Metro City Homes Up For Auction in June?
Tacoma Untapped is reporting that Metro City Homes (2300 Yakima) is headed for the foreclosure auction block. 13 unsold townhomes and 17 vacant lots make up the holding still owned by The Dwelling Company.
The public auction is scheduled for 10:00 am, June 26th outside the Pierce County Courthouse. The property will be sold to the highest and best bidder. The developer has until June 15th to clear the default to avoid the auction sale.
Ouch. Hopefully whatever happens will involve folks moving into those homes.
Link to Tacoma Untapped
Link to Metro City Homes
Filed under: General
54 comments
E Erik B. April 1, 2009
Here’s a chance to get a condo at a bargain price.
C crenshaw sepulveda April 1, 2009
According to their website you can contact Jerry, an “Urban Living Specialist”. Not sure WTF is an “Urban Living Specialist” is but it looks like they are still attempting to sell these turkeys in advance of the auction. Check out their site, for sure. It is some great laughs. “Urban Living Specialist” lol.
R RR Anderson April 1, 2009
anybody catch last weekends ‘this american life’ on NPR? had a whole act devoted to condo buildings in foreclosure and how bad it sucks to be stuck in one of those units as a condo owner.
J Jake April 1, 2009
fyi: Metro City Homes are not condos…
S Steven April 1, 2009
Jake,
If they are not condo’s, what are they?
Steven
B boomer April 1, 2009
Technically they are townhomes.
V Vlorg, the Mighty April 1, 2009
“If they are not condo’s, what are they?”
First: It’s condos, not condo’s. Plural versus posessive, people!
Second: Call those housing units whatever you like, they are still hideous. Why oh why couldn’t anyone build nice looking housing during the last 10 years?
The only things that went up in Tacoma that look halfway decent are 505 Broadway and the (RIP) Esplanade.
J Jake April 1, 2009
Zero-lot line attached homes/townhomes.
A altered Chords April 1, 2009
Forget condos and townhouses. Buy a real house in the Lincoln District.
You can borrow eggs or sugar (not beer) from altered chords.
E Erik S April 1, 2009
Normally I wouldn’t bother to make or recognize a distinction between ZLL places and condos, but I think that in this case not being attached to a sinking ship condo association and the related dues is probably a good thing.
Mind you, if there’s no HOA, I’m not sure how they resolve issues inherent in the shared walls and roof. I guess they can sue each other over pest infestations, deferred maintenance truobles, and the like. The joy!
V Vlorg, the Mighty April 1, 2009
HOA = the American form of Communism.
If you pay $X hundreds of thousands of dollars for a home, you should be damn well able to have whatever color door you like and whatever (leagal) landscaping you want.
I will live in a box below the SR-509 bridge before I’m held hostage by some HOA.
E Erik S April 1, 2009
I hear that, Vlorg. People tell me I’m a slave to my landlord because I rent. But at least I can move easily. If I’m going to sign contract of indentured servitude with a bank (a mortgage) then I’m going to make sure that I at least get my own patch of dirt (however tiny) to spoil as I see fit.
W Whitney staff April 2, 2009
Just a gentle reminder to all our commenters:
We reserve the right to delete comments without warning, but may ask the contributor to reconsider their remarks before the comment is deleted and/or the contributor is blocked from the site.
PLEASE use legit email addresses. We (Derek and I) are the only ones who see them and they are used to clear up confusion about comments.
We reserve the right to pull comments when we have questions of them. And when we can’t contact you to clear up confusion or concern they are lost forever.
If any commenters haven’t read our guidelines, please do.
Thanks!
Whitney
P patrick April 2, 2009
HOA’s are more like fascism, where the HOA board thinks that they have to be taking action against somebody at all times because that’s the natural order of things and will ensure that everyone knows who’s boss and everyone toes the line.
C crenshaw sepulveda April 2, 2009
I, for one, could never imagine legitimate discourse being deleted from this site. Maybe some other site, but certainly not Exit 133.
V Vlorg, the Mighty April 2, 2009
The email is legit.
And I’m sorry if y’alls think I am cantankerous. But I cannot help how I feel about the abomination that we call the HOA. I am not sory for that.
If you are willing to have an HOA lord over you, then by all means, waste your money on a condo or being in a gated community.
Meanwhile, I’ll take some land znd grow my own food or install solar panels or build a solar water heater.
T Thorax O'Tool April 3, 2009
17 vacant lots could = 17 community gardens producing literally several tons of fresh veggies
13 unsold vacant townhomes could = homes for 13 homeless families.
Clearly, these units have no actual monetary value. If they did, then someone would have bought them at some price. Maybe we should just let Reckless Lending Bankcorp, Inc. take the hit that they deserve and put some people in our community who need the housing into the currently vacant housing. It’s far better than leaving them to rot in this rather cold and wet spring.
M Marguerite April 5, 2009
I think the problem is just that their price point is too high for what’s going on down there. City Steps is blowing out their similar sized units at 199k. If MCH were selling their units at 199k they would probably see a little action.
E Exit 134 April 5, 2009
For a city with a median income in 2007 of $39K, the $199,000 price point is too high, period.
Drop it to 3x the median income and those babies will fly off the shelves like hot cakes.
Besides, look at the condo-buying demographic: mostly the young without kids and the empty-nesters looking to downsize. Typically, the empty-nesters would look for something more like the Esplanade or 505 Broadway (they’re the most likely to have the income/assets needed to buy a half-million dollar condo).
That leaves Metro City and the rest with the 18-30 demographic. A decidedly non-power earning group. No bank will give you a $200K loan unless you make at least $66K a year… well, no bank that isn’t insolvent after the last round of reckless lending.
How many of us under 30-somethings make $66,000 a year or more? I sure don’t, but my measly $35K is pretty good for a 26 year old single guy. But not good enough to buy one of those condos.
Metro Condos is suffering from the same fate as all the others: The price is just too high for the market to support.
T Thorax O'Tool April 6, 2009
Maybe, just maybe condos aren’t the eternally hot item the NAR wanted us to believe.
With housing prices roughly equaling condo prices, I’d wager 2/3 of potential condo buyers will get a house.
M Marguerite April 6, 2009
I have several qualified twenty and thirtysomethings looking in the 170k-250k price ranges right now downtown. A single high school teacher with a savings, little debt and good credit is very comfortable looking in the 180-199k range. Another newlywed couple are looking in the 200-225k range- their combined incomes making the $1500 payment a number they are comfortable with.
Those people are getting FHA loans, putting 3.5% down. For a 195k loan, the payment is around $1350 including taxes, insurance, etc.
In my opinion (and I’m biased because the majority of my clients are looking for homes under 250k) there are not enough affordable homes downtown. Tacoma is full of small 300k+ homes and condos for rich downsizing babyboomers that don’t seem to want to join us in the city. It’s frustrating to see all those empty spaces and have clients with good incomes who love the city, want to live downtown, and don’t have much in the way of choices in their price range.
Also, Exit 134, (I don’t mean to keep geeking out about this but it’s my favorite subject), for a person whose income is around 40k, that means according to FHA they can afford a house payment around $1,000 month- which means a house roughly 140k or less- which we are blessed to have quite a few of in 98405 right now! :)
T Tjorax O'Tool April 6, 2009
@ Margurite:
The $140,000 number… that’s $1,000 a month for mortgage payment only. What do you get for $1,000 per month when PMI, home owner’s insurance and property taxes are rolled in (as they typically are)?
$1K seems more like it’d actually afford you maybe $700-750 per month for the actual mortgage… which is pushing 134 down into the $100K range.
As my understanding is, your total hosing cost should never exceed 30% of your monthly income. That means mortgage, insurances, taxes and (god forbid) HOA dues.
Buying a house only makes sense if it is the same cost or cheaper than renting a comparable property. 134’s current housing is unknown, but likely he’s in an apartment (not many single guys rent a whole house). So, let’s assume he pays $750 for rent. Then buying a house for $110,000 makes sense. Buying one for $150,000 does not.
This is all more the reason why housing prices will fall more ‘round here. We’re still at 5.6x median income. Prices will fall until we get to about 3x. Look at the markets where housing has stopped falling: parts of the midwest, Michigan, etc. Why? Because houses are at that magic 3x number. Let’s not forget that interest rates WILL have to go up sooner than later, thus requiring prices to drop to be even remotely affordable (you can buy with approximately the same payment $300K @ 3% or $160K @ 6%). Then there is rapidly increasing employment… those folks certainly won’t be buying and many, many of them will lose their houses. And let’s not even forget the $1,500,000,000,000 in Alt-A and Pay Option loans that recast this year.
Anyone who thinks “we’re special” and that “houses are fundamentally more valuable here” need to stop drinking the Pink Kool-Aid and stop listening to the NAR.
J jamie from thriceallamerican April 6, 2009
Is “Tjorax O’Tool” T’OT’s Swedish cousin?
B boomer April 6, 2009
@ O’Tool
With today’s rates, the total monthly mortgage payment of a $140,000 home would be right at $1,000 or even slightly under depending on your FICO — that would include taxes/insurance.
J Jesse April 6, 2009
Strong HOA communities command more money when they go for sale as the new buyers know what to expect. It also stops the renegade idiots from “doing as they please with thier house” (see junk cars, no yard, and oodles of big dogs, etc., etc., etc.) therefore destroying your ability to sell your house as thier neighbor.
Also, I thing the bottom of the real estate market is, if not now, within months. Obama is making it so that foreclosures and bailouts will help all those people liquidating thier homes in a panic. Foreclosures will almost stop- and his projects have started. Therefore, your comparable value properties won’t be fire sales, repo’s, bank owned, and the like. This will stabalize housing prices at the least.
You can’t have a good ecomomy when someone making $35k a year is losing $25k a year in housing value. As well, noone would buy anything in this scenario… including other big ticket items.
Whether you like this gov’t or not, you can’t argue that they are doing everything they know how to stabalize the markets, housing, and the world economy.
T Thorax O'Tool April 7, 2009
This is neither the time nor place to go into this, but the open checkbook from Uncle Sam WILL NOT solve the underlying problems in the economy. A national debt nearly equaling the GDP is as boneheaded as you can get. It will cause more harm than good, even if you try to wait it out a very long time. Look at Japan’s “Lost Decade”. They spent trillions of Yen on bridges to nowhere, and they still had a decade-long deflationary recession. We’re no different.
What we’re getting from DC is a bandaid at best, while the infection still lingers. Housing prices will stabilize when they reach the historic 3x ratio. No sooner, no later. They’ll stabilize when people start thinking again and realize that owner-occupied residential real estate has never nor will it ever be a “key to wealth”. You make $ from real estate when you have rental properties, own a condo tower or apartment block. NOT from the house you live in. That’s shelter and a home.
J Jesse April 7, 2009
3x ratio for housing is a historic figure over the last… century maybe?? If so, 3x does not include a doubling of the workforce and a rise in two (legitimate) income families. So where $36k was the income when just dad worked (the average income in Tacoma per capita for one person working)for his family, you have to consider moms income today too. Let’s say she makes about $28k (women usually get screwed and make a bit less) then you have $64k income. 3x $64k =$192k. Yes, the median income is $44,500-ish. All these figures, though, all the homeless/low income housing in Tacoma proper as well… therefore dragging down the average. Median income in Pierce County is way higher ($60k plus compared to Tacoma proper’s $44k! It’s that big a difference)and it too considers all those dragging down the average (but at a smaller percentage impact as those folks are mostly found in Tacoma proper)by having one income or a significantly lower income than average. So, a house at 3x average income at $132,000 is a dream in itself —- nevermind the fact that the $192,000 figure as stated above is at about what costs are at now in Tacoma proper— well maybe a smidge low…
Good luck EVER finding the average house again for $132,000.
T Thorax O'Tool April 7, 2009
The approximate 3x ratio has been holding since the 1880s or so. A 13 decade long trend is a pretty powerful one. This is the trend , as obviously we’ve had booms (like the 20s) and crashes (like the 30s).
Let’s not forget that banks are returning to good lending practices, requiring 20% down and not approving you for houses that you actually can’t afford. The most standard metric, until the mortgage orgy for the last few years, was you can afford to buy a house that costs approximately 3 times your annual income, resulting in, as noted several times above, a monthly payment not exceeding 30% of your monthly pay. So yes, if you make $70K you can afford a $210K house. Not a $500K one.
The historical trend for Tacoma has been 3.3 x median income (I’m trying to hunt down the chart that shows it). Until prices return to that level, housing will not stabilize. Period. We’re 12-18 months behind the trend here, but we will follow it… the so called “bottom” will not be some sort of “V” shaped recovery, it will be an “L” shaped stabilization. Prices will resume their 1.4% historical annual increase (which is lower than stocks). Those enormous gains we saw during the last 8 years won’t be back for a few generations… long enough for most of us to be dead or in homes (not that the great-great grandkids would heed our warnings anyway).
You gotta remember, housing is not the problem, it’s just a symptom of the underlying problems in the system. We’ve been living off a debt orgy since the days of Reganomics, and the consequences are certainly coming home now. We have an overcapacity and overabundance of everything. Too many cars (Detroit can’t move them to save their lives… even Toyota and Honda are tanking). Too many houses (there’s 10% more housing units in this country than there are people to fill them). Too many computers and other electronic gizmos (there are warehouses full of LCD TVs in Korea and China that they can’t sell). There is too much debt (people and businesses don’t want to add more, and the national debt is racing to reach the GDP).
This is basic supply and demand, a surplus of items drives prices down. This is a deflationary cycle. Prices are down, asset values are down, wages and employment are down.
It may take until 2011 or 2013, but median housing prices will drop to the 3x ratio. It’s obvious that it has to happen before the economy can truly begin to heal. If you really believe things will go back to how they were in 2006, you’re listening to too much mainstream media propaganda.
I’ve been saying this stuff for years . If you don’t wish to think for yourself and dig up the numbers for yourself, then go ahead and believe what the NAR want you to. Otherwise, instead of dismissing me, try your own research and use some common sense and logic. You’ll find I’m coming to my conclusions for good reason.
E Erik S April 7, 2009
Thorax gets it. Prices may drop another 6 months or another 24 months. I don’t know. No one does. But one thing is as close to a sure thing as you’ll get anywhere: appreciation, especially when adjusted for inflation, will be almost imperceptible for some time to come.
J Jim C April 7, 2009
Nice rant on 28, Thorax, in my opinion that is one of the most reasonable assessments of the economic climate I’ve heard. What I’ve been saying for a long time: we (as in, 21st-century North Americans) are long overdue for an enormous standard-of-living correction – and I believe the collapse of the housing market is only the beginning.
As Americans, we have been educated and conditioned to expect that it is our birthright to live in an ever-expanding and world-leading commonwealth; we are told to believe that we are always on an infinite, neverending journey to a neoliberal pseudocapitalist utopia. Housing prices always HAVE TO go up eventually, right?
What’s worse is people’s tendency to expect that nothing will ever change, I think a more appropriate question to be asking right now is not “when are housing prices going to stop falling”, but what percentage of our nation’s net worth is going to disappear, magically, over the next few years because the ridiculously inflated imaginary value of all of this property is blowing away like dandelion seeds in a stiff breeze (to say nothing of the loss of imaginary wealth of the derivatives market…)
J Jesse April 8, 2009
Thorax: If the average house trends all the way down to $132k, I’ll buy you a house. You heard it here first.
V Vlorg, the Mighty April 8, 2009
@ Thorax: “3.3x median income”
@ Jesse: “Yes, the median income is $44,500-ish” and “ I’ll buy you a $132K house”
$44,500 × 3.3 = $146850
I think you owe Thorax a house if the median house price reaches $146,000.
And I think you’ll be writing a large check in 18-24 months.
Amazing how 24 months ago, the question was “how high will housing go?” not “how low?” like it is today. I’d bet a side of beef that Thorx, Erik S, Jim C, and others who are on the lower-value train were absolutely mocked and ridiculed 30 months ago for claiming the (then) current prices were unsustainable and would have to fall.
Given past performance, I’d put my bet on the side championed by Thorax.
B boomer April 8, 2009
I am one of the biggest bears on housing prices but we will never see the median price of Pierce hit the $140k levels.
We are currently at $228k (from high of $285k) and will likely bottom around the $180k-$190k levels at best.
If the Puget Sound region wasn’t so desirable and didn’t have many geographical building challenges then I might agree.
V Vlorg, the Mighty April 8, 2009
Now, before I begin my Mighty Rant, I should clear up that I have a degree in Finance, and I worked for 4 years with Charles Schwab. I am not an expert, but I know more than most. I got out of the financial industry in 2005 because I saw the writing on the wall.
Now proceed onto the rant!
There is whatever % to go to get houses to affordability in a given market, regardless of what Case-Schiller and the FHA say. People cannot and will not pull the trigger until they feel they can afford it. Underwater homeowners don’t feel like it’s smart to buy. The young without the 20% down don’t feel like they can buy. Those with substellar credit will never get 4.625% (4.99% APR). Those with no job, or a job that is in peril don’t want to buy. There is no “bottom in sight”. I’ll tell you exactly how the media and politicians will spin this. A resession exceeding a 10% cut in GDP or lasting longer than 12 quarters is classified as a depression . But that would be political sucide to let it happen! Think of the poor bankers and stockbrokers! And the children!
The talking heds in DC and in the MSM will declare the recession over before we hit month 36 (perhaps with the GDP going up 0.1%?). But nohing will really be getting bertter. We’ll get pegged with a “back-to-back” recession, each not exceeding 3 years or -9% GDP. Mark my words, and bet a side of beef on it. Hell, bet the whole cow.
Now onto topics of relavance.
The median cost in Tacoma is somewhere around $225K last I read. Jesse tells me that the median income is $44,500. Thorax tells me the historical trend since 18-whatever for Tacoma is running 3.3x
The Federal govenment tells me the the U-3 is 8.5% and the U-6 is 15%. High-paying employers like Russell tell me they want to trade blue collar T-Town for glitzy white-collar Seattle. Banks tell me I need 20% down and 620 or better FICO to even think about getting a loan.
Logic tells me that either that median income needs to drop to $146,000 or Tacoma’s median income needs to jump to $75,000. Only one of those options is plausible. Wanna guess which one?
J Jesse April 9, 2009
It’s not necessarily a 3.3x or 3x factor at all. Housing prices usually end up about 25-28% of the average income in payment. The feds will lower the interest rate to 0.5% before they watch trillions in U.S. wealth evaporate.
High interest rates equal low prices.
Low interest rates equal high prices.
I’m with Boomer. It’ll get about 10% lower and flat line before recovery.
PS – Tacoma is affected by the Seattle market as well.
E Erik S April 9, 2009
All hail Vlorg, the Mighty!
The rest of you: don’t forget that if housing markets stabilize due to fed-suppressed interest rates, prices will face renewed downward pressure when interest rates rise again to reach some kind of sustainable level. And, sadly, with all the money we have, are, and will be printing, “sustainable” probably isn’t going to mean the kind of long-term interest rates that produce mortgages in the 5.5%-6.5% range.
At best, prices will be stagnant for a very, very long time.
E Erik S April 9, 2009
You raise a good point, Thorax. Even at current rates, issuing and holding a mortgage may be a losing proposition for a bank over the the long run. At some point, banks simply won’t lend as the inflation risk is too great.
A friend of mine bought a house in Lacey back in ’79 (a year that I remember, but barely) by assuming a VA loan. He had to do this because that year the going rate for a mortgage loan was well above the 12% cap then in place under Washington’s usury laws. Effectively, there were no mortgage loans to be had in this state that year because anyone making such a loan wouldn’t collect enough interest to offset inflation.
T Thorax O'Tool April 10, 2009
Assuming Tacoma got a 25% increase is a fallacy. When dealing with finances that actually affect people’s lives, assuming a 25% increase is irresponsible. We know damn well that places like Seattle have been siphoning off us, as well that the lion’s share of money spent during the boom was in Seattle/Bellevue. I didn’t seen anything near the amount spent there being done here, even in proportion. Provide me proof that the median in Tacoma went up to $47,375 and I’ll believe you. I’d say if there was an increase, 10% is more believable.
But even if we get to some sort of mythical 25%, id does not change the affordability of housing here. Even at $47K, prices are still unrealistic unless we maintain a 3.675% APR on mortgages. Again, not sustainable. All this monkeying around Uncle Sam is doing in the markets will only delay and worsen the inevitable.
Contrary to the Keynsians, debt does not equal wealth, you cannot spend your way out of debt.
I’m so tired of preaching this. Sometimes the people who just won’t listen to math and logic are also those who stand to gain immensely if it was 2006 again. It’s not, get over it. The boom years are gone until we’re mostly gone and the great-grandkids repeat our errors, just like we repeated the errors of our great-grandparents. Uncle Sam can only monkey with rates for so long, can keep an asset overinflated for so long. If you bought after 2003, you overpaid. Plain as that, and nothing Obama or the idiots in DC can do will change that.
I’m done. I can only repeat myself 10,000 times. I have laid out just a portion of the facts, and it’s clear that prices are going to their 2001-or-so levels again. There is a plethora of stuff I did not even touch on with much detail… like the looming $1.5 trillion in Pay-option and Alt-A’s that recast beginning this year (google “negative amortization” to see why this is a ticking time bomb). I did not touch on the waves of commercial real estate that is starting to default. I did not touch on what the “official” unemployment going north of 9% entails for thousands of homeowners already on the brink. I did not touch on the tens of thousands of REOs that banks are sitting on, and not listing. I did not touch on municipalities, counties, states and the Federal government teetering on bankruptcy. I did not touch on the skyrocketing defaults on credit cards and car loans. I did not touch on countries like China and Japan actively selling their dollars to protect themselves domestically. I did not touch on the $Trillions of Our (and our grandchildren’s) tax money we’re pumping to keep insolvent banks afloat. I did not mention the wave of personal and corporate bankruptcies. I did not mention how much worse shape Europe and Asia are than us (especially the EuroZone). I did not mention the credit default swaps time bomb ticking in the market. I did not mention the error of Congress and President Clinton in repealing the Glass-Stegall act in 1999.
This mess we’re in is so damn much bigger than housing. In fact, housing is a mere symptom of the much bigger problem.
I am not captain doom and gloom. I am not calling for “the end of the world as we know it” or the “collapse of America”. Crap like that is best left to the loonies on talk radio. I’m just calling it like it appears to anyone willing to look at the situation and do the math. The last 30 years have been unsustainable debt orgies, with worthless paper to back it up. Everything is overdone now. Assets are over-priced, people are over-taxed and over-burdened with debt, governments overspent, homebuilders and developers overbuilt, TV and auto manufacturers overproduced.
Ugh. Thinking about the actual state of affairs makes me ill and my head hurt; it’s such a mess.
Personally, I am not buying until the interest rates rise and prices come down more. I don’t share my finances, but I did just get pre-approved by US Bank for $225,000. But I’m not taking it at least until mid 2010 or 2011. By then I’ll have 35% to put down.
If you buy now, proceed with extreme caution, unless you plan on staying put for a decade.
Otherwise, be careful or I may be the one buying your house at an auction in 24 months…
T Thorax O'Tool April 10, 2009
Saying buying is superior to renting is highly subjective.
I do not pay for gas, water, trash or maintenance. I did not have to pay for the flooded basement this winter when pipes froze during that cold snap. I did not have to pay to repaint the building last year. I did not have to pay for the new washing machine last May. I do not pay ever-escalating property taxes.
“but-but you pay for those in your rent!”
Quite so. But my portion in this 16-unit building is 1/16th what a homeowner would pay… when’s the last time you paid only 6% of any repair on your home?
My rent is $750. For two years, that’s $18,000. If I get a $1400 mortgage (which is what $225K costs you), that’s $33,600… $15,600 more than my rent… not including additional utilities, taxes and (god forbid, HOA). Do you have $15,000 in savings? If I put this $15,000 I saved in a 1 year CD with GMAC I get 2.62%. Not much, but better than the -8% houses have been doing and better than the historical (inflation adjusted) 1.4% annual houses have done.
“but-but you don’t own it”
Quite so. I am not tied to it. I can move at short notice if I need to or see a better deal. If I lose my job, I can find a cheaper place far quicker than I can sell… especially in this market. I grow my veggies at a free community garden. I am located in the 98403 and like it very much… the area is convenient to work, family, groceries and parks. I like where I live, but could never afford the $300K+ prices this area currently commands. But because I rent, I can live in a better neighborhood than I can afford to buy in. At this point in my life as a non-married 27 year old guy, this flexibility is worth more than anything a house can offer.
“but-but tax credits!”
Yeah. The $8000 will be around as long as the interest rates are kept artificially low. You don’t buy a house or have kids for a tax break. Tax shelters are for that. Having a house or kids should be because you want to.
“but-but investors!!!”
those with less that stellar credit and 20% down better have cash on hand. I repeat myself again: OWNER OCCUPIED RESIDENTIAL REAL ESTATE IS NOT AN INVESTMENT. Who really cares about investors? They helped create this mess, and they can stew in their own juices.
Remember this, investors. If you put $40,000 down into a house (20% of $200K), and house prices drop 5%, you’ve lost money already. Hell, if house prices drop 1% you’re in the hole. Investors don’t like loss; they’ll stay away until they really think prices have stabilized. Those who jump in too soon will get burned bad… just like all our friends the House Flippers got to deal with when the subprime went Chernobyl.
All asset prices will deflate to their pre-bubble levels. That is a fact. Happened in 1720.
Happened in 1819.
Happened in 1837.
Happened in 1857.
Happened in 1869.
Happened in 1878.
Happened in 1893.
Happened in 1907.
Happened in 1929.
Happening in 2009.
This “housing is the foundation of your wealth” and “house prices never go down” bullcrap the NAR and MSM fed us during the last decade is still people’s battle cry. It’s simply not true on both accounts. House prices can and do fall, housing can easily be your financial ruination as it can be your ticket to wealth.
I’ll tell you the exact date and time when the housing market will stabilize (not recover, those days of 3%+ appreciation are gone for a generation or two). It will be the day Joe and Jane Sixpack stop seeing their home as an investment/ATM machine and start seeing it as it really is: A place to live and raise your family. A place that needs continual repair and upkeep, but is worth the cost. That is when things will level off.
If you really, really want to buy, go ahead and do so. It’s your money… pay as much a month as you want.
But in 2010 I’ll be buying for $200K what you bought today for $275K.
B boomer April 10, 2009
Well, you can’t compare a single family home with an apt and the costs. You can find condos in that zip for $130k — which would be around $750 month mortgage/taxes. That is a better comparison.
I love that area as well. Have good friends that purchased in that zipcode back in 2000 — paid $150k for a 4-bed/2-bath craftsman.
I WISH average home prices would fall back that far in that neighborhood but it’s NEVER going to happen.
A altered Chords April 10, 2009
Thorax – your comment about asset prices falling below pre-bubble levels leaves out 2 important details. The exact date and peak of the bubble and the exact date on trough of the post bubble deflated asset level. In the abscence of knowing those things, one risks missing the boat. I think youu will be hard pressed to purchase a home anywhere at 1720 levels or even 1929 levels, or even the same levels we saw a mere 6 years ago.
The statement that “housing prices never go down” is nonsense. The assumption that they won’t go up is as easily dismissed as nonsense.
Good luck waiting for 1720 prices to come back.
E Erik S April 10, 2009
Boomer,
Don’t forget that most of the money you pay towards your mortgage is interest, not principal payment. You are renting money from the bank to live in a house rather than renting a house to live in.
And if you buy a house today (which any of you all should feel free to do) then I wish you good luck selling it for the same price when mortgage rates reach 8% or 9%. You will need the luck, because the government can’t hold interest rates low forever by borrowing money.
And, Chords, I think that the missing link here is that 1720 or 1923 prices may well come back…when adjusted for inflation. In any case, “missing the bottom” isn’t much of a risk when the appreciation on the upside (whenever that is) is like to be a few percentage points a year. You are right that trying to time a purchase perfectly is so difficult to do as to be foolish. But trying to time a purchase so that you don’t buy at an outright bad time is just common sense.
C crenshaw sepulveda April 10, 2009
When you buy a home make sure you are buying real estate. Don’t finance fancy stainless steel appliances and granite counter tops with a 30 year mortgage. These items only go down in value, not unlike the car that rolls off the show room floor. A mortgage is serious business and should only be used for an actual home and the land under it. How much land do you own when you actually pay off a condo? I suspect that when you buy a condo you are financing between 25 and 30 percent of the purchase price that will only depreciate. I think that is why it is called REAL estate. Bear that in mind.
J Jesse April 11, 2009
Let’s look at a self-built house from HiLine as explained to me by HiLine about 6 months ago…
House lot:$50,000
HiLine house (a 1700sq ft low end house—-damn near a trailer and lower per sqft than some builders can do at all at any quality level): $80k
Impact fees, painting, utility hookups, a couple upgrades, gov’t fees/permits, concrete work, yard, etc.: $20-$40k
$50k plus $80k plus $30(the mid) equals $160,000 while making zero mistakes. Now add 15% ($24k) for problems, unscheduled stuff, etc. (It’ll happen).
HiLine nearly guarantees 20% equity at completion. So, if you buy this dump at rock bottom price (only 20% profit margin) you’re looking at $220,800. So, this becons the question; what can be cut to make it $140,000????
IE—- You can’t even BUILD a house with your own two hands for $140k!
T Thorax O'Tool April 11, 2009
Condos? Don’t make me laugh about that waste of money. As Mofo alluded to, the real reason to buy real estate (pun intended) is the land.You can build 10 billion condos and houses, but they’ve stopped making land. Can you grow your own food or raise chickens or build a pool or a garage while living in a condo? Nope. Condos=waste of money. Even if a mere $10,000 bought a condo I would not take it.
But it seems y’alls misunderstood my mention of various dates between now and 1720. I am not, nor did I ever say housing prices would return to 1720 levels. If you didn’t live in an urban area (or sometimes even if you did), you just found land and built a homestead. “Property values” were somewhat irrelevant… not an accurate comparison by any benchmark. Nor do I have the data or desire to figure out the currency/inflation/whatever adjusted values of housing in 18th century Colonial America for comparison with 21st century USA.
No, I was pointing our bubble collapses and market crashes bringing about asset deflation back to pre-bubble levels. In each of those examples, the deflation following the bust/crash returned assets to their actual value… and in some cases like 1893 and 1929, even lower.
If one tries to time themselves exactly at the bottom, you’ll just give yourself gray hair and ulcers from worrying too much. Bottoms are like halcyons, they’re only recognized in retrospect.
It’s nothing about trying to catch the boat at the lowest tide. The best time to buy is actually right after things level off. Sure, you may miss a few thousands in price or half a percent in APR. But you’re not buying on the way down. Which is the problem today. Prices are still going down and will level off at the appropriate price range for a given community. House prices will rise, but will do so along with inflation. So unless we get 9% inflation, you won’t see 9% appreciation again in your lifetime. Of course, 9% inflation is a much bigger problem than just house prices. Erik S is right, it’s about not buying at a bad time. And as long as there is sufficient room to fall, the time is bad. Now if you plan to stay put for a decade or two, this is mostly all moot. It’s the people who actually pay off their mortgages (and not keep buying every 5 years or doing a HELOC whenever the Hummer gets a year too old) who have the upper hand. Pay off 20 years of your 30 year mortgage and you’ll comfortably survive (with equity) just about any downturn short of the Apocalypse.
Since prices will not stabilize until they have reached the magic affordability ratio, anyone who buys now will end up underwater. That is the danger I’m getting across. We’re not out of the woods yet. Everyone seems to think there will be this amazing return to the inflated values. That will not happen; that bubble is burst. Prices will return to their appropriate values based on the pre-bubble levels and local income. That’s all there is to it.
We’ll likely not see $150K prices in the 98403 simply because it is the highest earning zip code in town, per capita. Therefore, $300,000 to $1,000,000 houses may well be appropriate in certain neighborhoods (by Anne Wright, anyone?). But conversely, in poorer parts of town, like McKinley, we’ll quite likely see houses regularly go sub $100,000… there just is not the income in that area to support much more. Don’t take this median price thing to mean that you can find a $180,000 house being considered fairly priced in any neighborhood. The citywide median is quite handy and useful, but a poor tool if you’re looking to buy in a very specific neighborhood.
And please note, that if you want to build a house, more power to you. I’m quite certain you CAN build a house for less than $140K… it all depends on what you need or want. The price per square foot is higher, but a 900 sq ft house is still going to be significantly less than a 1700 one.
If you want to go through one of those homebuilders like DR Horton or Centex, then have fun. Those prices are still inflated for all that gleaming marble and stainless. The fundamental value of a new house isn’t all that different than that of a comparable 50 year old one. Older homes just tend to be in desirable areas (wonder why?) and new ones tend to be in souless subdivisions in the suburbs (cheap for a reason). It’s the location of the land that house sits on that commands different prices.
J Jake April 11, 2009
Condos? Don’t make me laugh about that waste of money. As Mofo alluded to, the real reason to buy real estate (pun intended) is the land.You can build 10 billion condos and houses, but they’ve stopped making land. Can you grow your own food or raise chickens or build a pool or a garage while living in a condo? Nope. Condos=waste of money. Even if a mere $10,000 bought a condo I would not take it
Actually every condo owner owns a piece of land. You own a percentage of the land the condo is on. Every condo owner in Tacoma pays property tax on their share of the land.
I know people who live in condos that grow their own food. Most people in condos have a garage (common or personal). You can buy a condo that has a pool in the building if you choose. Chicken well that might be a problem but I am pretty sure they aren’t allowed in Tacoma anyways. Even at a house.
And Thorax you do know that a condo is a form of ownership and not a type of building? So do you dislike condo ownership? Or do you dislike multifamily housing?
C crenshaw sepulveda April 11, 2009
I’m all for multifamily housing, no question about it but you can not put enough lipstick on the condo pig to make it work in Tacoma. Seattle, probably, New York, for sure. Same with San Francisco. Tacoma seems to like the people that would live in a condo but the people that would like to live in a condo would probably prefer to be in Seattle. For Tacoma they are just a huge rip off, nice money maker for the developers when the market is hot, but otherwise they have the appeal of a manufactured home in a rented lot in a trailer park. The condo model for ownership is not without merit but clearly in Tacoma the only way it would work is to provide very low cost housing in a multifamily model. Basic home ownership in a multifamily setting, no fancy stainess steel appliances, no granite counter tops, just good honest housing.
T Thorax O'Tool April 12, 2009
Multi-family housing is a good thing and I am not opposed to it.
I am opposed to spending significantly more to own a condo versus renting a similar apartment. My rent is $750 in a 103 year old building. Hardwoods, 9-1/2 ft ceilings, gas stove. If I can rent it for $750 why on earth would I want to buy the exact same thing for $1400+ per month plus HOA dues? Does not compute! And the “you get equity versus renting” argument is moot these days no matter who you ask.
Really, Condos make sense when the rents are about the same as owning a condominium and when said condo is far cheaper than a house… as is the case of Seattle and NYC. Not in Tacoma, which is why condos fail here. Why on earth would you pay the exact same price as a house with a yard to live in an apartment?
If condos are your bag, then please buy one. Or three.. they can’t even give them away. But they’re not for me.
If I am going to be financially obligated for 30 years and several hundred thousand dollars, I do not want an HOA holding me hostage, I do not want just a percentage of the land, I am tired of noisy upstairs neighbors who stomp around at all hours and tired of the guy next door who flushes like clockwork every morning at 2:30 am.
For my money, I want the freedom to paint my house whatever color I want, have whatever landscaping I want, grow what crops I want (legal ones, of course), build a garage if I want (and not pay extra $ for my parking space).
In my own case, and with my own needs & desires, condo ownership provides no clear benefit over renting, and is vastly inferior to a single-family house with a yard.
B boomer April 12, 2009
Wow. So many misconceptions about condos!
Condos= waste of money? Well, if you over pay for one (just like a house) yes it will be a waste of money.
As Jake already pointed out, every condo owner owns a piece of land.
My ex- purchased a condo 9 yrs ago. Obviously it had excellent appreciation during that time but even if it didn’t, it was still a great decision to buy. Her mortgage is now $800 LESS a month than it would cost to rent the same unit because of amortization. Rents still go up over time while mortgage payments go down.
There are definitely some RIDICULOUSLY priced condos in Tacoma right now. Some of the sq ft prices are insane and they’ll never be able to sell them. These developers thought they could replicate the same condo building successes in Tacoma as in Seattle and other parts of the country.
Condos in Seattle in the $200k-$250k still sell… and very well. They haven’t really seen any type of decline. Why? Because to rent a 1-bed apt in Queen Anne/Capital Hill/Bell Town/Ballard/Green Lake/Fremont, etc it will cost you the same as a monthly mortgage payment.
The same thing applies to Tacoma. The lower end condos still sell that equal a mortgage payment.
O’Tool, I mentioned above there are condos in 98403 for $135k-ish. Those will not be depreciating much if at all because it costs the same to rent at that price point.
You keep touting we’ll see 2001 median home prices again in Tacoma yet we won’t see $150k prices again in 98403 because “it is the highest earning zip code in town, per capita” — well, in 2001 the median price in Tacoma was $155k. My friends bought their 4-bed/2-bath home in 98403 for $150k.
Tacoma will not be seeing that median price ever again.
P Princess Adora April 12, 2009
What condos are $135,000?
All the ones I see in the 403 are above $200K.
But what’s wrong with the thorax man not liking condos? It’s his money. If he thinks condos are a waste, then he has good reason for it.
Boomer, if you think condos are better than sex, then you have your own logical conclusion for it as well. Maybe you had sucky landlords? I don’t know. Either way, it’s your money as well. If a condo makes you happy, then enjoy it.
Here is my take on this debate:
I owned a condo in Renton until last year. Sure, it seemed dandy at first, and the rent vs mortgage cost was about equal.
But that condo ain’t worth $300,000 anymore. I sold it for $250k last year and I saw it’s on the market again for $229,000. Certainly did not hold it’s value, I lost money bad on it.
I didn’t lose the place, but the short-sale was a nightmare, my income tax was a nightmare because of it, dealing with f-ing WaMu was a nightmare, my credit getting knocked down 200 points was and is a nightmare and the hassle gave me more than a few gray hairs. Buying that thing was the stupidest decision I made in my life.
Homeownership is not all it’s cracked up to be, and I’ve learned that the hard way. As of this current time, I don’t want to do that ever again. Maybe one day, the right home at the right price will change my mind, but in the meantime I’m very much enjoying my hassle-free (and smoke free too) $880 per month apartment by Wright Park.
T Thorax O'Tool April 14, 2009
This topic is still going on?
Boomer, you’re entirely right that timing is critical. And my whole point has been that this is certainly not the time to buy. No one wants to catch a falling knife, and just look at the data and numbers for yourself… the knife is still falling and won’t be bouncing back up. It’s gonna lie flat for years. Pick up the knife once it’s hit the ground. It’ll be there for quite some time.
And in regards to misconceptions about Condos, ponder this:
You do own X% of the land. To maximize the number of units (thus profit), condos tend to take up nearly all of their land. Whatever isn’t under the footprint of the building is either a strip of grass or under asphalt. So, your % of the land (which is increasingly small as the size of the building goes up), is extremely likely to be only that under your own residence.
Sure you live on top of it, but that’s it. You can’t grow 1000 sq feet of rhubarb. You can’t throw a luau under the oak tree. You can’t build a swingset for your niece and nephew when they come over. You can’t have 3 chickens for fresh eggs. You can’t build a greenhouse. You can’t have a 100 lb dog (a dog that big is NOT the indoor kind). Et cetera, et cetera.
This is the biggest beef I have with condos and why I think they’re a waste: you get no land that is usable. Why on earth would you pay the price of a house for an apartment?
T Thorax O'Tool April 14, 2009
It’s all too common for me to double and triple or rarely, quad post.
But this time I think I can justify it.
I recently got an email from someone accusing me of being an anti-homeownersip nutjob.
I’d just like to clear up that I am not against owning a house, nor am I against owning a condo. While I personally would never even consider a condo, buy what you like.
What I am is against making disastrous financial decisions. And at this point, buying real estate today is playing Russian Roulette with five of the chambers loaded.
Wait a year to 18 months to buy. You win in any way because:
1) If interest rates rise, prices must fall. $300K @ 6% gets you what $150K gets you at 11%…
2) if rates go lower, you save $, which is very good
3) If prices go down more, you’ve saved yourself instant losses and get more house for your buck
4) If prices stagnate, it’ll be obvious. You won’t have bought while the market was still on the way down… saving yourself from losses
5) If you wait, you can save more $ for a down payment. Remember, you need 20% for conventional and 3.5% for FHA (if you’re a first-time buyer).
6) If you lose your job in the next year or so, let’s be honest that getting another one is becoming increasingly difficult, especially at the same or higher pay rate. If you have any doubts at all about the stability of your job or employer, do not buy! Taking on a huge expense like that can destroy your finances should a job loss happen. During bad times, it’s way smarter to decrease your expenditures, not increase them
7) There are $30,000,000,000 in Pay-Option loans that recast in mid to late 2009, with another $67,000,000,000 set for 2010. These loans feature negative amortization , which in a nutshell means you can choose to pay less than interest only for 5 years (ever wonder how they offered $500K at $2000/month?) at the “teaser rate”. All that money you’re not paying gets added to the principal. That’s right, your principal grows every month! When it recasts, you’re now paying on not $500K, but $500K plus 60 payments worth of interest and principal that you haven’t touched. Fitch Ratings currently estimates people with Pay options will see an average of a $1,053 monthly increase on their mortgage after the resets, even with below 5% interest rates. Imagine if rates go back to 6% or 7%. Remember, 75% of people who took POAs, took the teaser rate… for which the minimum monthly payment increases 7.5% per year regardless of what happens to the underlying index value. Remember too, they recast to pay the entire balance off in 25 years, hence a huge spike in payments even if rates got even lower. Bad, bad stuff brewing there, I’m afraid.
8) Considering the economy is in worse shape than it was when subprime imploded, get ready for a bigger wave of foreclosures. And as we all know, that means an even bigger supply, thus ultimately lower prices over all.
My point being, I am not against home ownership. But considering there is a lot of bad juju to get through, prices will have to come down more… especially here in the arrogant Puget Sound region. Hold off until at least 2010, maybe even 2011.
If you choose to ignore the arguments and data I have presented thought this topic, if you choose to buy the NAR propaganda, if you choose to try to catch the falling knife, please please please take one thing away from all this:
Think long and hard about buying, and remember that a mistake really can cost you more than an arm and a leg.
J Jesse April 14, 2009
This is comment number 60.
B boomer April 14, 2009
Mmm, you’re missing my point and making general statements that anyone who buys now is catching a falling knife.
I agree that the median price is going lower and I’ve said it many times… BUT it doesn’t mean there aren’t deals out there right now at ’03 prices. Be very selective and go after the distressed seller today and you won’t have to wait till 2011.
The only prediction I don’t agree with is that median home prices fall back to $135k.