Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
2012 my seem like a long way off, but 28 months isn't that far away. This Business Week article is a couple months old and it predicts a couple more down years followed by a return to normalization. Of course it hedges it bet with the standard "all real estate is local."
Based on the last year or so of Case Shiller data, it appears Denver has leveled out. So, I'd predict the value of my houses will be about the same in 2012 as it is now. Maybe up a little, maybe down a little, but probably with 10% of the current values.
In addition to the "RE is local" hedge, I'll apply the "black swan hedge". Any sort of major disruption - more financial fallout, terrorist attack, another war, who knows - and all bets are off.
On the other hand the "real estate is local" talk is quite true. In the WNY area housing never rose much more than 5% per year throughout the boom years and even when national prices are dropping our market continues to grow ~5%
Already seeing a leveling off of prices in my Portland neighborhood ... down 10% from the peak so I'd estimate a flat or small (2-4%) appreciation for the next 3-5 years. Very few foreclosures in my particular area so damage was minimal unlike other parts of the city.
2012 is ample time for the market to turn over. I've heard from a bank representative I met that the market probably won't turn around until 2015, but I think she may be wrong. The market price of homes can only get so low before they the cheap price of homes just becomes too irresistable. So let's assume the price of houses gets chopped by 1/4 over the next year. People will be rushing the housing market like wild bulls trying to get a great deal on those houses. It would be crazy not to. I think the market will be on the rise by 2012, but home prices will not be any higher than they are now.
Thanks for sharing!
My city is at 14% vacancy and seems to be no end in sight for building multi-family complexes. But that's what you get when you have developers on city council! :roll:
Susan, property prices in Tokyo are down about 75% in the last 20 years. Prices definitely can go down steeply and continue going down for a long time. I am not suggesting that the same thing will happen here because our bubble was a lot smaller than their bubble from the late 1980s. But I think it is important not to invest simply based on a "feeling" that things will start going up. I would rather have proper metrics to support my decision.
JonK, Peter Lynch, the legendary manager of Fidelity's Magellan fund in the 1980s, had a rule. He looked at the cover story of BusinessWeek. If it was a flattering article about a company, he would sell the stock. If it was critical of a company, he would buy. He said BW was one of the best contra indicators that he had found.
If that magazine's sense of timing carries into the RE world, then we can just assume the opposite of what they predict and should be able to make some money.
So, a very simple analysis would say the value of each dollar is only 2/3rds of what it was previously. Not to mention the money supply wasn't exactly static under the previous administration.
In turn, that would imply the PRICE of houses would be 50% higher if their value remained the same and the dollars were worth less. That certainly has not happened in my area, and I don't think its happened anywhere else.
What happens when Israel starts bombing Iran in the next month or so? What happens when oil goes back up as a result? Will suburban homes become less expensive as people want to live in urban centers to save gas? What will happen with China who gets a large portion of their oil from Iran? If Israel bombs Iran we will be dragged in as there will be terrorist attacks left and right by Muslim extremists bent on getting rid of all Christians and Jews. We are living in a time when no one can tell. Best of luck.
I fully agree with that. Classic "black swan" situation. No matter how much we look at trends and Case-Shiller data, the reality is that some unforeseen event is likely to have more impact than the events we're expecting.
Wow! Some of those answers sound like you might want to get a massive ice cube right now, one that won't melt until 2012.
Take it in your garage, stand on it, put a noose around your neck and wait patiently for 2012 to come along. Oh, and in the meantime, please keep the doom and gloom to yourself!
Personally, I couldn't care less what my house might be worth. a) I won't be living in it because I'll have a bigger and better one that I stole from some dumb bank and b) Only I am in control of where I'll be in 2012, not a war, not a stupid terrorist and certainly not a dumb government.
Based on the last year or so of Case Shiller data, it appears Denver has leveled out. So, I'd predict the value of my houses will be about the same in 2012 as it is now. Maybe up a little, maybe down a little, but probably with 10% of the current values.
In addition to the "RE is local" hedge, I'll apply the "black swan hedge". Any sort of major disruption - more financial fallout, terrorist attack, another war, who knows - and all bets are off.
I don't think your 10% here and there estimate is based on facts. Real estate market is fluctuating right now and it will take some time before things become stable again. [LINK REMOVED] are also cautious in their approach after the slowness in the [LINK REMOVED] which has seen rates for the luxurious property fallen down quite significantly recently.
I think it's more a question of additional financial behavior that's sound and more conservative. It's ironic when people ask "when will it get back to normal."
"Normal" was artificial, it was based on far too much easy credit and a lack of common sense. RE should be treated as a business with solid planning and capital.
If we do not treat the root cause of this disaster, ill-advised financial exposure, the cycle is sure to repeat in like fashion.
As appears to be going on now, the cheaper houses become, the more certain interests with ready cash are grabbing them up...understandable.
What bothers me is the accompanying job meltdown. No matter how relatively cheap houses become in the next 2-5 years, those with chronic unemployment or underemployment over that time span, will not be buying them. Exotic teaser mortgage deals will not come back to the hand-biters...certainly twice shy, and the memory is too painful.
I've always liked the practicality of Jon Holdman's posts.
This is one of those questions where there is "not enough information." Not only will inflation, or hyperinflation, impact the worth of any capital pulled out the home. Nay, there is also the fundamental question, for most other than investors, of the costs associated with purchase.
Most will pay $200K for a $100K home due to interest and even if it "gains value" not calculate their true purchase price as a baseline.
As always, apart from what it's worth if you end up at the top of any market with escalated values and rentals more logical the landscape quickly shifts towards buyers.
Prices are largely artificial. Whatever a buyer will pay is the true worth, apart from what so many new investors cite as value (i.e. assessment). We are talking about capitalism, right?