The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: John Chen who wrote (186379)	2/25/2009 5:57:43 AM
From: Dan3	Read Replies (2) of 306849

Re: Falling home prices are not the problem, they're the solution That's for sure (unless you can get someone to accept rising middle class incomes as a good and necessary thing). Meanwhile, there is the problem of taxes and insurance. Looking through online listings, there are more and more homes for sale where the monthly cost of T&I is approaching the monthly mortgage cost of the home. An example is a home that's dropped from $800,000 to $400,000. For a buyer with $50k to put down, the $750k mortgage for that house would have been about $4500 per month - not affordable to most incomes. Now the price is $400,000 which would put a $350,000 mortgage at $2100 per month. Possible for many two income families. But now add back in the taxes, and the monthly "mortgage" cost is back to $4200 per month. Most municipalities assess property taxes by "assessed value" rather than market value, so real estate taxes don't go down even when housing prices collapse. At some point homes become worthless because their real estate taxes are too high - I think we're approaching that point in some cases.

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