Conservative Home Financing

Since my blog is a ripoff of irvinehousingblog.com and since he does such a great job analyzing the housing market and financing – much better than I ever could – I just wanted to share this article originally posted by Irvine Renter on March 1, 2007.

Financially Conservative Home Financing

This article is another valuable look at why Adjustable Rate Mortgages have caused our housing market to bubble, and what kinds of things people should be thinking about when they buy houses, to make sure they can afford their homes.

 

Countrywide reports reduced profit

From today’s Ventura County Star:

Countrywide Financial Corp. said Tuesday that its second-quarter profit shrank by nearly a third as softening home prices led to rising delinquencies and mortgage defaults among the most creditworthy borrowers.

“Looking to the second half of 2007, we expect difficult housing and mortgage market conditions to persist,” he said.

Mozilo said he doesn’t expect that the market will turn around until 2009 at the earliest.

The only thing missing are quotes from a realtor telling us not to worry that this is just a minor market adjustment and now is a good time to buy because the housing market will be strong again very soon.

 

House Pricing Changes

The Office Of Federal Housing Enterprise Oversight (OFHEO) has a website that lists all kinds of information regarding housing and the changes in housing prices. You can go to the site and run reports for various areas around the country.

I ran a report for the Oxnard-Thousand Oaks-Ventura area. I graphed the results. This graph represents the one-year percentage change in housing prices for the previous quarter. For instance, in Q1 2007 the housing prices in this group decreased by 2.08% over the same quarter in 2006. This represents the first decrease since 1996. I have attached a chart for a quick visual of the trends over the past 30 years. Right now we are in the middle of the worst decline since the late 80s and early 90s.

The recent decline does not mean that houses have decreased in value by such a significant amount.  What the graph shows is that the rate of change in housing prices have changed.  In 2003 housing increased by 32% over the previous year, whereas in 2007 housing DECREASED by 2% over the previous year.

Click the chart for a larger view.

And here are the raw numbers that I used to plot the graph.

Qtr % 1978 Q1 28.6 1978 Q2 20.76 1978 Q3 16.43 1978 Q4 16.06 1979 Q1 13.66 1979 Q2 15.91 1979 Q3 18.35 1979 Q4 17.48

Qtr % 1980 Q1 21.82 1980 Q2 17.55 1980 Q3 15.83 1980 Q4 13.78 1981 Q1 7.42 1981 Q2 5.59 1981 Q3 8.99 1981 Q4 8.99 1982 Q1 6.58 1982 Q2 6.05 1982 Q3 -2.89 1982 Q4 -0.78 1983 Q1 1.29 1983 Q2 3.02 1983 Q3 8.2 1983 Q4 3.53 1984 Q1 5.56 1984 Q2 6.27 1984 Q3 2.64 1984 Q4 6.25 1985 Q1 5.75 1985 Q2 4.18 1985 Q3 6.81 1985 Q4 5.69 1986 Q1 6.85 1986 Q2 7.93 1986 Q3 8 1986 Q4 9.38 1987 Q1 10.87 1987 Q2 11.66 1987 Q3 13.11 1987 Q4 14.86 1988 Q1 16.38 1988 Q2 18.54 1988 Q3 22.85 1988 Q4 27.58 1989 Q1 29.03 1989 Q2 29.27 1989 Q3 24.04 1989 Q4 14.93

Qtr % 1990 Q1 8.52 1990 Q2 1.41 1990 Q3 -2.62 1990 Q4 -4.68 1991 Q1 -6.66 1991 Q2 -5.75 1991 Q3 -5.28 1991 Q4 -3.05 1992 Q1 -1.75 1992 Q2 -2.02 1992 Q3 -2.5 1992 Q4 -3.99 1993 Q1 -5.14 1993 Q2 -5.12 1993 Q3 -5.48 1993 Q4 -5.32 1994 Q1 -4.03 1994 Q2 -4.75 1994 Q3 -4.86 1994 Q4 -4.94 1995 Q1 -4.32 1995 Q2 -1.6 1995 Q3 0.98 1995 Q4 2.85 1996 Q1 2.79 1996 Q2 1.66 1996 Q3 -0.48 1996 Q4 -0.49 1997 Q1 0.07 1997 Q2 1.11 1997 Q3 3.18 1997 Q4 4.24 1998 Q1 5.88 1998 Q2 6.94 1998 Q3 8.51 1998 Q4 8.76 1999 Q1 8.66 1999 Q2 10.09 1999 Q3 9.91 1999 Q4 9.8

Qtr % 2000 Q1 12.21 2000 Q2 11.06 2000 Q3 11.46 2000 Q4 11.45 2001 Q1 9.53 2001 Q2 10.09 2001 Q3 9.43 2001 Q4 9.33 2002 Q1 10.6 2002 Q2 12.4 2002 Q3 13.82 2002 Q4 15.35 2003 Q1 14.73 2003 Q2 13.09 2003 Q3 13.05 2003 Q4 18.31 2004 Q1 19.55 2004 Q2 23.63 2004 Q3 32.73 2004 Q4 25.88 2005 Q1 25.12 2005 Q2 22.65 2005 Q3 15.15 2005 Q4 17.52 2006 Q1 16.82 2006 Q2 13.43 2006 Q3 8.11 2006 Q4 2.66 2007 Q1 -2.08

 

How Inflated Are Housing Prices

Here’s another great article from IrvineRenter explaining why housing prices are currently at an inflated level and destined to come down – possibly quite a bit.

How Inflated Are Housing Prices

 

Houses Should Not Be A Commodity

I’d like to kick off this blog by sharing a great article I read on another blog. It does a great job of explaining why houses should not be treated as commodities.

Houses Should Not Be A Commodity