An interesting conversation on the housing market
I have seen quite a number of posts lately about the housing market. It seems that in many places things are getting a bit out of control. We apparently have forgotten the mistakes of our past and it feels like we are on a collision course with a scenario similar to 2008. Perhaps it isn't as similar as we think and that is why we are missing all of the warning signs.
This past weekend @mrsbozz and I were camping with her best friend and the friends husband. The fried who we will call "S" for the sake of ease works in the mortgage industry, she has been working that field in some capacity for I would guess fifteen years.
She currently manages three title offices. If you aren't familiar, the title office is the company that closes the sale of houses and properties. Basically they get all of the paperwork in order and make sure all of the i's are dotted and the t's are crossed.
Besides camping, we haven't seen her much over the past year because things are so crazy busy for her. Her company gave her a wireless hotspot recently, but that means she is required to do a little bit of work while she is on vacation.
This past weekend we were sitting under the awnings of our trailers one morning and we had this (paraphrased) conversation while she was working...
Just to recap, "S" is the friend, "B" is me...
S: Wow, they are asking for an extension (that's not the word she used) on this property (in podunk small town USA).
B: What's that?
S: They want to process the sale for more than asking price
B: That is happening a lot isn't it? What is the asking price?
S: Yes, $70,000
B: and what are they willing to pay?
S: the closing is for $90,000
B: Wow! In "podunk town"? It must be acreage or something
S: The SEV is only $25,000
If you aren't aware, SEV is State Equalized Value and it is the assessed value of the house. Usually you need to double the SEV to find the actual value of the house. So a $50K house had an asking price of $70K and the buyer is paying $90K for it.
B: That is nuts! $40K over the assessed value?
S: Yeah, this bubble is going to burst.
B: How much land does the house come with?
S: Let me check
S: laughs .14 acres
B: What? That's like a postage stamp!
B: It has to be on the lake or river or something
S: Another sad thing is so many poeple are waving their home inspections so they can close as quickly as possible before a better offer comes in.
B: That seems pretty foolish
S: It is nuts, the bubble is going to pop!
Sadly, that's just one property. She has been doing sometimes 28 closings per branch per day. This example isn't the exception, it is the norm these days. People are paying nearly 200% the actual value of these properties in some cases if not more.
It is pretty clear that he economy is on a very familiar path. If I had to find a bright spot it might be the case that balloon mortgages are pretty much a thing of the past. That should keep many people from falling into that trap.
You have to wonder how many people who didn't buy or sell are going to be priced out of their current homes as the taxes increase due to the over inflated price of homes that are selling.
This is one housing market boom that I think is going to come back to bite us all...
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@eos.detroit Staff Writer/BOID Team Leader
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