the fun hasn't even started yet.

Mortgage resets: Record bill coming due

Billions in subprime ARMs will be subject to higher payments.

By Les Christie, CNNMoney.com staff writer
July 9 2007: 5:20 PM EDT


NEW YORK (CNNMoney.com) -- More than two million subprime adjustable rate mortgages (ARMs) are poised to reset at much higher rates in coming months, worsening an already suffering housing market.
Borrowers who took out hybrid ARMs in 2004 and 2005 to secure low "teaser" rates for the first two or three years of the loan may see their monthly mortgage payments climb by35 percentor more.

http://money.cnn.com/2007/07/09/real...ion=2007070917

The above quote is from March 2007. It's worth revisiting.

Philly is in a slump. Houses are sitting on the market for far longer than sellers expect, and prices are being reduced as a result.

The RE agents I speak to all agree that prices are down and homes are harder to sell. Keep in mind that agents are usually the biggest cheerleaders of all -- yet even they are now admitting that Philly RE is weak.

Is Philly heading for the collapse that will likely hit much of Florida and California? No. Those places are going to suffer in a big way. No need to explain why. It's obvious on so many levels.

But anyone who thinks that Philly's RE prices will rise anytime soon are in dreamland. The problem here is that there is way too much building and rehabbing going on throughout the city. As all that new inventory hits the market, prices will continue to suffer.

Yes, Philly has changed for the better. MUCH better! Lots of people are moving here (I meet them all the time) as a result. But the RE developing in Philly is now out of control. You can barely drive down one street in Philly that doesn't have a rehab and/or new-construction going on! The demand isn't there for all these new units, yet all of these developers want to try to profit at the same time.

Supply is already too high. I drove by the new condos on the corner of 23rd and Market tonight at 9:45. I saw only one light on in the whole building. That is not a sign of a market with high demand. And soon many, many more condos will be hitting the market.

Things will get worse before they get better.

That's not a slump. That's moderation. But moderation, when compared to a booming market, might feel like a slump.

I'm one of those people who doesn't believe it's black and white, it's more like it's various shades of gray.

Agreed. Very much the same with the Jersey shore.

I think in certain areas of the city, prices will rise, albeit maybe at a healthy 3-8% annual rate instead of 20-50%.

The healthiest thing now for the city is to fill in more density in some of the boom areas of the last few years. High prices that sellers expect because they paid too much for shells and land are a big obstacle to that.

That I'll agree with. No different than dotcom bust, tulips (I think.)

Supply is high with condos inventory.

Says who? And are they in the same price point as the available inventory?

I disagree. I expect the housing market in the city will plod along at a 1%-8% rate.
I expect previously announced development projects will either be postponed or canceled. Existing inventory will be sold off eventually, perhaps at a discount, but sold off anyway. I expect that in the meantime, the presumed mayor Nutter will accelerate reforms and bring about efficiencies in city government, allowing a new boom to begin in 3-10 years. I hope that sellers and developers build in more density in some of the boom areas of the last 10 years before building out too much further. I expect to be part of that development in time. I expect that people learned from their problems with negative amortization/no money down/ interest-only/etc. financing and start looking at 10 year plans rather than 10 day plans.

That is my viewpoint, both as a real estate professional, and a Philadelphian.

__________________
Real Estate Practitioner & Quasi-Intellectual
ERA Aarch Realty LLC
Urban Green Partnership

__________________
Real Estate Practitioner & Quasi-Intellectual
ERA Aarch Realty LLC
Urban Green Partnership

>Agreed. Very much the same with the Jersey shore.

herb - what's your prediction for the Jersey shore?

how can the market get any worst? i can barely sleep at night.
this is just awful. when will this crash ever end?

Considering who owns the Inquirer, we need to take all seemingly positive articles with a grain (or pound) of salt.

Plus, here's a portion of the article that shows that the writer has a limited understanding of the subject about which he writes: "Factor in, too, that the subprime mess has forced many lenders to tighten underwriting standards, so lower-income buyers who might have been able to obtain a mortgage a year ago are shut out of the market now."

Subprime lending is for people with poor credit, not necessarily for people with lower incomes. Although I'd imagine that people with lower incomes tend to be more likely to have poor credit, it's important to note that the two groups -- poor credit and low income -- and not one and the same.

The only thing that I disagree with above is your prediction that prices will "will plod along at a 1%-8% rate." Everything else you wrote (except the Nutter comment; I'll get to that) makes perfect sense, for you point out the same problems/solutions that I've had in mind. Yet all those solutions to today's problems will, as you also wrote, take time (several years, seemingly) to happen. So in the meantime, it's hard for me to see how prices can rise while all the over-supply is slowly sold.

The only way for prices to rise is for buildlers to charge more than they did in 2005 and 2006. They can't do that, can they? Few, if any, builders have any interest in holding a property for several years until they can get their pre-determined price. Builders almost always finance their projects, and carrying costs eat into their profits if they hold their completed properties for too long. Builders will sell at whatever the market will bear. (When the profit motrive is gone, they will stop building.)

As for Nutter, I think he'll make a great mayor. Will his presence cause another RE boom? I'm not so sure. I remember when Rendell was mayor and Street was running for mayor. Many RE agents (and other Philly people) firmly believed that if Street won, Street would be a corrupt mayor and the city would go back into decline and RE values would suffer. Well, they were right about one thing: Street was a corrupt mayor. However, under Mayor Street, RE values increased at a historic rate! My point is that RE values are driven by economic and psychological factors (easy/tough credit; greed/fear). The presence of a given mayor may shape a city (Rendell certainly did). But even a great mayor in history won't be able to stop a runaway RE train -- in either direction.

When we started house hunting back in February, I thought for sure we could get a deal with all of the doom and gloom talk of a slow buyer's market. Not so! Several houses we saw in the UC/WP area were under contract within a week, and many sold above asking price with multiple bids. I started a thread about it here. Ultimately, we paid above asking price for our home and believe that we got a really good deal, based on comps on our block.

I have two young, professional friends who recently purchased homes as well--one in NC, and one in DC. I know several more who are looking to buy in the next few years in Philly and elsewhere.

I realize this is anecdotal information, but I think a lot of the doom and gloom stuff doesn't apply to all sectors of the housing market. I think it depends on the area of the city you're talking about, too.

Interesting! Can you provide more details about this statement? Was the price you paid actually lower than the comps on the block? I'd imagine that if you paid above asking price, yet the comps say you got a good deal, then the seller may have priced his property at a low price to sell quickly.

That wouldn't be unusual. There are many homes that sell quickly these days because some sellers (or their agents) recognize that there is little chance that they will be able to fetch the same prices that they could have gotten a year or two ago. So they price their properties accordingly -- and they sell quickly.