Ever get the feeling that your home is strangling you?

27 Aug

The McMansion is DEAD.

A lot of us THINK about building new homes for our families. And a lot of that thinking is aimed at refining a particular “alternative home” design or “building practice”, to help us save money while we build that home.

I preach building an ISBU Home using your paychecks and money that YOU save. We all know that conventional money lenders aren’t going to help you.

We talk about how it’s hard at first, but easier later, as many many families end up treading water (if they’re lucky) as mortgages slowly strangle them. We talk about how unstable the housing market is proving to be. We talk about all the foreclosures, and the economic crisis that is slowly killing America.

If you read this blog, you know that I’ve been saying all this for a long time (we’re talking YEARS, folks), and current events seem to be driving in the nails, like nuclear powered hammers…

How many reasons do you need… to take that step towards an affordable, sustainable home that will work with you, instead of against you?

Need I remind you that;

Existing-home sales plunged to their lowest level in 15 years in July 2010 as home inventories soared. This paints a pretty grim picture for the housing market in general, despite hopes of some kind of lifeboat (aka: government support) in a gruelingly stagnant and sluggish economy.

That’s a 25% decline from July 2009, folks.

I’ll point out that interest rates are at an all time low. In fact, they haven’t been this low since 1995 & 1999 (depending the the kind of home being financed).

Depending on who you “believe”, as home sales slowed, the inventory of unsold homes on the market grew to nearly 4 million in July. Based on current “production numbers” that Realtors value so highly, that translates to more than a 12.5 month supply at the current sales pace, and that’s the highest level achieved in more than a decade.

In a “good” housing market, 4 million houses in inventory would be almost six months worth of supply.

You didn’t have to be Albert Einstein to figure out that the expiration of a home-buyer tax credit in the spring was going to slow down home-buyers, but no one expected it to be this severe.

Admittedly, it was a stupid $8,000 “fingers in a failing dike” tax credit handed out to entice people to buy houses in a “nearsighted” effort to prop up the ailing housing market.

It just makes no sense. Little of this of late, does. Absolutely no “long-term” positive outcome can come from basically stealing money from taxpayers and then giving it to home buyers and sellers. All it accomplished was to cause people who might have been buying homes now to rush out and buy homes sooner and now we’re seeing the predictable crash that follows when the home credit expired.

And note that these people got less than they paid for, because THEIR new home purchases are also going to be included in those plummeting property values. It’s not like they are immune. And… taxpayers got their pockets picked, again.

Why aren’t people screaming? Oh wait… I did. And we talked about it.

The home sales drop, compounded by a meteoric rise in the inventory of unsold homes will translate to yet another death spiral of “down-legs” in housing prices, and I’m thinking that it’s right around the corner. Many economist agree with me on that.

People were quick to point out that house prices had begun stabilizing last year after declining since 2006.

So much for that…

There are no jobs, folks… no pay raises either. Unless you’re a fatcat CEO of a “gov’t supported company”, we’re all in the same lifeboat. High unemployment rates and almost non-existent wage “growth” are making many American families hesitate before signing o nteh dotted line, to achieve that major purchase, so I predict that a returning wave of falling home equity margins could further plummet us into a state of depressed confidence and “restrictive” consumer spending.

People kept saying that the sharp drop in mortgage rates in recent months would fix everything, and soon, we’ve be all better. Obama said;

“Don’t worry, I’ve got this one…”

Um… I hate to tell you this, but it appears that the programs and posturing applied by the buffoons on the beltway is doing little to stimulate demand.

The average rate on a 30-year fixed-rate mortgage has fallen to less than 4.5%, a depth that most would welcome in better times. But because of the conditions we all face as the “middle gets swallowed up”, the demand for new loans is weak.

Many of us won’t qualify as borrowers, due to the fact that we now face challenges qualifying for loans because of lost jobs, decreased salaries, or “squeezed” earning potentials.

And some of us are just too scared to jump into the water.

“The tide is still going out…”

For example;

According to the Wall Street Journal, a 58 year old retiree named Sue Dempsey is under contract on a short sale for a pretty nice three-bedroom home in Las Vegas that sold four years ago for more than $300,000.

The price she’s paying today: (you better sit down.,..) is less than $120,000.

While she missed the deadline for the tax credit, the price seemed unbeatable.

“We got such a great deal on the house, golly, we didn’t need anything else.”

I have friends that live in Henderson. Perhaps I should give them a call…

You can build one heck of an ISBU house for $120,000.00. And, you can do most of the work yourself.

Stay tuned.

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5 Responses to “Ever get the feeling that your home is strangling you?”

  1. a.b. August 27, 2010 at 3:57 pm #

    My folks live in Vegas and have taken a brutal beating in property values. I’m bringing them over to the “ISBU side.” When you say you can build quite an ISBU home for $120,000 does that include land or is that strictly construction costs? Thank you for your work!

    • Renaissance Ronin August 27, 2010 at 4:54 pm #

      As a “once Vegas resident” I can feel for the families seeing their housing values get trashed. Many of the people who flocked to Vegas are getting crushed by the housing situation there now, and they have no way out.

      Not to mention that fact that Las Vegas is running out of water. Oy. Have you read about the water project that is currently being constructed to draw water from a lake that will be “below reclaimable limits” before the project is finished? Argh! That’s gotta hurt.

      Whenever I talk about budgets for ISBU housing, it’s ALWAYS construction costs alone. Your property costs and even your foundation (be it slab, pilings, or whatever you deem necessary) costs may vary dramatically, depending on where you are.

      And additionally, the costs of solar and photovoltaic systems are usually excluded, because there is so much “room” there, when weighing options.

      On this blog, and in the book, I’ve shown several ISBU designs that can easily be accomplished for under $120k.

      Despite what building “professionals” will tell you about the cost of Alternative housing (after all, they’re trying to protect their profit margins and their livelihood) , this really CAN be “cost effective” housing, provided you bring sweat equity and realistic needs and requirements to the table.

  2. ted yrizarry August 28, 2010 at 2:25 am #

    A place to start…
    Since our economy is swirling the drain and the ‘ticians have no pratcical solutuons…do you suppose that land value will drop as well? I understand that a McMansion built in an upscale neighborhood has an assesed value. That value is fluid and the only truth to it is what someone is willing to pay. And a lot of folks that bought that way-to-overpriced house are seeing that the “worth” of it was a sham.
    But I’d be curious to see if you’d care to speculate as to weather the cost of unimproved land may fall as well? That is one of my stumbling blocks.

    • Renaissance Ronin August 31, 2010 at 3:19 pm #

      Hi Ted,

      I polled a series of Realtors and land brokers I know, and here’s what they basically all agree on…

      Even I agree with them, and they’re… um … er… “realtors.” 😉

      (I’m quoting my good buddy Clark Farley here and you can read more of his “white noise” at The Wakefield Doctrine);

      “The List Price for (build-able) lots has not seen the level of decrease that improved properties have, in our area about 15% year maybe 30- 40% over the last few years. The relatively low cost of holding on to this kind of property seems to be the culprit. Unless there are excessively large development costs, then just paying the taxes on a lot is not too hard to bear.

      Raw land (of any size) should be different. It is hard to find Buyers for acreage in my area (Clark is located in New England) not just because of the decreased demand for building lots but the source of money for this kind of development has become very restrictive.”

      Most of them all said the same thing. We probably won’t see a “fire sale” of vacant land, for a while… ;(

      Ronin

  3. Rick Johnson September 6, 2010 at 11:56 am #

    Hi there,

    I’ve been in the container industry for years. I would really like to live in a custom container house and get rid of my $350k McMansion – unfortunately there has a been a price decrease in Canada as well (not as bad as the U.S.) and having purchased in the real estate peak in ’07 I’m basically trapped in a zero equity situation.

    I sometimes feel that the structure of society in regards to mortgages is really just a refreshed version of the medieval feudalism/serfdom system. I honestly do feel like my home is slowly suffocating me – I want to live off the grid and be completely self sustainable.

    Anyhow on a lighter note, this is a great blog – I’ve been here a few times in the past and thought it was time to contribute.

    -Rick Johnson

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