patrick.net

It depends alot on what the government has up their collective sleeve as far as incentives. I don't think Obama wants prices to go lower Nationally so I am leaning towards the idea of lower interest rates to pull new buyers in.

Until you get back to 1997 prices plus inflation (35%). So the declines by region may vary.

thomas.wong1986 says

Until you get back to 1997 prices plus inflation (35%). So the declines by region may vary.

Hey Thomas, would you think that we are very close considering the interest rate from 1997 and now? I believe the monthly payments are very close to your idea (not including property tax).

And how does one determine the rate of inflation?

Seeing as to how things tens to overshoot. I'm thinking actual 1997 prices, without the inflation figured in.

I was thinking the graph has inflation understated if it's just a number obtained from some government source of some sort. They have many reasons to claim there was no inflation. They don't have to increase social security benefits, less people qualify for welfare, and etc. I just don't believe any numbers anymore when it's coming from government.

Vain says

Hey Thomas, would you think that we are very close considering the interest rate from 1997 and now? I believe the monthly payments are very close to your idea (not including property tax).
And how does one determine the rate of inflation?

http://inflationdata.com/inflation/Inflation_Rate/HistoricalInflation.aspx

If you check local wages and rents, you will see that both have rising only at rate of inflation.
Home prices have not. Yes they have increased back in 1997-2000 but have steadly dropped over the past 10 years. So interest rates are not usefully to determining prices.

Fireballsocal says

It depends alot on what the government has up their collective sleeve as far as incentives. I don’t think Obama wants prices to go lower Nationally so I am leaning towards the idea of lower interest rates to pull new buyers in.

That's one possibility. I think that one thing they will do is continue sort of a permanent tax credit-like way of subsidizing the DP of first time buyers. It allows them to continue the guise that the 3.5% DP requirement from FHA forces buyers to have some skin in the game, but they'll use taxpayer dollars to cover that amount.

That's what I would be pushing for if I were one of the criminal lobbyist scumbag fuckheads at NAR.

thomas.wong1986 says

Until you get back to 1997 prices plus inflation (35%). So the declines by region may vary.

That's a basic gragh with no substance.

According to HUD, "U.S. AVERAGE TWO-BEDROOM FAIR MARKET RENT" went from $582 in April 1997 to $889 in April 2009, a 52% increase. Actual Northern CA surely exceeded the national average over the past 13 years.

http://www.huduser.org/portal/datasets/fmr/fmr2009f/FY2009F_US_Average.doc

A 30 year fixed rate mortgage was around 7.5% in 1997. A 30 year fixed rate mortgage is 4.75% now. That is a huge difference and have to be factored in.

The graph does not account for any change in demand/supply, social/financial factors. You really think San Fransico and Stockton tracked the same way?

SF ace says

The graph does not account for any change in demand/supply, social/financial factors. You really think San Fransico and Stockton tracked the same way?

As they did back in the mid 90s ? Yes. Condos across Mosone were around $150K and you could have found homes lofts for around same price.
Home were not that expensive back in the day.

What you saw in 1997-2000 was a good chunck of the $150B of investment capital flow into the Bay Area for technology companies. As a result you saw a swing in demand for employees, higher wages and higher demand for rentals. Rental prices went up.
After 2000, as investments died off with the industry correction, so did rental demand. Some 300,000 jobs were eliminated from Northern California. Rental costs were cut by 30% and have been tracking at the rate of inflation since. Today you have more balance between supply and demand. Todays rents are compatiable to say 1995 rentals adusted for inflation.

Zlxr says

What will be next?

What's next? The school system will go broke and there will be no more public schooling. Children will be sent off for apprenticeship at the age of 4, and will be working for pennies per hour, sent home to their parents to contribute for rent. Only the rich will be able to go to school (private school). This sounds like a huge step back, but hey, where I came from back in time, it was like this; except, many children helped at home on the farms instead of being sent out.

Our country is headed for poverty :)

E-man says

Hey Jimmy or Robert, whatever you want to go by. Why don’t you give us your guestimate?

Adjusted for inflation, -65%. =)

Adjusted for inflation makes no sense at all. Especially when you're talking about a time where banks would loan up to 250K to people they used to would decline a 120K loan.

The correction is all based on the artificial correction, now deflating on the down side of the bubble, and the sheer incompetence that has muddled up the correction thus far.

For the foreseeable future I see housing prices falling even more, for two reasons. Loans will be harder to get, even with the outrageous piddly requirements and score. Yet new legislation will make sure that those with even fair to good, credit wont get approved.
You can make 120 a year contracting for many companies and have tax records to prove it. But if none of those W2's or 1099's are from revolving clients for more than two years, meaning you have to have an employer that you have worked for two years.
Which for many professional contractors, that's impossible. Let's say one of those accounts paid you 70k for three years. That's the income they go with. Even when your bank clearly shows much more.

The second reason, after you go through that joyous hurdle, the sheer volume of Crap that is physically available, meaning actual honest resales not short sales of foreclosures, is staggering and mind boggling. This is the crappiest of the inventory put out front in the market to represent the median price. The actual "REAL" rehab distressed properties, that had a cheap kitchen thrown in it, and a coat of paint applied and then listed as high as what you'd expect for modest dream house. I mean come on 170-225K is still a lot of money even in 2010, lets not kid around here, most families might can pay that, but they will forgo a saving and growing a nest egg, saving for college, because they will be wrapped up in mortgage payments, and lets not forget most coastal sates have high insurance, and depending on the City Taxes the Millage rate is getting a lot higher to off set the falling prices.

So on these 170-225 lack luster readily available D stock homes, people will be shelling out $1700 - $2000K a month. I don't see many prosperous families slaving long to these homes.

Now the actual houses people do actually want are tied up in Shortsale/Forclosed Bank owned racket and are intentionally being held back. Sure you can place bids on them, but if they don't get what they want, they will just sit on them.

People looking to actually buy a house, find out relatively quickly what messed up market it really is. It's like we're being cajoled to Ugly Betties to get them off the market for three years.

After about two offers or two months looking each year, most buyers fall back out of the market. These are people both capable and willing to buy a house, but aren't being treated honestly or fairly buy these Markets. It doesn't take a tell all book two decades after the fact to see what's going on.

Meanwhile house values decrease, because at the end of the day, a house is only valued at what they sell for. I would have bought last year houses that were listed for 225K, that are now listed for 160K, if there's was just a way to get the deal going.

I can predict deflation, bubbles, direction but there's no telling what the Idiots on the Hill will do next.

I've gone from worrying about home values, and over corrections to being more concerned of the Home owner class, "Land Barron" class we're creating in this country. Broward county presently has
33% home owners livng on property,
33% owned by investors or banks refurbished for either the rental market or resale,
33% of vacant homes either for sale, or foreclosed or abandoned.

The American Dreamers are a big Minority in this picture, that concerns me for the same reasons 450K 800 spft 2br houses in the bubble. I would like to think I'm raising my kids that will grow up marry and live the American dream. Instead of being relegated to being subjects of the local Land barons.

For the foreseeable future the floor is the limit, prices will drop until each house has ended up in an investors books, then they will flip them between each other.

TozT that was an excellent post. I especially like your grasp of how the "landed" class is developing and entrenching itself even more in this economy. We really are headed for hard times if they are allowed to own everything.

simchaland says

TozT that was an excellent post. I especially like your grasp of how the “landed” class is developing and entrenching itself even more in this economy. We really are headed for hard times if they are allowed to own everything.

Agreed