patrick.net

Housing prices will continue to fall and at some point end up even lower than "traditional" levels of affordability. From 2000 to 2008, houses were being built on a massive scale and sold, flipped, traded, etc. Many houses were not lived in for a considerable amount of time. Any slow-down in home building will not be able to significantly effect the over-saturation of housing that will come in the next few years. It will take much longer to have a traditional equilibrium. First we had the housing boom, soon will see the reverse, a vicious downward spiral, caused by excess supply and people walking away.

Underdark says

Any slow-down in home building will not be able to significantly effect the over-saturation of housing that will come in the next few years. It will take much longer to have a traditional equilibrium. First we had the housing boom, soon will see the reverse, a vicious downward spiral, caused by excess supply and people walking away.

The problem, as others have noted already, is that the excess supply in housing is in the wrong places. Those houses are almost worthless.

Underdark says

at some point end up even lower than “traditional” levels of affordability

After all the US banks goes bankrupt it will be Cash only business in USA. LOL.

solver says

I’m starting to think that the idea really is to bankrupt the middle class for control purposes. Why will prices keep falling? Maybe the power elites are really out to break the system so that they can reinvent it with new standards and a greater sense of control.

Was watching Money Masters (the full length version) on You Tube the other night and it really lends quite a bit of insight into the whole power structure of the world.

I think that there are simple explanations to it all. We just don’t want to see the handwriting on the wall.

Let me guess, you think 9/11 was a conspiracy as well?

The power elites have little to gain if the middle class falls. Breaking the system just results in revolutions, not in obedient slaves to the system.

I have to say that we are not even at the bottom of the point of where this bubble started. I am no rocket scientist just looking to be a first time home buyer before being engulfed in all these stats, charts and graphs. But I can figure things out. Unfortunately, if common sense would dictate, then it means the final bottom will be equally lower from the starting point from the graph of @Dan8267. It only makes sense. The peaks and valleys from the 70's and 80's were normal industry cycles. What this is a fictitious home inflation caused by banks and indiscriminate lending. However my local real estate agents have all been telling me for the past 5 years even at the peak that now is the time to buy! You better get this great deal of a house otherwise you lose out. One even told me that the median price even went up 20K from last month. Probably due to all the new listings of the month folks trying to offload there house so they aren't underwater. Then 10 more come out on the market at that price or lower. The cycle continues... The weight of this bank caused problem has to continue to give in.

Housing will bottom on December 21, 2012 when the Mayan calendar prophecies the world will end. After that, all of Apocalypsefuck's predictions will come true.</sarcasm>

Not for at least 5 yrs. You'll know when they've bottomed because everyone will be saying housing is a bad investment and they'll never buy another. Right now, too many people are still of the mind set this is just a dip, buy before it's too late yada yada. Nonsense. You want to buy when no one else wants to. Housing is still far too expensive historically compared to incomes. When renting becomes more expensive than owning, then it will make sense to buy.

Fisk says

HousingBoom says

Fisk says

In all previous collapses in any other country that I know (and I unfortunately lived through one in the USSR and studied a few others), RE was by far the BEST investment/hedge

load up on US RE and let me know how it went in a few yrs =)

I did buy a house and intend to buy one or two more within the next several years. All cash, not leveraged, so can wait.
But I do NOT actually expect a collapse - just rather high inflation
for some number of years. What amazes me are those who DO expect collapse and run away from RE. To where - currency and bonds of collapsing government?

Gold, corporate bonds, and a farm :)

bob2356 says

Really? So 70 million baby boomers currently at the peak earnings of their lifetimes living in empty family homes who will retiring, cashing out all their retirement savings, selling their mcmansions, moving to nursing homes, and dieing over the next 30 years won’t matter? They will be replaced by new immigrants and children? Explain the cold hard math involved.

I smell 70 million high paying job openings in UPPER MANAGEMENT.. the positions aging boomers are holding onto right now with a death grip!

What's killing the economy right now isn't so much the outsourcing of jobs.. It's the 50-65 year olds who are all still working! Once they retire or die... Somebody has to be hired to fill their shoes...

Corporate America has already cut their workforce to the bone... Once Boomers start retiring en masse.... Job openings will soon follow!

In fact, I read an article that there won't be enough people to fill the jobs all the Boomers currently hold eventually... And that will force wages higher and put the employee in the drivers seat for wage increases and bidding wars on their talents.

Fun Fact:

1) Beginning January 1st, 2011 every single day more than 10,000 Baby Boomers will reach the age of 65. That is going to keep happening every single day for the next 19 years.

Now if they all decide to work until they DIE... then we might have some issues.. But sadly boomers will probably have to learn to live a lower standard of living in retirement than expected and be forced to retire with less money.

VancouverRon says

We must not forget that the U.S. has been living far beyond its means for decades. I think if America was to live within its means the standard of living would be slightly higher then Mexico. America has gutted its manufacturing sector.

I agree Ron, though not sure if it would be as bad as Mexico. More like eastern Europe? Canada lived beyond its means also for decades but was forced to pay the piper in the '90s when government bonds lost their high credit rating. It took about 10 yrs of Paul Martin's austerity measures but now Canada is one of the most financially stable countries. My point is... Canada's political system provided the framework to support the necessary austerity. The U.S. does not have that. Things will likely have to get much worse in the U.S. than they did in Canada before there is enough political will to do what needs to be done. And that will make the pill that much harder to swallow.

common_sense says

The population won’t keep growing if immigration gets cut off like so many want.

But wages would increase which would cancel out any negative effects less immigrant population growth would have on housing... Boomers just started retiring this year... Boomers Retiring = Job Openings... Most Boomers held the high paying jobs too... All jobs can't be outsourced.

High Paying Boomer Jobs Openings.... Less Qualified People to Fill Jobs.... and you eventually end up with a reversal of the current job market. More jobs than people to fill those positions will eventually push incomes higher.

Los Angeles Renter says

But wages would increase which would cancel out immigrant population growth…

No it wouldn't. That's not what the studies indicate.

corntrollio says

No it wouldn’t. That’s not what the studies indicate.

Not sure what studies you are referring to....I'm just doing basic math.. 10,000 people reaching retirement age on a daily basis. Say 50% of them are actually still working up to age 65...

That should translate to nearly 2 million NEW job openings a year.... Just from Boomer population retiring.

Sure the numbers are out of whack now.. with so many unemployed. But that's 20 million new job openings over the next 10 years stimulated solely by retiring boomers...

Just trying to throw some positive spin on all the doom and gloom here.

Los Angeles Renter says

I’m just doing basic math.. 10,000 people reaching retirement age on a daily basis. Say 50% of them are actually still working up to age 65…

That's non-responsive.

You specifically said wages would increase if immigration were choked off.

The best study on the benefits of better immigration policy:

http://www.americanprogress.org/issues/2010/01/raising_the_floor.html

From the executive summary:

Comprehensive immigration reform generates an increase in U.S. GDP of at least 0.84 percent. Summed over 10 years, this amounts to a cumulative $1.5 trillion in additional GDP. It also boosts wages for both native-born and newly legalized immigrant workers.

Mass deportations would raise wages slightly for unskilled native workers, but would hurt those who have skills and those who modernize our economy, again, from the executive summary:

Mass deportation reduces U.S. GDP by 1.46 percent. This amounts to $2.6 trillion in cumulative lost GDP over 10 years, not including the actual cost of deportation.2 Wages would rise for less-skilled native-born workers, but would diminish for higher-skilled natives, and would lead to widespread job loss.

http://dailydish.typepad.com/.a/6a00d83451c45669e2014e8942dadf970d-550wi

We've literally lost 5 percent of our workforce. Does that really look like a recipe for higher housing prices?

Many of you are forgetting that we're on the precipice of a global financial meltdown. Think I'm chicken little? I couldn't care less. Mark 20 June 2011 in your calendar and I'll meet you here next year on the same date and you can tell me all about your awesome equity.

Los Angeles Renter says

But wages would increase

It would be other way, when most people who lost their high paying jobs could not land another one closer to their last income.

StoutFiles says

solver says

I’m starting to think that the idea really is to bankrupt the middle class for control purposes. Why will prices keep falling? Maybe the power elites are really out to break the system so that they can reinvent it with new standards and a greater sense of control.
Was watching Money Masters (the full length version) on You Tube the other night and it really lends quite a bit of insight into the whole power structure of the world.
I think that there are simple explanations to it all. We just don’t want to see the handwriting on the wall.

Let me guess, you think 9/11 was a conspiracy as well?
The power elites have little to gain if the middle class falls. Breaking the system just results in revolutions, not in obedient slaves to the system.

I think two planes hit the towers and that's irrefutable. I also think that they may have served as a decoy. www.drjudywood.com If you can look at this and refute everything that is scientifically backed, then you should present your discoveries to her. Till then, much is in question STILL and I don't see anyone offering up 100% of the details.

Anyway, I would imagine that given the average shovel ready job that was presented to the unemployed only paid slightly over minimum wage, that would represent a much much lower housing market in the near future. How else are those low wage jobs going to stimulate the economy by buying and remodeling homes.

Hell, homes would have to come down like 75% for these new hires to buy. Maybe there is light at the end of the tunnel.

it doesn't take a rocket scientist to figure out that we're just getting out of the eye of the storm and we're going back into it.

Oh, by the way, a revolution is not to far off. If you educated yourself by keeping up with current events in the governmental system, you'll find that we really are in an Orwellian like society. It's no longer conspiracy, it's not reality and knuckleheads (sheeple) like yourself are the reason. There are some who were born to be followers and some who were born to leaders. Leaders question everything, because they know they have to in order to get the facts straight.

Everything is intertwined at the hip. One thing affects another and problems usually trickle down. Why do they want to break our society? Maybe, because it represents power. How else would you explain all of our current events?

I was in my bank about 3 weeks ago and I was sitting down with the mortgage specialist who was helping me sort my accounts since the other reps were occupied. I was told that their analyst had been in the day before briefing all the branches of what was coming ahead. In short I was told that they were told to simply brace themselves for something worse then what happened before.

He told me that he couldn't say anything more and that he too was a little nervous. That just goes to show you, that even the employees at some of these banks are human too. It's the big powerbrokers at the top who are creating all the havoc in the system. These are bastards that will soon be getting what is coming to them.

As the saying goes: "Be careful what you wish for, because you just might get it" and get it they will.

common_sense says

Gold, corporate bonds, and a farm

A farm is obviously a form of RE, so you second my case.

Corp. bonds denominated in what currency? That of "collapsing government"? You may well get your coupon, in nearly worthless currency. That happened with corp. bonds in Germany during Weimar times, btw.

Gold is good, I agree. But govts. of all stripes, when pressed, have a nasty habit of confiscating or outlawing it as a legal tender. That has happened in 1930-s in Germany, here in the US, and many other nations. But they didn't confiscate or outlaw RE ownership. Perhaps because they can't sell confiscated RE abroad to obtain foreign exchange to pay for critical imports.

StoutFiles says

Let me guess, you think 9/11 was a conspiracy as well?

The power elites have little to gain if the middle class falls. Breaking the system just results in revolutions, not in obedient slaves to the system.

Ugh - awful analogy. You honestly think the 21st century robber-barons believe, or care, that there's going to be some sort of armed uprising against them if they go too far? Don't make me laugh. The sheeple are too concerned with who's going to win on American Idol to take up arms. You're also forgetting that the power elite do not necessarily act in their own best interest. They are only concerned with grabbing as much wealth RIGHT NOW as possible. If the price of soup went up, they'd gladly throw the goose that lays golden eggs in a pot to make a little short-term profit.

And that's where your analogy falls apart:

The 9/11 conspiracy is bullshit for a very simple reason. Which is more likely, that a group of terrorists from Saudi Arabia hijacked some planes and crashed them, or that the U.S. government somehow secretly planted explosives in prominent buildings, then orchestrated the most complicated charade in history just to make us believe it was done by terrorists? Obviously the first one.

But which one of THESE is more likely: The wealthiest Americans are manipulating politicians, the stock market, and the economy for their own benefit, just as has happened in past centuries, OR those same people are afraid that the middle class will take up arms against them? Obviously the first one.

Zlxr says

Additionally - who’s to say that Cities and Counties will not raise property taxes? Look at the city of Albany, CA. I know of someone who’s paying $3800 per year (property taxes) on a $60,000 purchase. $800 goes to the State - the rest goes to the City of Albany for sewers and schools.

Under Prop 13, that can't be right. Did I miss something? Are you from California? There's no way the property tax on a $60K purchase would be $3800/year.

In addition, property tax being so low in California largely makes it so that local government is highly dependent on the state legislature, which is highly incompetent and unaccountable. This is one of the big effects of Prop 13 that most people ignore -- loss of local control.

On a $60,000 home, the highest taxes would go for a heavily Melloed district is $1000 a year.
I was curious, so I looked up my neighbor's house as they have been around forever; they have a Prop 13 basis of around $55k. Their Ad Valorem taxes (at 1.2555%) come out to around $600. PRoB is one of the worst cities for special assessments. The Fixed Charges and Special Assessements component of proptery taxes (schools, parks, stormwater, libraries, mosquito, fire etc) tally up to be $1,350. The size of their home looks to be slightly less than 1400 sq.ft.

bob2356 says

Cash purchases will sink in the future

It will, with economy further going into pits.

I think, from now on, before every post you should list if you own a house or rent. I think a lot of stances on this thread are just people rooting for Team House or Team Rent to win, only because they're on that team.

chip_designer says

Apple planning to build UFO new campus

Yes, Apple's new UFO building will certainly raise housing prices in the Bay Area. Duh.

Of course in reality, Pandora is in Oakland, not Silicon Valley.

thanks cornrollio

Sorry to disappoint you all. But the next RE report that comes out will show that prices have went higher than 2009 prices again. In my area at least. I guess every so often there will be a good deal on a short sale/REO. But it doesn't seem to be stopping people from bidding it up again. Maybe because of the interest rates?

PIMCO says, "We anticipate an average decline from here of about 6% to 8% in prices across the country."

vain says

Sorry to disappoint you all. But the next RE report that comes out will show that prices have went higher than 2009 prices again

http://dqnews.com/Articles/2011/News/California/Bay-Area/RRBay110615.aspx

“Given the sluggish start to this spring’s home-buying season, with sales 20 to 30 percent below average, it’s no surprise we’re logging sharper declines from 2010. Sales got a big shot in the arm a year ago, when people rushed to take advantage of expiring homebuyer tax credits. Today the market must stand on its own, and it’s having a hard time doing that in the absence of stronger job growth and consumer confidence. So far, low mortgage rates and lower home prices aren’t enough to overcome the concern some potential buyers have that prices could fall more. Other would-be buyers are unemployed or underemployed, or can’t qualify for a loan. Scores of would-be move-up buyers owe more than their homes are worth; so they’re stuck,” said John Walsh, DataQuick president.

Distressed home sales made up about 45 percent of the Bay Area’s resale market last month.

How Low ?

Dqnew.com August, 2000

The median price paid for a resale house in the Bay Area was $372,000 in July, another record. That was up 0.5 percent from $370,000 in June and up 20.0 percent from $310,000 for July last year.

uffthefluff says

PIMCO

Yeah, right? Back at the peak in 2006, they said - "Nationwide, flat, but 10-20% drop in some areas":

http://www.youtube.com/watch?v=de1lQZjJkkc

mdovell says

Foreign buyers are not enough to prop up the housing market. Don’t get me wrong they can make some gains but it won’t restore it to where it was.

The fact that foreign buyers are buying is an indication of a top, not the bottom. Foreigners always come in at or near the top of the cycle. The fundamental reason for this, is that it takes longer for news to travel and spread from the source to remote locations.

vain says

It went down for a little and down to mid-high $400k’s for a month or two. Now it’s back at $550k again and again.

Your problem is that you are having a ride with the asking price. Asking price means complete BS in this market. I have not heard of any market in USA where homes were selling at 400K in 2009 and comps are now selling 550K in 2011.

klarek says

LOL a few months ago, weren’t you using foreign cities as a benchmark, to make a case that housing is cheap in the U.S.?

Yep--and obviously you didn't get his point.

Looking at the graphs above, tell me why housing prices wont revert back to the mean? After all, if they can go up by X percent, they can go back down by the same percent, yes?

People are not making that much more than in 2000 (if any). The population, if you include retirees, is not increasing. Interests rates can't really go lower. And, I feel that rent is increasing only because people don't want to buy- and that is creating rental demand- it's a dislocation, not a correlation. Now, in my area of NJ prices are no where near even their 2000 levels.

Tell me why prices won't DEPRECIATE (not crash) back to the mean, over a number of years?

odin says

Tell me why prices won’t DEPRECIATE (not crash) back to the mean, over a number of years?

1970s style inflation.

Don't see it happening, but I can't say it won't.

The minimum wage in Calif doubled between 1968 and 1981. It could double in the next 12 years.

That's the general trend; the system desperately needs wage inflation. Maybe we'll actually get it.