Lower rates will not help much. Banks do not give FREE loans anymore. Most of the home owners stuck they cannot refinance and cannot sell. And with a new law that foreclosure debt is forgiven and foreclosed home owner doesn't owe any taxes they can wait. In Los Angeles we have 11 months worth of inventory I am sure there are twice as many willing to sale but afraid to put it on the market.
What Median Home Prices Would Look Like If the Bubble Never Happened
- Thread starter commoditiestrdr
- Start date
Lower rates will not help much. Banks do not give FREE loans anymore. Most of the home owners stuck they cannot refinance and cannot sell. And with a new law that foreclosure debt is forgiven and foreclosed home owner doesn't owe any taxes they can wait. In Los Angeles we have 11 months worth of inventory I am sure there are twice as many willing to sale but afraid to put it on the market.
Sell now means book a loss. How many trader can take a loss?
There are many people are willing to buy - Banks do not lend.
2 years ago anyone could get a loan - today only those who can truly afford will get a loan.
Home owners (most) do not understand that banks are in the business of selling debt. And if no one is buying that debt banks do not make those papers anymore.
But of course RE has to go up because everybody from New York and Europe will buy all the inventory because it is cheap.
And we are also running out of land.
And everybody wants to live here.
If you donâ't act now, there is the risk you will be priced out of the market.
commoditiestrdr
Commodities View
It's ashame most people will go under...I had a friend in Florida that is going into foreclosure
has anyone considered the fact that possibly one reason the 1mm home has gone down to 850k is that obtaining the necessary credit has gone into an "oversold" area? once the credit becomes more readily available, prices will stop falling so much. again, i live this stuff every day as an owner of a housing related business and knew things went up too much. we experienced the downturn starting in the second half of 07 and just in the last three weeks we are at a 20% rise in sales over the lows. i would like prices to stabilze (as credit reverts to a truly normal state) lower than the crazy highs. back in the late 80's when home prices hit their lows; everyone thought it could never boom again (typical human behavior).....but boy did it ever. sure i am biased; but history and experience is my edge. my housing bear suit has imo another six months before i have to put it back in the closet.
Sorry to hear that. What led to it, an ARM increase he couldn't take on, or something else?
im in seattle area, and real estate is JUST starting to see weakness. for the first time.
i sold a house in july 2007 that i had bought in 2000 for about a 70% return and i was happy with that.
location, location, location.
show me a 20% + drop in home prices here, and i will be a buyer again.
houses absolutely can fall a LOT farther than that.
and all other metrics aside, imo the best metric for longterm comparisons is home price as compared to median income. iow, how many times yearly income is the home selling for. interest rates are of course important as well, but imo there is no more basic and longterm robust metric than home prices as related to incomes
i sold a house in july 2007 that i had bought in 2000 for about a 70% return and i was happy with that.
location, location, location.
show me a 20% + drop in home prices here, and i will be a buyer again.
houses absolutely can fall a LOT farther than that.
and all other metrics aside, imo the best metric for longterm comparisons is home price as compared to median income. iow, how many times yearly income is the home selling for. interest rates are of course important as well, but imo there is no more basic and longterm robust metric than home prices as related to incomes
Agree with most of the article.
If history is used as evidence we should see lower real estate prices for the next five years if one believes the 'bubble' lasted from 2003 to 2005, which I do.
If, as the follow-up article states, we believe the bubble started in 1998 and lasted through 2005, then we should see lower prices for the next 20 plus years.
Based on new mortgage underwriting guidelines, loans are being originated based in people's real ability to repay, not the value of the collateral. At this moment collateral is meaningless and that will not change for a very, very long time.
This is all created by human greed in a collective form and yes we will survive it too, just like we have much worse events in the past..
Soros, in his book 'Alchemy' goes into detail explaining what a credit bubble is and what it's consequences are.
If history is used as evidence we should see lower real estate prices for the next five years if one believes the 'bubble' lasted from 2003 to 2005, which I do.
If, as the follow-up article states, we believe the bubble started in 1998 and lasted through 2005, then we should see lower prices for the next 20 plus years.
Based on new mortgage underwriting guidelines, loans are being originated based in people's real ability to repay, not the value of the collateral. At this moment collateral is meaningless and that will not change for a very, very long time.
This is all created by human greed in a collective form and yes we will survive it too, just like we have much worse events in the past..
Soros, in his book 'Alchemy' goes into detail explaining what a credit bubble is and what it's consequences are.
This article is garbage with garbage input statistics and assumptions (2.8x salary?). It speaks nothing of changing demand demographics, changing salary multipliers (ie socal assets are at greater premium now than 30 years ago due to better local economies, larger lifestyle disparities than before, property tax rates, and commodity costs).
ie, I have a friend in Ohio with a $300k home. He pays the same taxes I do, and enjoys worse schools. His heating bill is attrocious. His housing maintenance costs (due to more seasonal wear and tear) are much higher. [my socal home trades double the price easily] etc etc.. Those are all discounting factors on his home versus mine.
$156K for median home? Last I checked, it costs $150 sq/ft MINIMUM (more like $200) to built a permanent house of decent standards in socal. At 2000 sq/ft, thats $300K, or $400K. Tack an additional $100K on for premium sunny land value and you are at a median of $400-$500K MINIMUM. Unless we go gold standard and have a deflationary cycle, this housing cycle only has 20-25% more downside in socal.