01-19-2009, 07:13 AM
I haven't bothered to compare numbers yet, but have prices reached ones similar to 1997 - 2000 prices yet? I'm now thinking they will go below those prices, though, since those lows were driven by an extreme poor local economy but not a worldwide one. Previously, I had thought land prices would drop to about 7% to 12% above the '97-'00 prices and then head back up again but this depression has gone or is on it's way to going global so prices will hit new extreme lows, IMHO. I don't see any bottom in sight until jobs are back and the U.S. as well as the rest of the planet is shedding those at an ever increasing rate.
Eventually, I suspect we will be back to where mortgages were in the fifties and sixties. At least 20% down (if you have sterling credit) or 50% if you don't and a loan to value ratio of about 75%. Which basically means the bank will help you pay for about a quarter of the house price. Oh yeah, and the mortgage can't cost more than 40% of your income.
So, with a bit of reverse math, you can figure out what average mortgage prices will be soon. Figure out the average income for an area, take 40% of the after tax amount of that and that's the mortgage amount folks will be able to pay. So calculate in the interest rates and that will tell you the average house price. There is a bit of difficulty when factoring in folks moving from other places and increasing the amount they are willing to pay for a house in Hawaii, but if they have to work in the local economy to support the mortgage payments they will soon enough be selling the house again if they paid too much. Fortunately, most folks wanting a vacation house in Hawaii usually want a different type of house than those of us who live here or we'd all be fighting for the same piece of pie.
"I like yard sales," he said. "All true survivalists like yard sales."
Kurt Wilson
Eventually, I suspect we will be back to where mortgages were in the fifties and sixties. At least 20% down (if you have sterling credit) or 50% if you don't and a loan to value ratio of about 75%. Which basically means the bank will help you pay for about a quarter of the house price. Oh yeah, and the mortgage can't cost more than 40% of your income.
So, with a bit of reverse math, you can figure out what average mortgage prices will be soon. Figure out the average income for an area, take 40% of the after tax amount of that and that's the mortgage amount folks will be able to pay. So calculate in the interest rates and that will tell you the average house price. There is a bit of difficulty when factoring in folks moving from other places and increasing the amount they are willing to pay for a house in Hawaii, but if they have to work in the local economy to support the mortgage payments they will soon enough be selling the house again if they paid too much. Fortunately, most folks wanting a vacation house in Hawaii usually want a different type of house than those of us who live here or we'd all be fighting for the same piece of pie.
Kurt Wilson
Kurt Wilson