According to Calculated Risk, real house prices, and the price-to-rent ratio, are back to late 1999 to 2000 levels. Does anyone seriously expect a drop below these levels? See http://www.calculatedriskblog.com/2012/12/comment-on-house-prices-real-house.html
Real House Prices Back To 1999-2000 Levels
By JFP Follow Thu, 27 Dec 2012, 8:37am 3,537 views 96 comments
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male
Yuup. May slide some more.
Should of happened sooner and faster.
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Given the policies of the Fed, I think if you are waiting for a greater decline to buy, you are going to be waiting a long time.
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male
No I am not.
I left California after the doubling and tripping of property prices, while incomes remained stagnant and taxes and gas went up.
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male
The policies of the FED are hurting real estate.
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male
What trust is left in the system?
Do you trust the chain of ownership?
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How can you hurt an inanimate object? Their policies have different effects on different groups of people. Right now, they are helping real estate owners and hurting renters and potential buyers.
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121212 says
Why shouldn't I? People all around me are buying and selling houses with no title problems.
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male
JFP says
If you say so.
My father-in-law is the VP of Chicago Tittle.
It's a disaster zone.
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121212 says
Which is significant, how?
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male
Beau Biden, Delaware Attorney General, Sues Big Banks' Mortgage Registry
http://www.huffingtonpost.com/2011/10/27/beau-biden-mortgage-registry-lawsuit-banks_n_1062635.html
Homeowner confusion arose from the fact that MERS assumed title to the mortgage instruments associated with the loans that its member organizations were bundling and selling off as securities. Yet MERS, according to the complaint, failed to ensure proper transfer of the mortgages, leading it to foreclose upon houses without the authority to do so. Homeowners trying to fight off foreclosure were hampered by the convoluted chain of title -- in other words, it wasn't clear who was actually foreclosing on them.
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male
JFP says
MERS!
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male
Are you in Real Estate?
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121212 says
That's a problem if you are being foreclosed on, or perhaps if you are buying foreclosed properties. If you are not, it's not an issue.
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121212 says
Yes, what I don't trust is all of the assholes that is keen to redefine everything for everyone else.
JFP says
Only on paper. Prices could get so low, that no body sells.
If my house on paper said it was only worth $5.00 then what motive would I ever have to sell it? I would give it to my neighbor first.
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male
CaptainShuddup says
Like MERS!
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JFP says
Not an issue, your blind, you have no idea of the scope and impact this is having on the entire real estate industry.
This impacts "EVERYONE" who owns property.
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121212 says
I've followed the MERS story closely, but it clearly hasn't had the impact that a lot of people thought it would have. If it was affecting the real estate market substantially in my area, I would know about it, because my neighbors wouldn't be able to sell their houses. They are all having no trouble doing so. So, why should I care about MERS?
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JFP says
It has been a contributing factor to the $7 Trillion loss real estate has suffered over the past 3 1/2 yrs.
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JFP says
I agree, at least 2 more years and think of all the rent money you will waist in 2 years! Buy now cause people in the BA are only getting richer and smarter.
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male
Did you ignore the "Beau Biden, Delaware Attorney General, Sues Big Banks' Mortgage Registry" story?
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121212 says
What is there to ignore? The suit was filed in 2011, and has had no effect on the real estate market.
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RentingForHalfTheCost says
Is this supposed to be a serious comment?
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The graph they use that shows the Case-Shiller Composite 20 index is a national graph of C-S and CoreLogic Indexes. The graph is also pinned to Consumer Price Index which is also a flawed Index.
There it shows a national level at around 100-110. It is generally assumed that 100 is a sustainable Real House Price Index number.
The one for the Bay area is still stuck at about 140, down from 200.
For all my Google skills, it is still a hard graph to find when I need it.
However, it looks more like this.
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@donjumpsuit
Thanks. That's a helpful graph. I agree the CPI is flawed, but all indexes have problems. I'm also not sure that 140 is that unsustainable in the Bay Area given the continuing internet bubble.
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bmwman91's website
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JFP says
If inventories stay where they are, house prices will continue their upward trajectory in the SFBA. There are EASILY more people with the financial resources and willingness to support much higher prices than there are decent properties available. Demand is probably somewhere between the historical norm or a little below that, but inventories are waaaaaay below the historical norm. So: supply
IF, and it is a big if, the government stops doling out easy-money loans or interest rates rise without being accompanied by inflation (which is somewhere between unlikely and impossible), things could reverse. It would knock out the entire segment of buyers that only care about the monthly payment on a house. If inventories were to increase back to historical norms, that would also put a roof over prices. For now, the Fed has been very effective at driving investors of all sizes into RE, and there is a lot of momentum there that will also keep pushing prices. Rising house prices are part of openly-stated public and monetary policy. Obama and Bernanke have outright said so. It'll take a big hiccup in the economy to diminish the efficacy of those policies.
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As an example, if a house price was $200,000 in January 2000, the price would be close to $275,000 today adjusted for inflation.
Problem with this logic is that house price inflation tracks wage inflation. Therefore adjusted for inflation, a $200,000 in January 2000, the price would be close to $200,000 today!
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JFP says
From a guy with the handle "RentingForHalfTheCost? I think not.
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zzyzzx says
Right. That's what he is saying. Real prices are at the same level as the year 2000.
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121212 says
The only way I'll have trust in a purchase, is that I receive the wet ink mortgage & wet ink promissory note at closing. If it's not there, might have a problem in the future. I don't trust title insurance. Can they back all their policies.If I buy today & they go under tomorrow, FMTT.
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zzyzzx says
It is much cheaper to buy a $275,000 house today than it was to buy a $200,000 house in January 2000. $1209 vs. $987 @ 20% down.
Not only that, tax rates are much lower, so even if wages are stagnate people can afford more!
Anybody counting on a big decline in national prices is an idiot. Inevitably it's SFBA people who can't see beyond that backwards ass crazy town.
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HEY YOU says
Or, more likely, nothing happens. Every single case I've ever heard of of title problems came from people with crazy complex mortgages (and second mortgages) who had been foreclosed on.
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121212 says
I don't get it.
Title insurance protects the lender/buyer. Potential disaster is why Chicago title has business in the first place, and why your father in law has a job.
As an insurance company, it is all about payout ratio and operating overhead to maintain a 0-10% operating margin (In a insurance product like this, its probably closer to 10%). And then use the prepaid cash from the premiums to earn another 5% investment income in addition to the operating margin.
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HEY YOU says
Insurance is state regulated. To protect the consumer, A.M. Best rates the insurance company.
The rating is based on a variety of factors:
Equity compared to policies ratio
Types of security/investment purchased from the equity pool (since insurance are prepaids with expected deferred liabililty and they don't view an aggressive portfolio favorably.)
History including payout ratio and efficiency ratio (payout % + overhead %.
Org chart and diversification of risk.
Reinsurane
Balance sheet is audited with state agents, outside accountants and actuary to verify the Balance sheet items including invested assets and estimated deferred liability. It's the opposite of government accounting where future liability is measured carefully and audited like hell.
Chicago title is one of many title insurance subsidiary of a subsidary of the insurance arm of Fidelity Financial. When you jave an insurance company, you have hundreds of entity but inter-related. Companies you never heard about is probably owned by one of the titans. I wouldn't worry about payout just as I never worry about New York Life not paying out my life insurance policy. Just go for the company with the higher rating.\
Even freaking PMI during 2008-2009 made their payouts as crappy as it was. It's not set up to take your prepaids and go out of business as everyone is all over that crap.
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Kevin says
Not property taxes.
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JFP says
Yes, run out now and give you money to any owner. They worked hard to keep the house from falling apart and deserve all your money. Give then 100k over asking and don't ask any questions. Then become a slave to the bank and watch as the owners drive off in their new Mercedes. They worked so hard for your money you have nothing to do but smile and wave. God love them, they are the ones that shall inherit the earth.
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Kevin says
The 20% down is not cheaper, neither is the property tax, HOA (if any), maintenance, insurance, etc. The debt for the free money is only part of your worries.
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RentingForHalfTheCost says
Down payment difference is not relevant. Even with fha its much cheaper to buy. Property taxes are flat in half of states, and up less than the declines in income taxes. Given that we are talking about it being 10-15% cheaper today, there is a lot of headroom.
The fact is its cheaper to own today than in 2000. I know you guys live in a fantasy world where housing is always more expensive than it used to be, but reality is knocking.
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Kevin says
Please send the difference of 20% of 275K verses 200K to my savings account if it is not relevant. Lets see that is 20% of 75K = $15,000! Nice, I'll email you the account numbers directly. Man, I can't wait. I'll use the money to do an irrelevant trip around the world. I'll eat irrelevant pasta and drink wine in Italy, I'll walk on the completely irrelevant China wall, and lastly surf the Australia waves, which as we all know don't mean shit. :)
Waiting for the 15K with irrelevant honesty and modesty.
Your humble servant and admirer,
Poor renter folk
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Kevin says
Reality is knocking only in a fantasy world. Reality is a place we are going to be soon whether you like it or not. Many will be going kicking and screaming, and some will say "I told you so". Good luck on the journey to mediocre.
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RentingForHalfTheCost says
Sorry, but if you can afford $1200 a month for a mortgage while saving the $40,000 required for 20% down at 200k, you can afford to save $15000 more.
If you can't afford the down payment, get an FHA loan. An FHA loan on $275,000 is STILL cheaper than a traditional 30 year fixed in 2000, even with PMI!
RentingForHalfTheCost says
Like I said, if you're making that bet, good luck to you. In 5 years houses will be more expensive and interest rates will be higher than they are today. I'm sure then you'll be claiming that prices are poised for another crash and that anybody who buys is an idiot.
My mortgage payment as of Monday will be $1733 a month. My home was appraised last week at $590k. Keep telling yourself that buying is so much more expensive.