Posted on 11/27/2007 7:58:34 AM PST by shrinkermd
No one knows how severe the slump will be, but economists and real estate experts interviewed by The Times, and who were willing to make predictions, said prices could fall 15% to 25% before turning back up.
Most said values would continue falling through at least next year, and some thought the market wouldn't reverse course until 2010.
That could translate to big declines for home buyers who bought at the peak of the market, which various measures place in late 2006 or early 2007.
For example, a home that sold for $800,000 in 2006 could fall to $600,000 over the next two years.
Some analysts, including UC Berkeley professor Kenneth Rosen, believe the severity of the downturn will vary by region.
Areas such as the Central Valley and the Inland Empire will be the hardest hit, he said, because these attracted a higher percentage of new buyers with shaky credit, and many of them are now defaulting on their loans. He believes values in these communities could fall by 15%.
But "in areas where there is very little new housing, where it's hard to build and a lot of wealthy people live, there will be little decline or maybe none at all."
So far, the monthly home sales figures appear to bear that out. Last month, for example, median home values fell 15.1% in Riverside County but only 3.8% in Los Angeles County, according to DataQuick Information Services.
(Excerpt) Read more at latimes.com ...
No, she’s pointing out that the MSM is thinking that way right now. IOW they’re pushing this on us to help elect The Bitch.
I bought my house in 1989. By 1992, the house, by assessed value, had gone down in value by 18%. Then the price bounced along the bottom for several before finally turning up again in 1997.
I live inside the beltway in northern Virginia.
A strange thing is happening this time around: Prices are lower but not much lower. I see “sold” and “under contract” signs regularly in my area.
However, if one goes outside the beltway, like Faquier County, VA, for example, prices have cratered.
$260k is about a 14.5% compound annual growth rate. At a 5% CAGR, it would be worth around $140k; 8% for 170k.
In general, you’re right.
In some boom-town areas (Vegas and Reno, for example, or Phoenix Tuscon, Riverside and the “inland empire” in CA, or the Central Valley in CA, or in Treasure Valley in ID, etc) you’re going to see much more severe and longer-lasting price depression because they’re fantastically overbuilt for the demand (on speculation) and over-priced for the wages that are sustainable in their job markets.
The prices in Reno, NV are among some of the most absurd I’ve ever seen. There just aren’t that many six-figure income jobs in Reno, and I know this for a fact because we used to live there.
What is really going to crush house prices in some of these areas is this: the developers are going to put thousands more homes into an already flooded market. The developers have no choice — they’re already on the hook for the land and materials, so if they don’t build houses, they have scant chance to recover their costs. They have to finish building these huge developments they’ve started. In Reno, that will mean something like an additional 10,000+ homes coming into a market that is already showing signs of saturation.
But “in areas where there is very little new housing, where it’s hard to build and a lot of wealthy people live, there will be little decline or maybe none at all.”
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
I will buy that, but in the world of those who work for a living prices must come down to a reasonable multiple of the average household income. This used to be reckoned as twice the annual gross income. I have seen posts on this forum within the past two years by people who seemed to consider five to six times annual income as a reasonable price for a house. Anyone who can do sixth grade arithmetic can calculate better than that if they try. Anyone who thought for ten seconds had to realize long ago that housing prices cannot continue to rise faster than incomes. There are always those who will try to buy the moon if someone will make them a loan on terms that make the first monthly payment doable, those who make loans to such people should be prepared to lose.
exactly...I still haven't seen this happening everywhere..what I have seen is that housing prices have not increased, but instead stabilized to the pricing levels of two years ago. Big deal.
After the escalation of prices in the 80's everyone lamented that housing prices would never regain...ten years later and people wished they'd bought during the last bubble. The fact is, if you live in an economically thriving metropolitan area, housing is somewhat finite and people have to live somewhere. Ten years from now, people will once again wish they'd bought during the last "bubble".
Furthermore, the entire graph is based on the California secular boom with prices varying between 6.8 and 9.5 times average incomes. If this were to drop to genuine "affordability" typically about 3 and maxing at 4 times average income, then "reality" is off the bottom of the chart.
To begin: The important high point date for California real estate is the summer of 2005. The article uses the bogus time frame of 2006. Real estate prices fell about 10% in that period and maybe even more in some regions.
In the past year, real estate has tumbled about 15% - 25% all over the state of California. The La La Times wants to assure readers that homes are not falling in value when anybody with a brain and eyes ought to know the truth. But people do not want to know the truth. They want to be assured.
Local governments want to be assured as well. Property taxes, you know?
The primary problem for people living in Los Angeles is the Culture of Debt. Everybody drives fancy, overpriced automobiles. People who cannot afford to buy them find ways lease them at even greater cost. People also spend fortunes on fancy clothes, jewelery, shoes, hair cuts and dining out trying to be seen with the rich and famous. They stupidly lease these item, too -- by buying them on revolving credit accounts. Paying 18% - 28% interest to do so.
Only makes sense in a society where appearance is everything. 'Fake it until you make it,' is a way of life in So-Cal.
All that changed suddenly in 2007. People woke up out of a dream and realized they had massive credit card debt. Credit card companies doubled the required minimum payment. Overnight. At the same time, people learned they could not refinance their homes 'just one more time.' Panic is starting to setin.
And the banks are squeezing customers (debtors) with bogus late fees, manufactured over-limit charges and collection fees based on fake late payment reports. It is all a huge scam engineered by credit reporting companies and Wall Street !
It time to wake up and smell the coffee. Everybody is getting screwed. Again and again and again. It is more like a Saudi style gang rape but you pay for the screwing yourselves.
Read these very long reports and learn something:
The Pathology of Debt I: Banks as Vulture Investors
Pathology of Debt II: Commercial Paper and Pesky SIVs
Wake up and learn something. Or stay stupid. Whatever.
In the meantime . . . Do you really believe the stock markets?
Yup, and Warm Springs is a fine area to loaf around too!! Best bring your wallet!!
Good post.
The market will always dictate the price....unless Congress gets involved and then we all lose....!
In my no-growth San Francisco Bay Area town, I've watched the housing market for about seven years, and prices are finally starting to creep downward. Some are down as much as 15% in the last 3 months. But prices have a long way to fall. Someone put the foxes in charge of the henhouse in about January of 2004, when banks started allowing high risk buyers to take out mortgages for 100% and even 125% of the already overinflated house prices. In addition to these sub-prime mortgages, so-called liar loans were given to buyers with made-up employment records and unsavory credit histories. Prices shot up as speculators rushed in. It's very much like the internet bubble that pushed the NASDAQ from 1000 to 5000 in only 3 years (1997-2000.) If you look at the graph, there is an almost symmetrical cone shape as prices fell back to almost 1000 from 2000-2003, followed by a brief bounce, after which the curve has continued at the same rate of increase as it has for most of its existence.
If someone can point out why the housing market should not follow the same correction as the NASDAQ, I would love to hear it.
“incomes rising at 4.6%”
Really? Where is this going to happen?
Thanks for your post. Bookmarking to read your links later...
Also are there benefits/deals to be had purchasing a foreclosed home rather than a typical house for sale?
You waited till the end of your rant to get to your agenda. You could have made this the first statement in your agenda-driven rant, and skipped the rest.
yep, and it will be one of the pandering points like; gun control, health care, abortion, etcetera...
It is my belief that real (average) incomes have not been rising at all in a couple of decades. Of course, inviduals do not see this because they get a pay increase every year and miss that everyone marching up the ladder with someone falling off at the top and someone climbing on at the bottom is not social progress.
I was talking to a Las Vegas real estate agent on Sunday, and she said something I believe to be true all over the US: the million dollar and up market hasn’t been affected much (if at all), but the hugely overbuilt suburban 300-500K areas are in for a big tumble. She thought Asian money would keep the high-end afloat for the forseeable future. I’m seeing that in San Francisco, also - there hasn’t been much of a price change in any higher-end real estate. With the dollar’s fall, it looks cheap to foreign buyers.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.