Housing Bubble Finally Bursting

[Jim in Chicago]

This basket of housing stocks is tanking over the last week or two:

finance.yahoo.com/q/cq?d=...hi+fnm+fre

Now, I'm doing a refi, and I'm hearing my mortgage broker say the same thing.  I've been waiting for this thing to slow down, maybe now it finally is.  Sadly, maybe, according to the appraisal, my house has gone up in value a lot in the last year....

[The Original Dinosaur]

More convincing, Sir John Templeton is being quoted saying much the same, and he has become a billionnaire by being rignt about financial stuff for the past 55 years.

[Unknown]

I found this curious statement from SJT:

Quote:John Templeton: Yes. Real estate is very different from the stock market because
it's so local and separate in terms of type. But in many locations and
many types of real estate, prices are dangerously high right now. And
in real estate it's easier to say what's dangerously high. You just
look at what it costs to rebuild. Right here in the Bahamas, I have
recently seen people pay four or five times for a house what it would
cost to rebuild.

What's curious about it? Well in many markets the cost of land far outstrips the value of the actual structure.

[The Original Dinosaur]

Yes, there's this "inversion" thing, where the structure's value is less than the land's market value.  This leads to "teardowns", i. e., buying a perfectly OK house, tearing it down and replacing it with a much more elaborate house, even in downscale locations like Dearborn Heights and Inkster, MI.

The thing is that mortgage interest rates are at historical lows (I never heard of sub-5% rates until 3 or 4 years ago in 50 years of following them), and when the rates go up, people will have to sell their houses for less, because buyers won't be able to afford the huge monthly payments.  And at the same time, new construction will have to be a lot cheaper to sell at all.

[ITWhore]

Based on my 2004 income (1040 line 22) of $38K (yes somehow without a job I had that kind of income), and with about $1800/mo debt payments outside of my home, I almost qualified for a home equity loan of $130K.  I told the underwriter that I was planning on having a temporaneous income a bit higher in the future (i.e., a contract gig), and he said if I could produce 2 pay stubs with a little bit more income, he'd give me the loan.

[Aussie]

"Yes, there's this "inversion" thing, where the structure's value is less than the land's market value. This leads to "teardowns", i. e., buying a perfectly OK house, tearing it down and replacing it with a much more elaborate house"

We have that 'McMansion' thing happening over here as well.  Mansions and other 5bedr-plus houses used to be custom jobs, now it's off-the-rack mansions.  I reckon in the coming decades, quite a few of those McMansion will wind up subdivided into flats, for the same reasons that happened back in the post-war period.