Please do not comment about your local real estate market. Nationwide, when and why do you think residential real estate will bottom out and begin to rebound to the point where prices not only stabilize but actually begin to appreciate?
When will residential real estate hit bottom?
By RayAmerica Follow Wed, 17 Feb 2010, 2:42pm 58,122 views 993 comments
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It has been what "Should have been the bottom" for many cities. The problem is, due to all of the fudging of numbers, price fixing measures by local governments, federal governments and the REA active interference of the free markets, will cause an "OVER CORRECTION" of those cities, towns or subburbs that have already fallen in line with a good historic price. With inflation adjustments factored in from 1999 to now that negates the last decade of growth, while allowing for proper 3% YOY growth from 1999.
Those homes will be less desirable as the last hold outs hopping for a miracle return of exuberant investors, abaindon this non sense and their prices start to fall in line. Will trickle those already down even lower, to make room in that price demographic for the hold outs.
It seems RE has bottomed, but really there are a lot of DOG properties filling the 150K-220K that have no business even listing over 120K.
But don't take my word for it, I'm hardly ever right. }:-}
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I heard on NPR this morning, that in So Fla, 99% of the Foreclosures aren't even on the market. This was from the spouse of an RE attorney.
I can wait, INCOMING!
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iwog says
Thank you I am rushing to my real estate agent.
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I can see some value in a high level view of the housing market.
For one thing, the Fed would start to put away the bazooka. It is just one metric.
Some folks here focused on the BA like it is the crown jewel.
For me, BA is like a freak show that has little connection outside of 50 mile radius.
Even my own city, it isn’t a good time to invest in rentals despite some bargains being under cost to build. That’s just my own view, I own rentals since 1987.
It gets old to be a landlord, dealing with other people’s problems. My houses are cash flowing positive but costs are rising faster than rent.
Reality is, eventually you will rent to the Adam’s family and it is a nightmare until they are evicted, separate you from thousands of dollars.
A national bottom would be useful as one indicator of entry to REITs.
I made good, effortless money in 2003-2005 in REITs. They are liquid and don’t need 6 months, a ton of work and expensive parasites to be paid off to liquidate.
The financial world is drastically altered, harder for the little guy. There are few long term trades when the market is run by hucksters, front runners that make money by manipulation of the markets. To counter that on a personal level, I need to be quick.
When the big boys move, my money must go with them, to anywhere in the world. And brick and mortar houses are SLOW money.
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kt says
You just explained why I don't invest in this market. I'd rather take my chances in Vegas, at least they put up and feed losers. Or is that the Government that does that?
Now I'm confused, who's running thins again?
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Portland, OR
Guess I'm perplexed why housing would be such an important indicator of the health of the nation. Was our country healthy in 2006? Sure looked like it if you just went by the housing prices.
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Baltimore, MD
2013-2015 at the earliest.
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"Was our country healthy in 2006? "
Absolutely not!
I was having mental wedgies on a daily basis.
I was fare more concerned about my kids future than how many cart loads of crap I could buy at the Big Box store. At that rate by the time most high school kids would have been at the home buying age, a house would have started at a Million dollars.
If that's healthy, then good Lord where are we headed next?
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Portland, OR
Tenouncetrout says
That's my point. Many, except you, I and a 'few' others who were screaming 'OMG!', thought USA was on the road to riches, and that everything was fine and dandy. I mean, just LOOK at my home equity;O)
That's why I think looking for bottom, predicting bottom is just one of MANY indicators of economic/national well being.
But to play along...my prediction, another ugly dip starting now w/ a severe hemorrhage beginning in May (something about the $8K credit and the fed termination in buying toxic assets) leveling out in Novemberish 2010 and sliding along bottom for 2 years. Gotta have jobs to pay the mortgage but with prices so low folks will start to accept the new American way: single income households, 10 year old cars and vacations at Wolf Lodge, Busch Gardens, 6 Flags, if your lucky otherwise just a weekend at the lake in a tent.
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Alexandria, VA
It is hard to predict the timing and the possibility of double dip as an ordinary guy, so I'd better not talk about it. But something is bothering me when I think about things happened in US stock market this week, Obama on the TV and what Burnanke said... Looks like they are cheating altogether for something though, who knows... anyways...
Leigh says
The wife and I am already doing what you called "new american way" for years, so what should we do if it hits the bottom whenever it is? :)
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AdHominem says
No we bean counters do not roll up and average anything. Its the opposite we segregate out and provide detail analysis by component/element which provides relevant data for end user.
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Portland, OR
"The wife and I am already doing what you called “new american way” for years, so what should we do if it hits the bottom whenever it is?
"
My husband got nailed a couple of times during the tech bust of ~1999-2001 so we've been living like we only have one income due to the instability of his temp jobs, part time jobs and career change/school. I'm a FT RN making decent money though we have the expense of two toddlers. So to watch folks live soooo far beyond their means these last 5-7 years has been so painful. I do wonder if we would have seen all the writing on the wall if my spouse was still making the big bucks in hi tech. Would we have been too busy enjoying the $$$ to care? I would like to think not but it's hard to say. What hardship we hard early in our adult lives has been a wonderful lesson to use the next 40 years. We sold just before the Portland peak but I do worry about having too much fear and analysis paralysis as we go forward. I'm just an RN, not a financial guru. I don't understand half the stuff I read on sites like Calculated Risk or Roubini's blog. And I have a hard time grasping inflation and how to overcome it.
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Leigh says
There are a lot of people being displaced in HT as well. Its nothing new to some like me who saw the 86-91, 1999-2001 tech bust, and current downturn due to recession. The higher up the latter you were in HT the harder to get a new job, but also there is plenty of staffers who are seeing their jobs vanish. Your right this will provide a lesson as you live out your lives. Keep your spirit high and good luck!
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Alexandria, VA
Leigh, what you've been thru is unfortunate, but very precious lession.
That's what happened to me too. Thanks to the wife who has stable job, frugal and full of heart, we're able to get back on the track in couple years. I owe her my life's worth of debt, and I will try to repay her as long as I can. Doesn't matter you understand financial mumbo-jumbos or not. You learned your lession, you can appreciate what is there with you, and you can support your family in hard times. So be proud of yourself, hang in there, keep your chin up because you're worth it.
***
Seeing -94 points already in DOW pre-market, what Burnanke said, and depending on how asian and european market will repond next week... it will be interesting.
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Burbank, CA
Leigh says
It's important because as a "market," real estate (commercial & residential) swamps all other markets. If real estate prices continue to deflate, that directly effects banks, etc. and has a huge impact on the new construction and home improvement market. Deflating residential real estate also happens to be, for most Americans, their largest financial investment. When prices deflate, they feel poorer which translates into less confidence and has a direct impact on their spending habits, which has negative consequences for lasting economic recovery.
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RayAmerica says
Appearances can be extremely misleading. Take the year 1928 for example. Everything "looked" great. The business community commonly made claims that there was "no reason why everyone can't be rich." Common every day people were making money in the stock market, etc. However, few noticed that many people purchased their stocks on margin (borrowed money) and their prosperity was shared with their “partners” the banks. As long as the stock market continued to rise, the banks had no problem lending out more. When stocks took a huge tumble in 1929, the banks called in their margin loans which further fueled the plunge in stocks. The smoke and mirrors appearance of prosperity was fully exposed by the Great Depression. The recent real estate crash has exposed our era as another phony prosperity. In my opinion, we won’t see prosperity as a nation again until this real estate mess is cleaned up.
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When anything housing is most hated topic, then the bottom is in.
When Patrick gives up the Crash site and moves on.
When the government stop throwing borrowed money to rescue the debtors.
Even then, it will flat line for years in the US, no need to hurry.
Looks like a game of stalling. They trumpet a new program like HAMP, knowing it will take 12 months before we lose interest. Then the next program is waved in front of us. Nevada is getting $1.5B love today. Maybe CA is deemed TBTF so Obama is greasing the skids for states bailout. Wash and repeat, sooner or later the market fixes the problems. We will declare victory.
The issue for me is, there is too much unkowns to lock-in to anything. I care more about the return of my money. Too many shoes to drop on housing for my taste.
To those that thinks this is a great time to buy, I truly hope you're right.
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Manchester, NH
RayAmerica says
Yeah, I notice when there's a shortage people start shipping their homes to high-demand areas.
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Manchester, NH
zzyzzx says
That's about right. Maybe longer.
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Boulder Creek, CA
When rent and purchase price reach a reasonable parity.
Determining "reasonable" is the hard part. It's easy to determine it isn't "reasonable" for mid-high where I live.
When it gets there I'll let you know =D
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Burbank, CA
After their real estate bubble burst 20 years ago, Japan is still in a real estate slump. Yikes.
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Burbank, CA
Things sure aren't looking up. So much for the "dead cat bounce" we got from the Homebuyers' Tax Credit programs. Like all Keynesian stimulus programs they end in a thud.
http://www.zerohedge.com/article/hard-truth-about-residential-real-estate?source=patrick.net#main
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47 male
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Iwog,
here in the central valley the tumble is just begining for upper / middle homes. Only the bottom level junk has went to "normal" prices that reflect actual incomes. The upper / middle stuff is still puffy and is just about ready to slide. The early jumpers are leaving their McMansions and buying up the "ok" upper stuff right now - in someone elses name. So, right around the corner there will be mucho McMansions hitting the auction blocks. So, it is my guess that upper / middle level homes in the central valley of California are in for much more bad road. Another 30% down from here before they match wages. Normal is not here yet, and since the climb up will be flat, there is no rush. Just my uneducated opinion.
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47 male
Lafayette, CA
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I don't see any major appreciation for awhile, and I suppose we could see real estate dropping 5% or so from these levels, but I think the best way to describe the next 3 years will be flat.
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Burbank, CA
More proof the Homebuyers' Tax Credits were a flop:
http://www.bloomberg.com/apps/news?pid=20601087&sid=adSkz7WCGd0o
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RayAmerica says
lol-- you must have a different definition of success than most sane people...
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Yup, I saw that too, and laughed.
Tenouncetrout says
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CSC says
Do you guys disagree with their methodology then?
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I am not sure enough of their methodology to say ... but, I am sure enough of their motivation to maintain my doubts. Is that fair?
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Bap33 says
I completely understand being a skeptic--usually a good thing. But, at some point, real estate will hit bottom and will be affordable. So, I just wouldn't dismiss the article out of hand...
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Winter solstice, 2012.
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50 male
Beverly Hills, CA
WillyWanker's website
The real estate market will have hit bottom when I can pick up a 3 story house overlooking the marina on Marina Blvd in SF for $1.5M I think that will be in first quarter of 1978. Now all I need is a time machine.
*sarcasm*
All real estate is local. Who cares what is happening in Las Vegas if you are in the market for a brownstone in the Upper East Side of Manhattan. You can't have the banks pull comps from Vegas. It just won't work out that way.
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Prices are still falling in Phoenix
Everyone who bought last year is now underwater.
There are many, many empty houses.
I'm not sure there are many cities where there aren't alot of empty houses and apts. If someone tells you so, then you should go and check for yourself.
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I wonder if insurance costs will affect rent and payments.
If people make 44,000 and pay 3500, it seems that it will cut into their rent/payment budget.
If they make more they pay more, so pple making 50,000 will have less budget too.
also if we get VAT it will make maintaining a house expensive. Paint costs 50-100 dollars a can in New Zealand and many houses are not painted for years.
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alibeamish says
There is no VAT tax in NZ. There is a GST (goods and services aka sales tax) tax of 13.5%. Everything is expensive here. NZ is 4 million people (about the size of the Philly metro area) living on 2 islands a very long way from anything (6000 miles Shanghai to Auckland), prices reflect the reality of shipping and handling relatively small quantities (no wall mart type purchasing power) of goods over long distances then distributing them in a sparsely populated country with a very limited road system (there is only 15 miles of divided highway in the entire country). That's 50-100 NZ at .66 NZ to the dollar as of last night by the way.
I've seen very few houses in NZ with poor paint. Houses in my area are mostly very well maintained. What part of NZ do you live in that has so many poorly maintained houses?
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Burbank, CA
RayAmerica says
tatupu70 says
The only thing the tax credits program did is move up the buying date for buyers that would have purchased in the future. Now that those purchases have been made, what's the result? Predictably, a dramatic drop in sales activity. Also, an "unintended consequence" increased our national debt. When you add it all up, it sums up as just another government boondoggle that passes on more debt to future generations and accomplishes next to nothing.
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RayAmerica says
Well, you're in the minority there from what I've read on this board. And really, looking at sales data, it's hard to defend your conclusion. The number of sales in the months preceding the tax credits program compared to the sales during the program is pretty dramatic, wouldn't you say? How many months of sales at the pre-credit rate would it have taken to equal what you ended up with? That's pulling ahead a lot of sales...
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Bellingham, WA
Ray America may be a minority here on this but IMHO he is perfectly correct here. The $8000 tax credit was horrible policy.
You can't just hand out $8000 to EVERY buyer without it distorting the market (ie supporting high prices).
Until we figure out that high real estate prices are a BAD thing in this country we'll never get our act together.
http://www.calculatedriskblog.com/2010/04/home-tax-credit-costly-failure.html
Congress spent $15B to keep home prices high in 2009 and part of 2010. What a great investment.
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Is Ray America really a minority? I certainly agree with him.