Seattle Bubble Forum Archive

Question for anyone who's got a good hand at analyzing data from the last downturn (and forgive me if this has been beaten to death; I haven't checked into SB as much lately):

How do starter homes fare during a price correction? More to the point, is it a top heavy phenomenon, or does a falling tide sink all boats? I would guess that big ticket homes would take it on the chin, but starter homes would suffer less.

I'm asking because I'm trying to decide when (I know, timing the market=bad) to buy a small starter house ($350k or so) and this makes the timing critical for me. I can barely afford the $350k price tag (as you can see from the price, I'm already venturing well outside any desirable areas), for even the most basic of homes (800-1000sf, 2br /1 ba). There isn't a whole lot of downward mobility for me. Condos and townhomes are not an option due to HODs (I consider them a waste) and stairs (because I actually plan to live in my house until I'm much older)

Let's say the market goes up 10%, I would be unable to comfortably and sensibly afford some of these ugly little starter homes. And we have a household income well in excess of median with good savings and very little debt.

So because I sit on the fringes of affordability, this is a critical question for me.

If I had bought a starter home in Seattle during the last downturn, would I have lost much at the trough? What might I expect now?

Sorry, I don't buy that the banks are nearly as responsible as the borrowers. Banks are in the business of making money, and everybody knows it. Just because something is offered doesn't mean you are compelled to take it. There are any number of loan products out there that are simply dangerous and not so fantastic for your financial future (three cheers for alliteration!).

I don't have a deep well of sympathy for those who now say "I didn't know what I was getting into" or whatever. It just doesn't float. Regardless of what loans were out there, people irresponsibly and foolishly chose neg am, IO, etc without understanding them. Don't forget, not one of those exotic loans would have exploded in popularity the way it did without DEMAND.

People actually did effectively pound on loan officers' desks and ask for those loans, because if they hadn't, the weird money would've faded away like every other product nobody wants. Unless banks were assigning people mortgages at bayonet point, that's a pretty unconvincing argument.

Everyone's repsonsible for the bubble. A broker I heard from yesterday said that banks would ruotinely give him a hard time if he came in with a full-doc loan, because it took so much extra work for them to process. He says they were much more amenable to a no-doc.

History may not repeat itself, but it does rhyme a lot
Mark Twain