“Buy Wholesale and Directly From the Bank”
Yes, people, that is the pitch that an agent made in today’s top listing on the Daily Stats. Interesting choice of words, eh? Given the number of homes being foreclosed and in the hands of financial institutions, this could be considered true. One single seller can only lower the price just so much due to their investment or hands s being tied by the mortgage lender, but the lenders themselves have so many properties that they need to be rid of that they can hold a fire sale, undercutting individual sellers (which in turn could cause further foreclosures).
While I understand the need for financial institutions to rid themselves of property—because let’s face it, they are not in the business of being landlords and empty homes do not generate any money for them—it is possible they are doing more damage than good by artificially lowering prices for their own gain, and not for the good of the economy. Yes, the buyers will benefit. Yes, this will assist in the reset of home prices. But it could also increase foreclosures and bankruptcies and contribute to a recession. While I am no economist, this scares me a bit. These companies caused the whole sub-prime debacle to begin with, artificially inflating home prices for their own gain, and now they are doing just the opposite. When will it stop?
As for the property in question, it is located at 24540 Eden Avenue in Hayward. A 1,506 sf, two-story townhome with 3 bedrooms and 2.5 baths located in a 6-unit complex (HOA Dues: $288/mo). This home sold in January of 2007 for $540,000. It was original listed for sale at $445,000, but is now offered at $350,000 and has been on the market about 2 weeks.
Recent Sweet Digs Posts:
Serious Slash and Burn in Oakland
How Small?
Berkeley: Home Sales Stick Close to Asking Prices
SF: Your Best Investment?
Becca said:
The prices need to correct, and any intervention is going to make the process even more painful. We should not prolong the madness of artificially inflated housing prices (due to “creative” financing, speculation and low loan rates). People who bought into the idea that “housing always goes up” (at 20% per year, forever!!!) and bought a house that they could not afford _should_ lose that home. They never really owned it in the first place, and they should consider themseleves lucky to have lived in a home beyond their means for as long as it lasted. Walk away from the homes and your credit will eventually recover. Stay in an overpriced place that you cannot possibly ever afford and your debt will continue to increase. Foreclosure in these circumstances is simply unavoidable for many “homeowners.” Why prolong the misery?
January 16, 2008 8:32 AM
David said:
Prices will drop until it makes sense to buy. People are realizing that they can’t pay 50% of their gross income in housing without being severely squeezed (50% to housing, 28% to taxes leaves you with less than 1/4 of your paycheck to buy that $50 tank of gas and that $200 grocery bill, never mind trying to save money).
Prices should be about 20-25X annual rents for houses around here (historical norm), and about 5.5-6X income (historical norm for this area, it’s 2.5-3X elsewhere). When that starts happening, prices will stop dropping. It doesn’t make sense to buy a $529K starter home when just two blocks away I’m renting a bigger house for $1750/month (yes, this is a real life example). That price should be ~$420-$475K, just as an example (more to the lower end since it’s smaller).
So another 20% price would seem to be in the cards. Just hold tight and we’ll get there.
January 16, 2008 10:03 AM
Red said:
“artificially lowering prices for their own gain”!! No way! The bank is in major pain on these, and drops the price till it sells, trying to save what they can. If the bank doesn’t sell, the place sits empty, squatters move in and destroy home values for the whole neighberhood, the pipes and wires get ripped out for recycle value, and eventually these homes can end up bulldozed as worthless.
Prices here are still too high, and now we are entering a recession – just think what that will do to home values.
I have no pity for the banks, but they are proving to be the greater fool that buys from the guy who got 100% financing thinking he could sell the place for more… now they will lose 10 times what they ever gained.
January 16, 2008 12:25 PM