you pay interest, it disappears and doesn't add equity to the property. To fully simulate characteristics of renting, we assume buyer will apply for a zero down, interest-only loan.
It turns out that rent of $2000/month is equivelant to mortgage payment of a $340,000 loan at 7.0% APR. And comparing $340,000 loan to $500,000 or $550,000 price tag, from buyer's view, the two bedrooms condo/townhouse is 30% to 35% overpriced.
One may ask, why is there a discrepancy between two perspectives of the buyer and owner?
The discrepancy is a result of 2% differences in interest rate that buyer borrow comparing to yields of bonds and CDs that owners would get. We understand that buyer would always pay more. That is the premium of buying to own. However, looking from home owner's perspective, current housing market is probably 20% to 25% overpriced. We recommand investors to wait for a better entry point.
The answers post by the user, for information only, BAnswer.com does not guarantee the right.
Other Questions and Answers: