Next Segment of the Housing Market to Crash: $1+ Million McMansions
June 30th, 2009Via: Business Insider:
The new hallucination for most strapped McMansion owners is that they’ll “rent the house for a year and then sell when the market comes back.”
The happy theory here is that, yes, prices are temporarily depressed, but when the green shoots really take hold, we’ll go roaring right back to 2006 levels again.
Most real-estate agents will be eager to tell you that they agree with this theory. What they won’t be able to tell you, as Mark Hanson of the Field Check Group points out, is why.
Even after a 30% fall from the peak, house prices are still too high. Meanwhile, millions of homeowners are losing their jobs, consumers are still saddled with truckloads of debt, banks are still tightening credit, foreclosures and delinquencies are still soaring, mortgage-mods are a failure, there are still too many houses on the market, wages are declining, taxes are likely to go up, and the economy is likely to struggle for years.
In short, it’s likely that house prices will now crash below fair value and remain below it for years. So McMansion owners sniffing at current prices and planning to “wait until the market comes back” will likely be waiting a lot longer than they think.
In my area, real estate is crashing even worse than I thought.
A few days ago, I drove around with a friend from out of town who is interested in moving back to this area.
She called the number on one For Sale sign, and the realtor told her the house was set to close the next day. They were mainly waiting on financing. The selling price: $14,000.
This was for a 3-bedroom, 2-bath lakefront house that appeared to be in excellent condition. It was a foreclosure. It probably would have fetched $100,000 a few years ago.
A year ago I was hearing that you could buy a foreclosure for about one-third of the asking price, if you were paying cash.
It appears you can now buy at least some for about one-sixth of the asking price, even if you’re not paying cash (assuming you can get a loan).
Is that somewhere around Detroit?