Housing Crisis 90210?
| June 10, 2008 | Posted by Roshawn Watson under Uncategorized |
By: Roshawn Watson
Last week, we discussed how housing prices are currently declining faster than during the Great Depression . Well, even wealthy neighborhoods are feeling the sting of the housing crunch. In some of the U.S. richest zip codes, there have been steep home price declines. According to Zaio, the million dollar plus homes declined about 4% over the past 12 months. Of course, this is significantly less than the precipitous 14.1% plunge in overall home price .
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Currently, the volume of sales has declined, and we are thought to be in a buyer’s market as 1) buyers become more cautious and 2) sellers begin to downsize. One of the reasons buyers are becoming much more cautious is because potential “high-end borrowers” are put off by the high interest associated with jumbo mortgages (loans above 417,000). Unfortunately for some sellers, this means they may be stuck for a while. The sellers in the most trouble are those who over-extended themselves to buy an expensive home and then to keep up the facade of wealth. Often these individuals either bought too much house or borrowed too much against it (HELOCs). Of course, not all zip codes are suffering such losses.
One thing this article also illustrates is how money protects the wealthy homeowners too. Do not misunderstand me, a declining “asset” is still not a great investment . Nonetheless, one can see how these home owners were at least somewhat insulated (S&P; Case/Shiller Home Price Index showed a 4% declined compared with the overall 14.1% decline) against the potency of the housing market crunch, so far. Additionally, while foreclosures are up in these wealthy neighborhoods too, it is likely that many of the over-extended individuals are quietly negotiating short sells to protect their credit and reputations. Ultimately, what many are deeming a crisis, for some it will clearly be just an inconvenience.
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I believe JP Morgan said that some people with just a million or two think that they are rich.
That's really interesting. I never heard that quote before.