Comments on: Homeowners in denial A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: hsvkitty Sun, 17 Apr 2011 00:36:46 +0000 I find it difficult to speak to the question because I see the 5% down as a vulnerability and when you show a weak underbelly, it can be easily torn apart. In good times or bad, 5% makes everyone else’s homes vulnerable as well and I agree can push prices up artificially.

Affordability can’t be determined until you see stability and you won’t see it for a couple more years at least. (And don’t bring any sharp objects into our housing market for those 2 years, please)

By: TFF Thu, 14 Apr 2011 22:44:21 +0000 “…and have gardens, apple trees and children…”

Note to self — remember this year to plant the apple trees in the garden, plant the children in the bathtub.

Glad we agree on these points, hsvkitty. I do have some sympathy for the people who trapped themselves, and there are certainly many thousands of those, but the numbers suggest that many more homeowners have maintained a sensible outlook throughout.

Wanted to throw an idea out for discussion…

If we back away from low-downpayment loans, do houses become MORE affordable or LESS? I’ve been arguing that low-downpayment mortgages push prices higher (since there is more borrowed money sloshing about) thus making housing more costly. Hasn’t this been our experience over the past decade?

Which is more affordable, a house selling at $500k with a 5% downpayment (typical for my area at the peak of the bubble) or one selling at $250k with a 20% downpayment (we aren’t there yet but could be in a few years)?

By: hsvkitty Thu, 14 Apr 2011 20:35:11 +0000 TFF “gets” it… and has answered the why. It may be denial for a select few, but house value is more then market value … unless you are about to sell.

Value is where they are financially on their homes… not ignorance or lack of intelligence. I am quite sure there are still many of those who are happy in their home and spent more money in and on it to ensure its value and also pay off the mortgage that feel they are better off then those renting who put their money in the market.

The ones who were in denial are those who bought too high, didn’t do homework, bought above their means and are inclined to move often, etc. They are in a pickle… but also by design, especially if they become unemployed for any length of time. They are likely also house buyers as opposed to home owners. (but I would think those that were should also be more aware of the market)

Plus, perhaps the older among us still remember their parents telling about those who lost everything in the stock market became drifters who worked for farmers and homeowners. (People like me who save, always have emergency funds, pay off debt, have owned homes, understand the housing market, put down solid down payments, and have gardens, apple trees and children … and only move when we have to and when the market is right)

By: TFF Thu, 14 Apr 2011 00:04:40 +0000 Speaking of which, I asked my wife the question in the survey. Her answer was, “Yes, No, Yes.”

Yes — the market has fallen.

No — she philosophically objects to valuing our house according to the market since we will not be selling any time in the next ten years.

Yes — she finally decided that the property has depreciated/deteriorated marginally over the last five years. Which is true, but not the interpretation that Felix is interested in.

She is educated and generally aware of the real estate market swings, just philosophically inclined to value our house according to its utility rather than by the market. Wonder how many of the survey respondents answered along those lines?

By: TFF Wed, 13 Apr 2011 23:58:56 +0000 “As for taxes, do you know anyone whose property taxes went down to the full extent of the deflating bubble?”

I’m guessing we live in different states? Property taxes in Massachusetts rise by precisely 2.5% every year (barring a voter-approved override which is rare). If assessments skyrocket, then the rate is forced down. If assessments plummet, then the rate is forced up. There are minor adjustments as the balance of commercial/residential real estate shifts, and as state aid changes, but it has literally nothing to do with property values.

Did your local government increase its revenues by 10%+ annually during the housing bubble? If so, you need to find some new local politicians. That would be an outrage! But again, it doesn’t really have anything to do with the rising property values. They could have voted a lower tax rate (and maintained stable revenues) if they had wanted to do so.

“I have to ask if they are the two-thirds who are “safe” or if they are at risk in other ways, which you seem determined to ignore.”

People are plenty concerned about jobs, health care, jobs, their savings, and jobs. Why is it important that they worry about whether their house could (theoretically) be sold for more than they bought it for? If the market were booming, they wouldn’t be any richer. You can’t eat your house (or at least you can’t live in it after you’ve eaten it). So why should they be concerned about whether or not it has fallen in value.

People don’t care whether THEIR house has risen or fallen in value unless it is relevant to THEIR personal situation. If you ask them whether the broader real estate market has risen or fallen, you might get more sensible answers.

By: LadyGodiva Wed, 13 Apr 2011 21:42:31 +0000 TFF,
No outrage, just umbrage. This is far too trivial for outrage.

As for taxes, do you know anyone whose property taxes went down to the full extent of the deflating bubble? I don’t. In my area they are about par with peak value time. This is non-trivial and unlikely to change, as local government does not want to give back the money it got used to spending during the heady days. In fact, as people lose homes and THOSE houses’ taxes go down substantially (the best argument for walking away that I know), their neighbors may pay more because, hey, the village manager isn’t giving up any salary or perks!

All of which goes to prove Felix’s original point (which I started out defending and will end up doing) that Americans do not really understand what a pickle they are in. And when you go on about how two-thirds don’t care (which is no doubt true) I have to ask if they are the two-thirds who are “safe” or if they are at risk in other ways, which you seem determined to ignore.

Still, no outrage.

By: EagleDriver Wed, 13 Apr 2011 20:29:55 +0000 On my street in California, in the last two years we had 4 foreclosures and 2 sales. All the foreclosures sold for dirt cheap and one for sale was sold. The other failed to sell for two years, so it was rented. My value is equal to 2004 values, but I bought in ’99, so I am still OK unless Obama continues to destroy America at his current pace.

By: TFF Wed, 13 Apr 2011 20:21:51 +0000 ber-of-underwater-mortgages-up/

“About 11.1 million households, or 23.1 percent of all mortgaged homes, were underwater in the October-December quarter…”

Just a guess, but I would assume that this is still in the “steep” part of the distribution — thus the percentage of homes that are SIGNIFICANTLY underwater is likely much lower than 23.1%. You aren’t likely to walk away from an underwater mortgage over a difference of $10k or $20k. It isn’t worth impairing your credit over a small difference like that, and you could easily end up spending more on moving expenses and rent than you would “save” by abandoning the excess debt.

So how many homeowners are underwater by $50k or more at this point? And how many of THOSE are unaware of that fact? My guess — few and none.

If 23% of mortgaged homes are underwater (perhaps 15% of all homes), then there are 75% to 85% that are not. Compare against the survey results that Felix reports and it doesn’t require delusional behavior on the part of any underwater homeowners at all. And while the remainder may be mistaken, it isn’t likely to be a mistake that is relevant to their personal situation.

By: TFF Wed, 13 Apr 2011 17:52:30 +0000 LadyGodiva, property taxes are APPORTIONED according to property value but they are DETERMINED by the town (often subject to statutory limitations). It is nonsensical to blame rising property values for rising taxes.

I freely admitted in my earlier comment that trading up (or moving) in a dead market is a chancy proposition. You will note, however, that this fact is ALSO independent of valuations.

But if you put your outrage in your pocket for a moment, and read Felix’ post, you’ll see that he was sneering at those idiot Americans who are blithely unaware that their home is worth less today than it was in 2007.

And my response to that stands — most Americans don’t care. A third of homeowners don’t even HAVE a mortgage, so they can’t be underwater. Half of the remaining mortgages (at least) are above water, so the weak turnover of the market is of greater concern than the valuation (and then only if they decide to move).

The remaining third of the country is in a somewhat precarious position. They can’t afford to sell at a loss (they have little or no equity in their house at this point) and so are forced to stay put. It is THIS segment of the population (along with the eggheads) that is most acutely aware that their house is worth less than they paid for it.

But the majority of homeowners couldn’t care less.

By: MyLord Wed, 13 Apr 2011 17:40:51 +0000 Hmmm. I can type in an address in Zillow, say 512 E 11th #3A3D for sale for $575k and see the price curve for the East Village has fallen from $1.1MM to $765K over the past year though it appears to have stabilized. Now this is only a rough guide since the mix changes and prices likely change block by block as well as unit by unit in New York but it would be the starting point for any guess without considering any further information. That wasn’t so hard was it?