How Far will real estate prices fall? What do you think?

Question

I'd like to see what your thoughts are on the following question:
[b]
How far will real estate prices fall in the near-term, and what effect will the decline have on the national economy?[/b]

Lets get a dialogue going . . .

N/A N/A · Answer

This is a great topic.

What I know for sure is that no one knows for sure! There is no easy answer to the question as there are too many variables today, terrorism,sinking dollar, inflation, and out of control appreciation in many real estate markets etc. What goes up unrealistically also tanks eventually or has an adjustment period, which is tanking for those that are too far leveraged.

Aside from a nuke the re market will continue to do well or at least ok for those that are seasoned investors.  Prices are dropping almost everywhere including my stomping grounds, Washington state and other parts of the Northwest.

Arizona and some areas in Cal are taking big hits. I have some investments in Ariz and will probably lose some $ on one of them.

I bought the property I live on in 1973 ( 30 acres) for 36k, $1200 an acre at the bottom of a dip. 5 years later property in this area was selling for 8k an acre and then the recession of the 80's hit. The property decreased in value by half and took 10 years to come back..

Can this happen again, probably. Will it happen again, probably in some areas?

For those that are looking at areas offering cheap real estate, beware. Do your homework. Some areas like northern Idaho will probably do ok for a while but property is not as cheap as it was a year or two ago. Spokane Washington just a couple years ago was way below market. Today there are few listings.  It was discovered and the market went crazy. 
The only jobs there are service and farming. Will the boom last?  I suspect not for too much longer, but what do I know?

I like to invest where the good jobs are for most of my properties with the exception of the trailer court I have in Idaho...JB

U.S. 2Q OFHEO home price index up 4.7% annualized
Print
Disable live quotes
RSS
Digg it
Del.icio.us
By Rex Nutting
Last Update: 10:06 AM ET Sep 5, 2006

WASHINGTON (MarketWatch) -- U.S. home prices were appreciating at a 4.7% annual rate in the second quarter, the slowest gains since 1999, the Office of Federal Housing Enterprise Oversight said Tuesday. In the past year, home prices are up 10.1%. The purchase-only index is up 8.3% in the past year. The deceleration in OHFHEO's home price index is the fastest in the three-decade history of the index. "These data are a strong indication that the housing market is cooling in a very significant way," said James Lockhart, OFHEO director. In the first quarter, home prices had risen at an 8.8% annualized rate, with prices up 12.8% year-over-year.

Randy Thaler · Answer

Just wanted to jump in here with a question.  Given everyone's experience with what is going on in different parts of the country, does it stand to reason that areas that are still quite affordable stand to do well in the future, and for the short term not experience much of a pullback?  I'm speaking specifically of North Carolina (Research Triangle, Charlotte, etc.).  My wife and I live in the Northeast and are considering relocating to NC.  From what we've seen, homes there can be had for 30+% less than what we're seeing here.  I'm quite new at this and would love to start acquiring some rental properties but prices around here have gotten somewhat out of control, so I would imagine that can make a positive cash flow quite difficult.

Deyano M. · Answer

I follow the market in my area very closely and have seen home sales dropping steadily, but not drastically- people are still buying! And I have also seen average sold home prices increasing steadily from last year- not as huge of a percentage as in recent years, but still increasing.

I think alot of regular home owners list their home too high and have seen it start to sit on the market. New construction developers have also been hit hard because their shiny cookie-cutter homes have been overpriced for a long while and this is the first time in a few years that they aren't selling. Buyers are definitely shopping around more now, so that increases risk for investors like me. With that said, I still see nice homes with favorable pricing sell pretty quick. The area I invest in has seen alot of economic growth and new jobs, so there are definitely alot of buyers still.

I think alot of pessimists think that the market has busted and that means there are suddenly no buyers and no sales- NOT TRUE! It's just about being smart and not getting greedy!

Wes Tuinstra · Answer

I think Southern Cal and Florida will be hardest hit with
cuts in prices. After a few years, prices will firm up and
start to go up again.

N/A N/A · Answer

I agree with the above posts. We definately have a slowdown in my area, inventory is up, houses take longer to sell, and usually sell at slightly lower than asking price. That said, they are selling.

I think the thing that is most affecting RE in my area is that sellers still have a 'sellers market' mentality, and are listing above a realistic price, thus creating longer days on market. The days of 'pick a price & lets see what we can get' are over for now.

Sellers & Realtors will be working harder to get homes sold.

The RE market goes up & down like any other market.
I think we will see a rebound in the future.

N/A N/A · Answer

In many areas, the slowdown is not just new home sales.  You can look to the Board of Realtors to get specifics, but inventory is definatly up.   Is Real Estate doomed?  Absolutly not!  You do need to watch your investments, but there are a number of reasons the rise in interest rates is good for the investor.  One being that there will be many more foreclosures(good deals, and more tenants)  the other is that while rates were so low many people that couldnt buy before were able to purchase, and left the rental market.  Leaving the bottom of the barrel tenants in the rental pool.  Good things ahead.  my personal prediction is that around 2009 we will start to see appreciation rates take off again.  but until then, look for the deals and be ready for the surge.

TK Herrin · Answer

My personal opinion is to keep everything in perspective.  Sure, there is slowing in some markets, as there are several markets that are still hot - while others are not impacted at all by the recent slowing because they were not overpriced to begin with.  I also think the "chicken littles" of the real estate sector need to quantify that most of the news being reported is "new home sales" where builders went crazy and demand, interest rates, gas prices (buyers are feeling the pinch with less money to buy - so they are waiting and trying to watch every penny).  In the end, I'm staying positive and buying/investing smart.

We create our tomorrows by what we say and do today!!!  Let's not drink the cool-aid . . .   :groovy: