help me understand...

I can help...because people buy them.

For reference as to why: see baby BMW's/Baby Audi's, etc.

I can help...because people buy them.

For reference as to why: see baby BMW's/Baby Audi's, etc.

Well, here, they have no little choice, because that is the only option. It is either, buy a house, or not.

Do you seriously think that the guy who works on your a/c or the guy who builds your seawalls really desires granite countertops and heart pine, flooring, et al. ? Sure, there are many people who may want the upgrades, but that is not entry level, people who can barely scrape together the cash for a $200,000 home, and would be stretching it at $250K.

I would tell them to highlight the price.

... and that would be a good answer. Today. In this market.

But I suspect a year ago many a Realtor would have suggested that if the seller were to upgrade to granite and hardwood, they could ask another $100K+. Or, even more likely, the agent would have bought the Formica and linoleum ladden property themselves, installed granite and hardwood and flipped it a month later for $100K+ profit. Oh what a difference a year makes.

Having said that, I do believe there will be a plethera of sub-$250K properties on the market in the next year or so as pricing continues to correct back down toward 2002/03 levels ... Some of them might even come with granite countertops.

... and that would be a good answer. Today. In this market.

But I suspect a year ago many a Realtor would have suggested that if the seller were to upgrade to granite and hardwood, they could ask another $100K+. Or, even more likely, the agent would have bought the Formica and linoleum ladden property themselves, installed granite and hardwood and flipped it a month later for $100K+ profit. Oh what a difference a year makes.

Having said that, I do believe there will be a plethera of sub-$250K properties on the market in the next year or so as pricing continues to correct back down toward 2002/03 levels ... Some of them might even come with granite countertops.

I don't know about that. Last Sept, the market had put on breaks quite a bit. Go back two years, and you might have seen the upgrades to granite, et al, but the prices for those homes were $150K -$175K, much more entry level prices and affordable to many more people. Today, those same homes are starting at $275K -- not quite the same ballgame.;-)

...and if the market goes back to 2002/03 prices, those homes would be listing around $120K, because you could buy two lots for $10K total. Ain't gonna happen -- I gare-on-t-it.

I hope that someone can help me understand why we continue to see entry level homes being built with granite counter-tops and nice solid hardwood flooring. Am I just stupid, or does that not add up to common sense? It is all people can do to afford an entry level home in many cases, so why the hell would they expect to get granite counter tops and nice flooring, and have to pay for it over thirty years? Call me crazy, but that, IMO, is just plain crazy.

Because they can.

Well, here, they have no little choice, because that is the only option. It is either, buy a house, or not.

Do you seriously think that the guy who works on your a/c or the guy who builds your seawalls really desires granite countertops and heart pine, flooring, et al. ? Sure, there are many people who may want the upgrades, but that is not entry level, people who can barely scrape together the cash for a $200,000 home, and would be stretching it at $250K.

simply put, the market rules and says you are wrong.

I don't know about that. Last Sept, the market had put on breaks quite a bit. Go back two years, and you might have seen the upgrades to granite, et al, but the prices for those homes were $150K -$175K, much more entry level prices and affordable to many more people. Today, those same homes are starting at $275K -- not quite the same ballgame.;-)

...and if the market goes back to 2002/03 prices, those homes would be listing around $120K, because you could buy two lots for $10K total. Ain't gonna happen -- I gare-on-t-it.

Ah, the good 'ole days. When there was correlation between rents and sales prices. When the average dentist from Atlanta with 2 1/2 kids could afford his little piece of paradise without a 40-yr IO loan. When $250K sounded like a small fortune for a two bedroom condo. But I digress.

I would agree that we won't see $120K prices ever again. But I was looking around in the SoWal market back in 2003 with a measly $200K to spend, and there were options available at that time, albeit limited ... Cassine Gardens, Beaside Condos, Legends of something-or-other, Beachwood, Carribean Condos, Emerald Heights (?), lots of townhouses and condos in Sandestin, and even more in Destin ... I don't think that it is completely out of the relm of possibility that, if the the landing is harder rather than softer, these properties revert back to sub-$250K.

There may be hope for the common man after all.

Because they can.

You are correct. They can build them with those upgrades, but the problem is that they cannot sell entry level homes at $300K, so I wonder just how long it will be before the builders realize this and decide to make cuts in other ways, such as cutting these upgrades.

You are correct. They can build them with those upgrades, but the problem is that they cannot sell entry level homes at $300K, so I wonder just how long it will be before the builders realize this and decide to make cuts in other ways, such as cutting these upgrades.

Businessweek Article: Are Seller's Incentives Masking True Price Deline?

The way they're "cutting the upgrades" is to offer them for "free" so they don't have to lower the price of the house. Problem is, the people who jump at these "freebies" (GCT, SS, cars, plasma TV) are paying property taxes based on the "freebies." Buyers who are impressed by "shiny trinkets" have already been suckered into overpaying...what's left are the wiser, hard-core, pre-approved, end-user buyers in no hurry to buy into a declining market. They'll be the buyers who stand toe-to-toe with the builders and say, "Here's my final offer for the house with all the 'bling' included, take it, or leave it." <Hands over business card with price on back, turns and walks toward marble-inlay foyer>

FROM LAST SATURDAY'S NEW YORK TIMES:

“The reason the Realtors’ data has never showed an outright decline” before, he said, “might be that they’re not measuring the effective price.”

Lawrence Yun, a senior economist with the Realtors group, said that in markets where inventories had been rising rapidly — like the Northeast and California — incentives could well equal 3 percent of house values. But he estimated that the national number was smaller, because homes sales were continuing to rise in roughly a third of markets around the country.

The typical incentive package from a home builder consists of upgrades to the house — granite countertops instead of humdrum tiles, stainless-steel refrigerators and stoves instead of plain white models and wood blinds instead of plastic. At the extremes, some have thrown in $30,000 swimming pools.

Buyers who demand discounts often get them in the form of excused closing costs or low interest rate loans made by builder-affiliated mortgage companies.

On the west coast of Florida, builders are advertising incentives like upgraded countertops, interest rate promotions and cash rebates totaling $40,000, or 6.6 percent to 8 percent of the sales price, on homes that sell for $500,000 to $600,000, said John Dew, a real estate agent in Naples.

Builders tend to choose discounts because they worry that reductions in the list price would send a clear signal that the market is in trouble, potentially angering previous buyers and emboldening future customers.

“They already sold the same product to the guy next door and if they reduce the price he is going to scream,” Mr. Dew said. He added that many builders were also offering agents bonuses worth tens of thousands of dollars in finders’ fees for bringing in buyers.

In effect, the incentives have become a quiet way to cut the price of houses without further damaging the market. Sellers “don’t want to create this environment of fear in the market that prices are going down, so you should wait to buy,” said Dean Baker, co-director of the Center for Economic Policy Research in Washington, who believes that prices will fall in coming years.

Incentives are often most substantial on homes built on speculation before a sales contract has been signed, or on properties that buyers have walked away from after signing a contract. Big builders report that cancellation rates are running as high as a third of new sales, compared with about 20 percent or less a year ago.

Pulte Homes, for instance, was recently offering unspecified incentives totaling as much as $10,000 on homes in a Connecticut development to buyers who were willing to move in before school started. In the spring, Centex Homes ran a “24-hour sale” in Southern California where buyers who agreed to purchase within the day could get a $100,000 discount. It ran a similar offer for a $60,000 discount in Atlanta.

Lenders are also wary of incentives. Lenders do not want to finance transactions where the sales price exceeds the true value of the home. Fannie Mae, the large buyer of mortgages, requires disclosure of perks and it caps them on a sliding scale from 2 percent to 9 percent of selling prices, depending on whether buyers will live in the home and based on the size of the down payment. The concerns of lenders will eventually limit the size of incentives in home sales, said Anthony Hsieh, president of LendingTree.com, the Web loan site. Many buyers may also balk because their property taxes will be based on the sales price listed on the contract.
Eventually, buyers will realize “there is no free lunch,” he said. “There is a reason it’s being given away.”

Entry-level Seattle Condo McNugget: The moda condos, set to break ground in October, promise "New York-style living," with units as small as 296 square feet that start at $149,950. All of the condos will have such luxury touches as appliances with stainless-steel finishes, granite or limestone countertops, floors finished with cherry or walnut and tile bathrooms.

They're so small....

The front door and back door are on the same hinge
The mice are hunchback
You can't order a large pizza
You stick your key in the lock and pop out the window on the far wall
You have to step out in the hall to change your mind

And my favorite video of all time: [ame="http://www.youtube.com/watch?v=ssktODChnEY&mode=related&search="]YouTube - Condo[/ame]

Shelly, that video cracks me up, I remember you posting it once before. But the guy is correct about one thing, it does have "heck of a view."

You are correct. They can build them with those upgrades, but the problem is that they cannot sell entry level homes at $300K, so I wonder just how long it will be before the builders realize this and decide to make cuts in other ways, such as cutting these upgrades.

The problem is that if you cut theses few upgrades the asking price is only down a few percent say to $350k. At that price the deal doesn't seem so good on a "stripped" house. It is almost impossible to build a starter house in this financial climate. The problem with the cost of housing doesn't lie with the evil builder, it is primarily the artificially inflated cost of land and also impacted by the greed of suppliers/manufacturers IMO.

The problem with the cost of housing doesn't lie with the evil builder, it is primarily the artificially inflated cost of land and also impacted by the greed of suppliers/manufacturers IMO.

There was more than enough greed to go around including the RE industry, banking, government, suppliers, developers, contractors and, yes, investulators. The perfect storm.

The problem is that if you cut theses few upgrades the asking price is only down a few percent say to $350k. At that price the deal doesn't seem so good on a "stripped" house. It is almost impossible to build a starter house in this financial climate. The problem with the cost of housing doesn't lie with the evil builder, it is primarily the artificially inflated cost of land and also impacted by the greed of suppliers/manufacturers IMO.

I hear you, but the asking price on entry level around here starts around $275K, so we may be talking about getting that price closer to $250K list, without the additions. That becomes a whole different ballgame.

I hear you, but the asking price on entry level around here starts around $275K, so we may be talking about getting that price closer to $250K list, without the additions. That becomes a whole different ballgame.

Hmm, let's say we are dealing with an end user (owner occ) with good credit and goes for a 30 year fixed rate mortgage. For simplification, we will use your two numbers and not deduct any down payments.
275k @ 6.5% = $1738.19 principal and interest.
250k @ 6.5% = $1580.17

Your actual mileage may vary based on credit score, down payment, taxes, insurance and so on and so forth, but my point here is that 25k in the selling price financed with a typical long term fixed rate is not that big a difference ($148 a month). Some of these other factors might affect one's ability to buy the house , but if that amount on the sales price is the difference between being able to afford the house or not, these buyers are in too high a price range already , IMO.

Hmm, let's say we are dealing with an end user (owner occ) with good credit and goes for a 30 year fixed rate mortgage. For simplification, we will use your two numbers and not deduct any down payments.
275k @ 6.5% = $1738.19 principal and interest.
250k @ 6.5% = $1580.17

Your actual mileage may vary based on credit score, down payment, taxes, insurance and so on and so forth, but my point here is that 25k in the selling price financed with a typical long term fixed rate is not that big a difference ($148 a month). Some of these other factors might affect one's ability to buy the house , but if that amount on the sales price is the difference between being able to afford the house or not, these buyers are in too high a price range already , IMO.

But lets say they bank that money for say 7 yrs. (average time a person is in a home)
That equates to about $13K with interest more or less. Now they have 1) either a start of a downpayment, or they can use it to buy the granite and stainless refridgerator for considerably less money than the extra 25K.

But lets say they bank that money for say 7 yrs. (average time a person is in a home)
That equates to about $13K with interest more or less. Now they have 1) either a start of a downpayment, or they can use it to buy the granite and stainless refridgerator for considerably less money than the extra 25K.

Not quite sure of your point here. Of course if you could bargain the builder down by removing those items or they weren't there and you had that cash in hand, you could do something with it. My point was regarding the statement of 275k vs 250k being 'a whole different ballgame' for the buyer, affordability wise as far as getting into the house.

I would agree that if 25k is being charged for something worth far less, then yes, it would be better to not have it and spend the money more wisely yourself.

Hmm, let's say we are dealing with an end user (owner occ) with good credit and goes for a 30 year fixed rate mortgage. For simplification, we will use your two numbers and not deduct any down payments.
275k @ 6.5% = $1738.19 principal and interest.
250k @ 6.5% = $1580.17

Your actual mileage may vary based on credit score, down payment, taxes, insurance and so on and so forth, but my point here is that 25k in the selling price financed with a typical long term fixed rate is not that big a difference ($148 a month). Some of these other factors might affect one's ability to buy the house , but if that amount on the sales price is the difference between being able to afford the house or not, these buyers are in too high a price range already , IMO.

This is precisely what I find to be the problem with real estate currently. Never mind that 25k buys a nice car or so many other things, it's only $150 a month. The disconnect of the value of something when you mortgage it at a low rate is ridiculous. I realize SpinDr that you are talking about the price difference not closing out a buyer because of the payment, but the 25k will cost you over 50k if you finance it, period. If you had to work to save 25k it sure would be a different story. This is the credit mentality which I always complain about and if you say it doesn't exist in the higher end homes I can assure you that you are uninformed.

BTW if anyone knows a buyer who will pay 25k for stainless upgrades and granite tops I will give you a 40 percent split of the 25k at closing:funn:

Not quite sure of your point here. Of course if you could bargain the builder down by removing those items or they weren't there and you had that cash in hand, you could do something with it. My point was regarding the statement of 275k vs 250k being 'a whole different ballgame' for the buyer, affordability wise as far as getting into the house.

I would agree that if 25k is being charged for something worth far less, then yes, it would be better to not have it and spend the money more wisely yourself.

$143 a month in payment is susbstantial to some people who are seeking affordable housing. Even though FNMA and FHLMC approve loans with higher debt ratios with someone with good credit, ie: 45% total of their gross income combined debt is still quite a chunk of their wages. If their total monthly outlay is approx. $2000 a month, no debt, no car payment, someone could qualify with a 2 income family of $35K each.

I am not sure why this thread has gotten so much attention when SoWalSally posted 2 threads about affordable housing in Walton County and not one reply?
What am I missing here? PM me with answers if you feel the need.....................

I am not sure why this thread has gotten so much attention when SoWalSally posted 2 threads about affordable housing in Walton County and not one reply?
What am I missing here? PM me with answers if you feel the need.....................

We hashed out the "affordable housing" and "low wage" problem back in February. At that time lots '0 people thought all would be well when the "Spring buying season" would turn things around. Some people even believed that $12.50 per hour was a reasonable "living wage" for the SoWal area.

As for that "minimal monthly $148" SpinDoc....no problem, just toss it on the top of the heap with the rest of the debt:

Hmm, let's say we are dealing with an end user (owner occ) with good credit and goes for a 30 year fixed rate mortgage. For simplification, we will use your two numbers and not deduct any down payments.
275k @ 6.5% = $1738.19 principal and interest.
250k @ 6.5% = $1580.17

Your actual mileage may vary based on credit score, down payment, taxes, insurance and so on and so forth, but my point here is that 25k in the selling price financed with a typical long term fixed rate is not that big a difference ($148 a month). Some of these other factors might affect one's ability to buy the house , but if that amount on the sales price is the difference between being able to afford the house or not, these buyers are in too high a price range already , IMO.

EXACTLY my point. They are already stretching it to make ends meet and an extra $100 in the pocket every month can go toward putting diapers on little Joey.

That is quite disturbing.

I cannot believe this is not being removed off of here!!!

Good gracious!! What on earth happened to post #21!!!!!

SJ...I bet your computer or the website has been "hacked" with porn photos like that!

And to think a comment from me about a condo being "way over priced" was pulled off in an instant...shesh :roll:

Kurt....oh.....Kurt!!

Sometimes when you hotlink a photo, the photo on that URL is replaced later.

If anyone ever sees an inappropriate post, click the report post button at the lower left of the post. Thanks!

We hashed out the "affordable housing" and "low wage" problem back in February. At that time lots '0 people thought all would be well when the "Spring buying season" would turn things around. Some people even believed that $12.50 per hour was a reasonable "living wage" for the SoWal area.

As for that "minimal monthly $148" SpinDoc....no problem, just toss it on the top of the heap with the rest of the debt:

Remembering discussing it, "hashing" it out in my book means solutions were found.
SoWalSally threads were solutions offered by a major employer in the area for affordable housing. Not construction by developers. Different animal altogether.

Remembering discussing it, "hashing" it out in my book means solutions were found.
SoWalSally threads were solutions offered by a major employer in the area for affordable housing. Not construction by developers. Different animal altogether.

I wish them nothing but luck and hope it materializes in 3 years according to their proposal.....

but....(you know there's always a "but")....believe it or not, there once was plenty of "affordable housing" in this area before the Real Estate money-grab took off.

Politicos and businesses were the ones who stood by and watched (and profited?) while the entire local economy got turned on its ear....so now the tide is turning and they've gotta fix it--correction---now they SHOULD fix it. If you ask me, it's like trying to put the toothpaste back in the tube.