But Nguyen, 31, is feeling confident. Though he figures his home’s value fell at least $40,000 during the last year, he gained $200,000 in equity during the five-year boom. Thanks to that equity and his earnings as a project manager at UnitedHealthcare, he’s qualified for a conventional 30-year fixed-rate mortgage on a $750,000 house he hopes to move to in Orange County after he sells his current home.
“It’s at a good state right now,” Nguyen said of the housing market. “It didn’t completely crash on me.”
Analysts say the U.S. economy won’t completely crash either as a result of the sub-prime mortgage meltdown, thanks in part to homeowners like Nguyen. Their home equity built up during the boom is among several factors that could support consumer spending and the housing market.
So the answer to the problems created by excessive debt, is to take even more debt.
Why this bounce? When there were already 175K completed unsold new homes on the market in January. Plus another 277K homes for sale, still under construction.
Why are builders further ramping up new home supply by starting work (UA) on 106K homes this month, is puzzling.
What are they thinking? Or are they thinking at all?
Or may be because they build with money borrowed from the banks, they think they can recklessly malinvest other people’s money. They can just walk away if they cannot sell these homes, and the bank will take the hit.
At what point does this insanity stop?
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McMansion To Cabana
Posted: March 18, 2007 at 7:20 am by Somesh
Last week a local TV station ran a story on two companies that make small affordable homes, at significantly reduced costs.
“Toll Brothers Inc. Chief Executive Officer Robert Toll said the spring selling season has been “pretty much a bust'’ and he can’t predict when the housing recovery will begin.
“When will the market rebound?'’ Toll said at a conference in Las Vegas today. “Who knows? The Shadow knows. I have no idea. I would’ve thought that it would’ve rebounded by now and I would’ve been dead wrong, and I was.'’
When Toll posted a stronger than expected first quarter result, and the net contracts rose as compared to the previous quarter. It was clear to me that the unusually mild winter during December & January in the Northeast and Midwest had temporarily boosted sales for Toll (and also K Hovnanian).
But this boost was not new demand, it was borrowed from February and March. Which Toll is now coming to realise. The late winter arrival in Feb & March will kill Toll’s numbers for the second quarter ending in April.