PCOC - Spring 2010 - (Page 27)

capitolScope Housing Crash Affecting Your Business? By Curtis Good PCOC Legislative Chairman With the cost of housing prices still falling in most areas, home prices are nevertheless dangerously high compared to income and rent. A safe mortgage is a maximum of three times the buyer’s annual income with a 20 percent down payment. Landlords say a safe rental price is a maximum of 15 times the annual rent for the property. Yet, for the cost of a house, both of those safety rules are still being violated. Buyers are still borrowing six times their income and putting only 3 percent down. The lack of increases in salaries and the steady or reduced rental prices prove that housing prices will keep falling. The only true sign of a market bottom is a home price low enough that the property could be turned into a rental and a profit could still be made. The only true sign of a market bottom is a home price low enough that the property could be turned into a rental and a profit could still be made. Then you’ll know it’s safe to buy property for yourself because the income would cover the mortgage and all expenses if needed, eliminating most of your risk. Because there is a massive and growing backlog of latent foreclosures, millions of homeowners have simply stopped paying their mortgages. And, the banks are not doing anything about it; therefore, the owner lives in the house for free. When a bank forecloses and takes possession of a house that means the bank is now responsible for maintenance and property taxes. Banks don’t like those costs. Then if a bank sells the foreclosure at current market prices, the bank adds another loss on the loan. Consequently, there is a wave of foreclosures on the horizon that the banks are ignoring. Here’s another thought … retiring baby boomers. There were 70 million Americans born between 1945 and 1960. The oldest boomers are 65. One third of them have zero retirement savings. The only money available to them is equity in a house that they will probably sell; this will add yet another flood of houses to the market, driving prices down even further. Obviously there are no easy answers as to when the economy will turn around, especially in California given the economic black hole facing the state. As a word of encouragement, we must always remember to stay well informed, vigilant, and ready to meet challenges facing our industry. PCOC / SPRING 2010

Table of Contents for the Digital Edition of PCOC - Spring 2010

PCOC - Spring 2010
President’s Message
Martyn’s Corner
Tackling a Multi-Unit Housing Bed Bug Problem
State Capitol Report
Capitol Scope
Firm Profile
Ten Ways to Cut Fuel Costs
Africanized Honeybee Certification Renewal
Seven Keys to an Effective and Profi table Web site
Index to Advertisers

PCOC - Spring 2010