I think the reality of our economic and banking systems have really started to sink in with the general public. People are talking, and not much of it is positive.

Definitely. The people in my circles are finally acknowledging what I was saying for most of 2007 – the ride is over. I have some acquaintances who as recently as January were still insisting that Seattle/Bellevue housing was a great investment. I think they’re finally seeing the writing on the wall.

I’m just saying that the MSM has its share of blame for not reporting on the credit bubble as it was happening. There should have been investigative reporters back 3-4 years ago exposing this stuff. They dropped the ball.

Personally I think “the media” had little to do with the crazy run-up. Blame for the run-up can be placed on the absurd availability of cheap money to anyone and everyone, and people’s willingness to jump head first into said financial products. Once the easy money got things rolling, mass psychology maintained and built the momentum.

Perhaps the media may have been a small part of the mass psychology factor, but I think seeing people seeing their friends and neighbors sell their houses for 30% more than they paid 2 years ago, or moving into McMansions with zero down, etc… would have had a much larger effect than a newspaper stories.

Isn’t it luck of the draw that FredomLover posted an overt blame on the media directly below your post?

FL, what do you think of Tim’s argument? you can’t have it both ways.

The last portion of the conference, a question-and-answer session, admonished the media for depressing consumer confidence by focusing on only the negative aspects of housing data.
…
George Chamberlin, a panelist at the event and columnist for the North County Times, said that some news reporters biased their reports because they are jealous of homeowners.

Most real estate agents who spoke at the conference seemed to agree, with one agent suggesting that agents and builders pull all advertising from newspapers until positive articles are printed.

“People think the market is down and the market will still go down. That’s not the truth. The market is down, but it’s not going down anymore,” said John Tuccillo, former chief economist for the National Association of Realtors. “I think it’s because consumers focus on national news and not enough on local news.”

This is in San Diego, where the local news is worse than the national news.

Also, the MSM is not entirely the local media. I would argue that the national media is the greater force in the MSM, and they have been providing housing disaster headlines on a daily basis since long before prices here showed anything but strong growth. I absolutely agree with your last statement.

I frequently said that the MSM was painting an unrealistically rosy picture of the market. What I did not say was that the landscape of the market was due to what they were saying. Real estate “professionals” are now claiming that the current market landscape is due to what they perceive as incorrect reporting by the MSM.

Its ridiculous for two reasons. 1) The MSM has been under-reporting the local downturn until only the last month or two. 2) The MSM doesn’t drive the market, they react to it (very slowly). By the time you read about it in the paper, it’s been going on for a long time.

Someone is actually arguing that the MSM is deceiving the sheeple into wrongheaded real estate perceptions? Sheesh! Pathetic……although somehow it does seem vaguely familiar.

If this is true, why make payments anymore, at all?

We all know how lovely ‘deep pockets’ are.
And, could the locations be any more sublime?
Let’s hope that he comes back all covered with the deliciously fragrant ooze of lucre.

The challenge that I see is that one can only withdrawl, without penalty, $10,000 if a first time buyer, which as a down payment here in the Seattle area is a joke.

It won’t be much of a joke if median prices drop 50% or more in the next 3 years.

WaMu Alt-A Pool Revisited

That is already happening. Over at RCG, they have been posting new lender criteria as it comes out. Once an area moves into the prices falling category, the down payment requirements start to ratchet up. You might be able to find a 0 down load in Seattle still, but not by the end of the year. I recall that one lender had put into place something like 65% LTV requirements for Nevada and some California areas.

What impacts future house prices and no one is talking about it, even Dr. Roubini, is the massive impact of 80 milllion Baby Boomers retiring on annuities based on the current dinky interest rates the banks give us for saving.

If asset prices keep falling then low interest rates, and annuities, won’t look so bad. You may actually be better off getting a .5% return on your deposits rather than a 20% gain if the prices you have to pay fall by 25%. During the ’90s you actually had people grateful to get a slight negative return on their deposits just for the assurance their capital losses wouldn’t were limited (i.e. you wouldn’t lose more than .5% or so). A .5% negative return looks very attractive when stocks, real-estate, and commodities are dropping in value like a rock.

Don’t forget that the very LAST thing a lender wants is to have customers with negative equity, since the incidence of foreclosure increases dramatically in these cases.

Many holders of these HELOC’s now state they lost their cushion for possible layoffs and medical problems. This adds to even more fear.

I asked the investors what they are doing with their cash because they are obviously paying about 7-8%. All are not even looking at Real Estate at this time which leads me to believe I must start looking again. Many are stuck with homes they couldn’t sell and the smell of blood is just everywhere. We are early in the game but GEMS are popping up everywhere I look in Pierce County and Nevada.

Off to an Investor tour of Reno, Vegas, and Phoenix with people that have very deep pockets. I will report back the carnage as I see it.

Ray Pepper
http://www.500Realty.net

Besides, there are a number of whole industries that we can probably do without.

What impacts future house prices and no one is talking about it, even Dr. Roubini, is the massive impact of 80 milllion Baby Boomers retiring on annuities based on the current dinky interest rates the banks give us for saving.

The 80 million 401K Baby Boomer incomes is the interest; unless you suck the principle dry faster too, which creates a harsher effect on real estate prices as the interest income plummets toward zero. The Boomers won’t be spending if they make a crummy income. That means they won’t be travelling in Boeing jets, buying cars, eating at restaurants, buying computers, etc, etc…..imagine the job destruction on Seattle’s economy and further real estate price decreases with retired Boomers unplugging their local spending, because their retirements’ saving interest is a joke, to bail out the banks’ subprime messes.

Our economy is not savings-based. It’s consumption NOW based. Whole industries would collapse overnight if the American people decided to save, starting with renting.

I’d be surprised if 20% down becomes the norm again. You’re talking about saving a huge sum of money in a savings-adverse society already saddled with too much debt. Meanwhile, there are plenty of companies desperately competing for their business.

Sorry, but I think big down-payments will be the norm by the time we hit bottom. The degree to which lending standards (including required down-payments) are tightened is directly correlated to the percentage that real-estate prices decline. Lenders do NOT want to get stuck with borrowers who have negative equity, and will take whatever it takes to prevent that from happening.

If national home prices drop 20% to 25%, as many economists are now predicting, then lenders will begin demanding down-payments of that magnitude, since they will have seen that such drops are indeed possible. If national home prices drop 30% or more, then we could even see down-payment requirements go above 20%.

Its simple, lets get real estate prices properly butcher axed. Then the buyers will be back.

But some say, but ohhhhhh….what about the ones that lose their shirt? Would if we fall into a recession?

I’m laughing now…..”fall into a recession”…..wake up and smell the coffee, we’ve been in a recession for a long time now and to quote Bruce Springsteen, “…and those jobs ain’t comin’ back….”. Get used to it.

Here’s a great URL documenting the top 30 occupations in America for the next 10 years from the Bureau of Labor Statistics:

http://www.bls.gov/news.release/ecopro.t05.htm

Note: Most of them do not require a degree. None of them are for engineers. The list is horrifying isn’t it. It tells me household wages are going way down in the future and so are real estate prices. There’s no soft landing for real estate, just more lowering of prices to get used to continue for many years to come.

If you have a kid in college and they aren’t working right now, I’d put ‘em to work right now, while they finish college…..or don’t clean their room out right away, just yet.

Getting a 2nd mortgage is not really “skirting around PMI” because the higher interest of the 2nd loan is essentially the “insurance” against default. OK, so it’s not called PMI and it’s not called “insurance” either, but it’s essentially the same thing. It’s just tax deductible so people figured that it was the best option.

I don’t disagree with your assertion that single digit down payments are here to stay. In fact, it never *was* 20% as your only option. Before the recent credit boom you could always do FHA, PMI, etc.

What we’re returning to is *some* element of down-payment (3-10%?), realistic underwriting based on the capacity to repay (job!), and a realistic assessment of whether you’re the kind of person that it likely to repay (credit history/score). Returning to these sane underwriting standards is a big deal, of course, and I don’t want to underplay it. I just don’t want everyone thinking that they *must* have 20% down in order to buy a house right now or in the future.

We can continue to fool ourselves about the affordability of mortgages with single-digit down payments. It won’t make those people any less knife-catchers.

second, house prices falling nationally has the potential to be catastrophic for our economy/currency. Japan’s point is that a slow deflation of a bubble over a decade or two is preferable to a collapse. slow or no growth for 10-15 years is less traumatic than negative 10% growth for 2-3 years.

but those appear to be our choices today. trillions of dollars were added to the economy by unsupported asset appreciation and now those trillions are being taken back out. this is inevitably impacting economic growth.

I’d expect to see the risk of low down payments more accurately priced (no more skirting around PMI with home equity loans), but I think single digit down payments are here to stay.