Deseret News | Economist hails falling home prices

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Tad Walch: Economist hails falling home prices

Economists rule! | 2:08 a.m. June 7, 2008

Economists are typically misunderstood by the mathematically challenged. I know, I am one. Kelly Matthews is brilliant and correct so often it's scary.

The only people who truly benefit from skyrocketing home prices are the speculators who are far more responsible for our housing "crisis" than they will admit. Dump gas on fire and the fire grows. Stop the fuel, the fire dies. That's housing too.

Dramatically rising home values do not benefit the homeowner who intends to live in their community. It only means higher taxes. Not the rate, but the assessed valuation multiplied by the existing county rate. You may say that a higher value allows a homeowner to borrow more against the home. True, but you won't ever find me arguing for consumer debt and that includes equity loans.

I am delighted to see the values drop. I'm sorry for those who may lose homes, but almost invariably they bought more than they need and more than they can really afford. They gambled. They lost. The government does not bail our Las Vegas gamblers, and should not bail out these gamblers. It's a tough pill, but swallow it and get your private economic house in order.

Given up | 5:04 a.m. June 7, 2008

In my profession I will never have enough money to ever buy a house in Utah. I've given up on that dream and put my money elsewhere.

Why Teach? | 8:12 a.m. June 7, 2008

No beginning or veteran teacher makes anywhere close to $70,000.

Try $30,000. I just went to a mortgage qualifier site to see what $30,000 would get you. On that salary you could buy a house worth a whopping......

$96,502!!!!

Cardboard box here we come!

Raise that salary to $50,000 which would take about 15 years of experience as a teacher and after 15 years you could finally afford.....

$155,605 !!!!

So after 15 years of working with those darling 2-13 year old children, a teacher still couldn't afford a home.

Meanwhile the parents pull up their SUV to drop off their child at school before returning to the McMansion worth over $1,000,000. They they write their letter to the editor complaining their property tax went up $100 this year.

As the day goes on the teacher finishes his/her work with the students and takes the bus to the second job...

Comments continue below

Anonymous | 9:00 a.m. June 7, 2008

Building home equity by paying off your mortgage is a wise financial decision.

Increased equity due to home appreciation is an illusion because all other homes, including the next one you buy, have appreciated as well. If your existing home goes up 50%, the cost of your next home will also have increased by 50% or so

No house for me | 9:34 a.m. June 7, 2008

I quite agree with the last commenter about teacher's wages. That's where I am at. My wife, of course, works, but we want to start a family but would like for her to stay at home with the kids. (Not because we're old-fashioned, but I have more earning potential as a teacher than she does as an office worker.) In any case, we won't be able to afford a home if only I work at this point. So we'll continue to rent; and I'll continue to sus out my career options. I did want to teach, but if push comes to shove I'll give it up for something else. My future family, as well, is too important to me to take on 3 jobs or something insane like that to support them. I need a good job that pays at least the 70k he talking about in the article.

CondoChatter | 9:48 a.m. June 7, 2008

You can still afford a condo under $100K... It's a viable alternative. Even though real estate demand has softened, I don't think prices are going to fall 20%. The Salt Lake Valley has a limited land area, which is quickly being developed. Rising home prices are inevitable with the lack of land available.

Anonymous in WA | 10:16 a.m. June 7, 2008

Finally, an article that speaks to the reality of the housing market, whether you are talking about Utah or Washington State, where I live. Those that have homes now and have not put themselves into precarious financial positions by over-mortgaging them based on their inflated value, are fine. It's those who have not purchased yet that are left out of the equation. Believe me, it's tough to purchase a home in the Seattle area even if you are making $80K/year on one income so I have given that idea up. It was my desire to buy a home in N. Utah and retire there but at the present time, that is financially out of the picture until prices drop. I fear my son will not be able to purchase his own home for many years unless some "equalization" occurs in the housing market everywhere. I'm not enjoying hearing about people losing their homes but at some point, one has to be responsible for the financial position one puts themselves in.

Ben | 10:19 a.m. June 7, 2008

The days of every American hoping to achieve the American dream by owning a home are over, and it only took 7 years of Republican rule to do it. I wonder when people who voted for Bush are going to realize that his economic goal was to concentrate wealth into the hands of the already wealthy, more so than it was when he took office. Step back and look what Bush has accomplished for the US economy. Record oil profits and tax breaks for oil companies. Tax breaks for the already wealthy. The creation of a new low socioeconomic class through illegal immigration to maintain a vast supply of cheap labor to keep wages down. Children living under the poverty level increasing every year of his administration. Those without health care increasing every year under his administration. College education unaffordable to more and more high school graduates. An infrastructure crumbling because billions are being spent to pay for his war in Iraq and going into the pockets of his war profiteer friends like Haliburton, and to arms manufacturers such as the one his father is involved with. And all he had to do was wrap himself in the flag.

Retired Teacher | 10:46 a.m. June 7, 2008

Much of what has been said here has always been true about teaching and income, however with sacrifice many of the financial obstacles can be over come. It has been done before. On the other hand due to systemic problems in our society today, the younger generation, not only teachers, may have to settle for a lower standard of living, than todays middle aged generation.

Renting now may be a better option since prices are still falling and property is being rented well below the mortgage/tax/insurance costs. If you just have to encumber yourself by location, mortgage payments and other options, a condo is a reasonable option. Just remember that if you don't like the neighborhood, paying for repairs, or you may change jobs and move, it will be much more difficult than giving the landlord thirty days notice. You may even lose most if not all of your down payment by the time you pay closing costs. You could even be required to bring money to closing. In this case the only profit will have been made by the realtors and lenders.

Housing | 11:12 a.m. June 7, 2008

I just did a cursory search of a couple of real estate web sites and the only places I found that were below 200K were condos that look like they are in meth buildings. Is that where we want are children living? Get used to them living in the basement.

Gus | 3:13 p.m. June 7, 2008

One of the prophets (Kimball or Benson I think) counseled young couples not to live with parents after your married. He said it would be better to live in a tent than with parents.

Expensive housing should not be a reason to live in your parents basement. If you have a job in Utah that pays around $10/hour, then you can afford to rent an apartment. Rent for a while, save your pennies, and buy a house when the home's price is affordable to your income and you'll be fine.

Greg | 3:24 p.m. June 7, 2008

If you look around, you can rent 3 bed 2 bath condos and small houses for less than $1000/month. This is much lower than what a mortgage would be on the same property. In most states, the young couples save for a decade or more before they buy their first place. I say save your money, rent for a while, and keep your eyes open because properties will be abundant and inexpensive in the coming years.

No stopping it | 4:49 p.m. June 7, 2008

House prices are going to continue dropping. it will take a while for sellers to get out of denial. We are going into a depression. Sorry.

Gus | 6:58 p.m. June 7, 2008

Although I can't help but think, even though we will be in a depression/recession for a few years, that if you want to get a good deal on a house, you should be preparing your finances now to buy in a little while.

I'm not saying buy today, but you should probably be getting ready to buy soon. Like in 12 months or so. What do you all think?

Responding to Gus | 9:16 p.m. June 7, 2008

I think you will need to watch things. Winter 08/09 will be the first opportunity for a deal with one LARGE CAVEAT. That is if there is not further meltdown in the financial system, then winter 08/09 is the earliest to look for a deal. This spring and summer is still the "season of denial".

If things start straightening out late in the year, then buy in the winter before things start cooking again.

That's wishful thinking though. Housing is likely to continue declining for at least three years more.

What I REALLY think is that the dislocations in the financial system thus far are akin to going over some rough rapids. Next we are going to go over Niagra Falls and all heck is going to break loose. Riots, crime waves, protests, commotion. I'm one who had a vision in my mind of what is happening now over two years ago. I was telling people to go buy some extra rice months before the panic. Will I be right again? Let's hope not.

from CA | 8:09 a.m. June 8, 2008

To Ben,
It sounds like you weren't around during the Carter era!

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