My bold prediction for this decade
By ¥ Follow Tue, 25 Jan 2011, 11:01pm 6,172 views 79 comments
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Tempe, AZ
coop says
You can easily list it for what you want and see what happens. You don't have to sell if you don't get an acceptable offer. If you do sell, then you'll need a safehaven for the money. In general, I would be surprised if real estate went up but rather seems more likely to continue a slow slide downwards until it has a date with inflation at some point in the future. I won't be surprised if mortgage rates were two and a half points at some point. This could be a good economic strategy if that is what you value for the hassle of moving. Just recognize it is first and foremost about economics. Moving and renting can be a hassle.
Another advantage is that after you sell you can shop for another house. But you can tighten up your criteria and focus on finding a real gem. Zero in on neighborhoods you really like and after a while you'll know them inside out. You'll get a great feel for the right home and price point. You can save a fair amount of money by tailoring the home to what you want and not paying for an extra bedroom, or an extra bay in the garage or a commute that is five miles too long.
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Troy says
Is that right? I'm only seeing that rate for the 10 year.
http://money.cnn.com/data/bonds/
doubleup says
As a newbie, this is something I don't understand about real estate. The current CMA and comps include all the local foreclosures and short sales and thus spits out a number well below what I think the house could sell for (is the CMA especially low because it's taking comps from the winter season? Is there incentive to wait till early summer so I could have a CMA that includes the spring comps?). My instinct is to do as you say, list it for what I want and see what happens. However, I keep hearing about the dangers of over-pricing and how I need to price my home according to the bank-owned-saturated comps! Also, if my house is on the market for too long, I hear buyers get suspicious...why couldn't it just be the case that I'm holding out for the right price?
Thank you guys!!
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Bellingham, WA
coop says
my bad!
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Saint George, UT
elliemae's website
According to Troy's graph, in the future:
- red & green will now make gold when mixed together.
- all lines will become arrows
- all graphs end after Jan 2012
- no more recession!
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Tempe, AZ
You house will need to compete for buyers with anything else comparable on market. If your neighborhood is filled with bank-owned property, then that's going to affect it's market price negatively to some degree. It will also affect it's ability to get appraised when you have a buyer.
You'll have more incentive to price at the market clearing price if you goal is to get out while the getting is good. If you're just fishing for top dollar, then you'll reduce your chances to sell but you might get lucky and land a buyer that will meet your needs.
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Los Angeles, CA
coop says
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Los Angeles, CA
coop says
Your house is 650k and you only have 230k left to pay and of course nobody here tells you to stay in it? Wow!
You’re mortgage payment must must be pretty low. Rentals in Woodland Hills are $2000+ , more like $2500-2800 for a house that is worth 650k!!
Do you want to rent again for more than you pay now?
Don’t sell. If anything, rent it out IMHO. You’re a lucky guy!! Don’t listen to the panic in this forum. They love to tell you to sell sell sell…it feeds the agenda of crashing prices and doom and gloom. Pay those $230 off as fast as you can…then you don’t care what your house is worth because you own it and you pay nothing to live there and if prices really come down a lot - good for you, you’ll adjust your property taxes DOWN and live even cheaper.
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Troy says
Thanks Troy!....this would mean that for me now is the time to stack my chips as one day I may be able to buy a house outright with cash.
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Bellingham, WA
From a year ago:
vs now:
Ima jenius
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46 male
Menlo Park, CA
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Good prediction so far!
I bet you'll be right for the rest of the decade too.
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CS seems to moving along your prediction line. Isn't the CS graph indicating that 2009 bottom is already busted?
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I'm curious the average age of PATRICK.net posters.. especially those planning on waiting another 10 years to purchase a home?
I have a feeling many will see their grave sooner than the inside of their first home.
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There does come a point in which people who think home prices are going to keep declining become just as delusional as those who thought home prices would keep appreciating.
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Los Angeles Owner says
Very old... What does it mean... I pissed more beer and banged more pussy.
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Los Angeles, CA
That CS graph is like a crazy skateboard ramp and just as dangerous too.
Bubbles kill people when they burst.
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Danville, CA
gregpfielding's website
An updated housing chart today from the SF Fed:
(though I'm not sure why the caption says "steady" when the trends are clearly still down.)
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gregpfielding says
Northern California was already in a bubble by late 2000. Draw the chart 15 years prior 2000 and forward to present.. that would show a different story, and change any conclusions.
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Bellingham Bill says
vera fidelis
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Ross, CA
Seriously, I don't think this will happen in my neighborhood. But I do think it will happen in yours.
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Bellingham, WA
HousingWatcher says
Thing is, what if the past 30 years has been total bullshit?
http://research.stlouisfed.org/fred2/graph/?g=4JZ
What if we've gotta actually start cutting expenditures and raising taxes?
What if tightening oil supply and our trade deficit starts actually ripping wealth out of this state & country more actively:
http://research.stlouisfed.org/fred2/series/BOPGSTB
What if we have to raise FICA and Medicare withholding substantially to actually pension off the boomers?
This is begging for a HItler's Bunker parody, where Hitler's first line is "That's OK, we can just print" and the OKW guys give him the bad news . . .
"Anybody here who hasn't paid off their house please leave the room."
"WHAT DO YOU MEAN WE CAN'T PRINT!"
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San Francisco, CA
Los Angeles Owner says
Late 40's. Switched careers in my mid-30's, and then by the time I was settled and ready to buy the bubble hit. Been waiting 10 years now, and if I wait much longer, you're right, I'll be an old geezer buying my very first home.
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Los Angeles, CA
HousingWatcher says
Why does that matter? Curbed LA recently ran an article explaining that median 2bd/2ba rents in Silver Lake were $2150/mo. They then asked if people would pay mortgage size amounts to rent these homes.
The thing they forgot to mention was that 2bd/2ba homes in Silver Lake sell for $630-800K :|
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Los Angeles, CA
My current rent = $1640/mo and includes around $140 in amenities that I would not get in ownership.
Buying an apples to apples loft would cost me $2200/mo.
Prices are still actively declining. That $2200/mo used to be $2800/mo
Why would I buy? Why would I care that I am not buying?
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I read this graph differently than the yellow arrow prediction, I see a oscillation in the graph from 2009-2012. The last time you saw a similar oscillation in the graph above was when the market hit top and was deciding to change direction. I think the market is in the process of deciding to change direction and that higher interest rates indicative of higher inflation will be catalyst make housing prices go up. Historically when interest rates went up housing followed up. Does not make sense but is true.
I think the argument that a bubble most over correct on the down side because it always has in the past is the same as what people used to say "housing prices never go down" there is no always.
I think my biggest concern has been and still is the level to which the government is determined to hold and raise housing prices. It looks like new tax payer money coming in to stop foreclosures by reducing principle and interest rates. In addition most worrisome is the bulk housing auction of shadow inventory starting this month with no public access to the selling price info being a criteria to even being an investor.
I don't know where the market is going, but I don't feel as certain as some of you that it is going down.
I also see a larger divergence in pricing due to specific market geography,If you live in a sweet spot versus an area that was over buildt and near nothing it simply isn't the same real estate market and can't be lumped together.
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Danville, CA
Los Angeles Owner says
I agree with you! My husband and I are in our mid-40's and have rented for 7 yrs. Right now we have an opportunity to buy a house for about the same as rent and are looking to do it. By the time we calculate the yearly taxes we pay and extra utilities buying looks to be a good deal. We would like to pay the house off by the time we retire and are getting older. Rents in the area are holding pretty well if not going higher. The cost of the house is 2 1/2 times our yearly income. I don't want to rent for another decade waiting for prices to drop! That's insane!!
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46 male
Menlo Park, CA
Premium
The comments about German humor are all moved to this thread in the Humor forum now:
http://patrick.net/forum/?p=1208438
Please continue the humor discussion over there, if you dare.
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Bellingham, WA
bigbubblemama says
Interest rates in the past just did not "go up". They were intentionally PUSHED up by the Fed to curb borrowing and debt expansion.
http://research.stlouisfed.org/fred2/graph/?g=4Lu
blue line is the debt cycle (new debt over wages) red line is fed funds rate.
The Fed does this to prevent wages from "hyper"-inflating like they did in the 1970s. Unfortunately, we've broken our economy now and can no longer raise the interest rate:
http://research.stlouisfed.org/fred2/series/FYGFDPUB
Home prices are going to be driven by disposable income -- wages less taxes.
I don't know where that's going this decade and next.
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South Pasadena, CA
Bellingham Bill says
No, it does not. Only about $4 cheeseburgers. But you will walk to the nearby McDonalds. (maybe gonna get a bit healthier.)
You don't even need $15/gallon. $8.5 will do it if we add $5/gallon taxes now.
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Kent, WA
John Bailo's website
Sometimes I drive around looking at new houses...large but pressed up against each other with 2 feet of air space, and I think, hey what a lot of house for $290,000...$325,000...$405,000...
Then I think back to the days of the American settlers...getting 40 acres, 100 acres...for free! Or when 50% of the American population was rural and lived on family farms...it was only 100 years ago when that was true.
Now we're crammed into houses butt up against each other and the urbists call it "sprawl". Couldn't you also call it cages?
That is to say, if you really look at the teeny, tiny amount of land that even the largest metro area house sits upon, are they worth any thing at all?
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Bellingham, WA
John Bailo says
Try living with no sqft.
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San Jose, CA
I see “Japan” style path in housing from long time.
What could be different?
Japan was alone with huge government debt. Currently most developed countries have same problem. In past if any country had this problem, debt restructure and debt forgiveness, brought them to health.
World debt is now well connected. If each country forgives debt to each other, economy can be greatly improved and global inflation avoided.
Rising rent may affect home prices. However rent increases have its limit without rise in salary.
The rent is keep going up, but in areas with short distance to core business center. Remote areas actually showing softness in rent increases. Some folk start buying (a lot of pending sales), including people from this forum. This action releases some stock of rental units.
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MarkInSF says
We as a nation, seemed to have forgotten that RE prices do fall and did fall heavily as in the case in '89-'94. This was previously in our lifetime. But many over the last boom dismissed such talk. Many wrongly believed RE would appreciate 10-25-50% a year... thats just insane.
Lack of any financial regulation had little to do with this.
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REpro says
Business and companies move around from one end of Santa Clara County to another.. 5 years later.. its all different.
Cisco started in East Palo Alto, moved to Santa Clara, then to Milpitas. Had they been able to execute their plan in 2000, they would have moved to Way Way South San Jose.
Things change!
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John Bailo says
I don't know.. my 2 story home sits on a a 1/4 acre lot and it feels pretty spacious to me... More land equals more expense to maintain it.
That's why when people say you can get a home for twice the size with 4x the land outside of Los Angeles I think... Well that's at least twice the maintenance cost... so you are paying more out of pocket per month. Homes may be more expensive in Los Angeles.. but aside from potential earthquake damage.. Maintenance on smaller lots and smaller houses is minimal by comparison. Less windows to replace, less roof sq footage when replacement time comes, no snow removal....
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Scottsdale, AZ
robertoaribas's website
¥ says
how'd that work out for ya?coop says
I wonder if this guy followed your advice? anybody care to tell me what a $650k home in woodland hills circa Jan 2011 would be going for today?
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Victorville, CA
Premium
¥ says
That's what my bartender used to say...
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To accurately make this prediction you would have to know what is going on inside of Bennies head
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robertoaribas says
It is interesting to look back and see what the general sentiment was at the time. If anything, it seems like a plurality of posters were dissatisfied with that prediction in that it was not pessimistic enough.
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For example...
thomas.wong1986 says
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Oakland, CA
HousingWatcher says
people got burned on the way up it was inevitable that people would get burned on the way down too. Just feel good if you didn't get stung both directions like the people who bought at the peak and walked away at the bottom.