Modulars ARE NOT MOBILE HOMES! They are built to the same code as site-built homes. They just happen to built off-site and assembled later onto a permanent foundation.
In fact, there are pretty good arguments that they’re even better than site-built. And if you custom-design your own, you can be sure it won’t look like a double wide too.
They’re built in factories, where they won’t get rained on in the framing stage. They have to be extra-tough and reinforced to withstand the road trip. The construction is well-supervised and often built to higher standards than your typical site-built spec home.
Nevertheless, there’s a lot of negative bias towards modulars just because “it came in on a truck”.
I’m building one right now in Los Angeles. Even though my loan-to-value is just fine, it could be even better if that negative bias would evaporate.
I’m spending $300k on a house that will appraise for $380. The appraiser handicapped our value by $55,000 just because it’s not site-built. That means it really should appraise for $425,000.
Anyway, ranting aside, it’s the only way I could get my family in on the housing market. There’s no way we could afford an existing home.
By the way, the factory is building our 4 modules for about $65/sf, and we’re going to put a lot of our own sweat into the finish work.
Good luck, jpeg. Watch out for those subcontractors. They’ll eat you alive if you let 'em. You’re 100% right about modulars, BTW. They are better in many respects. I’m very pleased with my new project.
This newspaper article claims that in 2004, 48% of the loans in California and 33% nationwide were interest-only. That’s up from 2% in 2001.
This article makes the case that the price increases are driven by the easier to obtain loans.
While real-estate has gone up over 20% in the past three years, it’s still quite affordable. With interest rates being as low as they are, it’s more affordable to own a house now than at any time in the past 20 years. That’s why home sales are skyrocketing. This is not necessarily a bad thing, even if people are borrowing. Look at it this way: At a time when the country has low-cost money available, people are choosing to take advantage of it by building homes, which improve the infrastructure. These homes will last 50-100 years. They increase the aggregate wealth of the country. Perhaps a home-buying spree was exactly the right thing for the ccountry to do at this point in time.
I’m still trying to nail down that stat. The Wall Street Journal estimated it at 10-15% of new home loans and the Mortgage Banker’s Association is using a figure of about 2% of all mortgages, which would translate to something like 5-7% of all purchases and a slightly higher percentage of all first-time purchases. So while the LA Times is on the high side of the estimates I’ve seen, candidly I don’t know who to believe just yet – for all I know they may be low. I will say that ARMs generally are still increasing, something not usual for this point in the interest rate cycle.
Well, it says that, and that’s undoubtedly part of it, but not all. There are a lot of other factors, including increasing willingness on the part of buyers to dedicate a large stream of their incomes to home ownership.
People want to own homes. In particular, people who might have accumulated some money in a 401-K and seen it shrink might want to own a home. Also, in areas like California, Florida and Texas we’re seeing that immigrants want to own their own homes more quickly than prior waves of immigrants did. There’s a lot more going on here than the sudden availability to moderate-income people of a product previously reserved for the rich.
So: The answer to the OP? Well, a lot of them are record numbers of first-time home buyers along with the standard crew of move-ups, empty-nesters, etc. The percentage of American households who own their own homes is over 69%, a record. Innovative products and lower credit standards are a not-small part of what drives the increase, but also contributing are the increased uncertaintly in financial markets (making home ownership seem more attractive by comparision), decreased availability of non-mortagage deductions among AMT payers, higher personal incomes, the desire for security in an uncertain world and, frankly, some panic on missing out on a seemingly good thing.
Another batch is speculators or investors, or both, depending on how you classify them. The percentage of homes sold for investment purposes rather than inhabitance purpose is up to 9% from 6% last year. It’s getting to the point where in some areas some homebuilders are requiring buyers to certify that they are not investors and that they intend to actually live in the homes they are buying.
Still another batch is second-home buyers. These buyers might also reasonably be described as investors (none of them is thinking “Sure, that shore house is going to be worth a lot less later, but what the hell”), but they’re distinct from the guys in the last paragraph in that they do not intend to “flip” the house (sell it quickly) or realize meaningful rental income during their holding periods. I’m still trying to get the numbers on this for you. Keep in mind all those well-off baby boomers you eep reading about in articles like “The Coming Intergenerational Transfer of Wealth” or “The Coming Crisis in Long-Term Care” or whatever. Those guys are reaching their Florida condo age – a lot of them are buying the condo and keeping the old homestead. At least for now.
And one more factor is foreign investment. I read an article recently about how the real estate boom in Florida is being driven in part by Europeans taking advantage of the weak dollar to buy condos.
It becomes an issue if and when the housing prices drop and people are left with homes that are worth less than the mortgage.
Also, the problem with a lot of those interest only loans is that the payments often increase substantially after a few years. Combine the two and all of a sudden you have a house you can’t afford to make payments on that you can’t sell for what you bought it for.
Unfortunately (or fortunately depending on your perspective) housing prices never seem to drop. As they say, the best investment is land since they aren’t making any more of it.
Not necessarily a bad deal for Americans either. Back during the Japan boom, the Japanese started buying American property willy-nilly. Remember the breathless talk about how Japan was going to ‘own’ the United States? It was supposed to be the new economic catastrophe for the U.S.
Anyway, the demand for U.S. real-estate led to it being sold at highly inflated values. Then later when Japan’s economy crashed and the margin calls came in, they sold the properties back to Americans at a steep discount.
So folks who can’t afford a home in the US should just hang tight and wait for the European economy to collapse on itself, eh? Pardon me if I don’t think “Waiting for someone else to screw up” is a very viable plan…
I want to know what the banks think theyre going to get out of this in the end. Surely banks can’t possibly think that all these no-interest loans are going to be paid back. If the housing market collapses, then theyre going to be massively overextended.
[quote]
Japan has always been heavily populated and short of land. Only about 28 percent of Japan’s land mass is inhabitable, so it’s no surprise that one of Japan’s most precious commodities today is real estate
It comes as somewhat of a surprise that such a precious resource could devalue so drastically in just 12 years. From a peak in 1990, property prices in Japan have plummeted over 60 percent on average, and have dropped almost 80 percent in Tokyo.
I recall a show about the run-up to the Crash of 1929, with a clip of Groucho Marx as the real estate promoter in Cocoanuts ("…You can get stucco. Oh, can you get stucco…") and a description of his putting his money into the market.
It is a sad state no doubt. I live outside DC in Northern VA, bought my house 4 years ago. The last county assesment cements the fact that if I sold my house I couldnt afford to live anywhere near where I am now!
They have townhomes in my area selling for 300k+…a freaking townhouse! Its insane.
I hear that. There is a town house development a few blocks down the road from me, where they start at $290K. And my next door neighbor wanted to cash out on his equity and move to another house in the same area. He could sell his house in about ten minutes, but he couldn’t find a house with the features he wanted that he could afford.
Of course, people expect a heckofa lot more from their houses than they used to. My “starter house” was a two bedroom, one bathroom single story with an unfinished basement that was built in 1926. My nephew wouldn’t look at anything with less than four bedrooms when they bought their first house.