Investor · colorado springs, CO · Member since 2009 · 283 posts · 45 votes
Interesting article on the US market, bubble prices and the reason, further adjustments, etc. Scary part is, according to the article, we're still in for a 20-23% correction. How would the current frail market tolerate that?
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
First, I'm certainly no expert on macroeconomics, buts that's never stopped me from giving my opinion... :)
While I agree that there are some major challenges that both the housing market and the U.S. economy as a whole faces over the next 10 years (and if not solved will result in a recession larger than the one we're currently in), I think we're going to see a recovery over the next 24-36 months.
I attribute the October drop in the market to a couple things: seasonal downturn, expiration of various tax credits, increase in new housing starts in some areas, etc. I think once we get through the historical seasonal downturn of winter, we'll start to see some local improvements in various large markets.
While the economy has seen growth the past 3-4 quarters, the fact that employment is just starting to trend up is going to have a big impact on home sales, and in general, the more houses that are selling, the more stable the prices are going to be.
Again, I'm no expert -- and I think we still have plenty of economic issues that will continue to plague us until they're adequately solved -- but I just don't think we're at risk of another major market drop in the next 12-24 months.
Specialist · Riverside, CA · Member since 2008 · 382 posts · 72 votes
15y
Not buying it. My market was one of the hardest hit and if you simply pull medium income, consider average housing expenses, and determine what the actual affordable payment is in my area, we are still 10% too low. We did see buyer fall off a bit but when you talk to people they all wanna buy but have given up because every property had 80-100 offers. If we drop 20% I'll eat my hat.
Placer County, CA · Member since 2011 · 5 posts · 0 votes
15y
I tend to agree with Mr. McKee. We may still drop, but that figure is probably only there to get people to read the article. A little bit of fear mongering. Land should be expensive, and it should probably take a good 20-30 years for a responsible family to pay it off.
It's statistics, you can spin the numbers how you want if you select only the things you know will give you the numbers you want.
Loss Mitigation Specialist · Denver, CO · Member since 2009 · 12 posts · 0 votes
15y
Unfortunately I don't have as quite as rosey of an outlook as the author of that article does. I believe a majority of the run up in real estate prices was due to two major factors. Easing of credit standards and low interest rates.
The credit standards were tightened to a more reasonable level and we saw a 20% drop in real estate prices. Eventually interest rates need to go up and the amount of home a fixed monthly payment can buy will go down, then the rules of supply and demand will kick in to drive prices back to a historical mean.
I think there is always opportunities in the market, like good old fashion rentals, but I honestly believe home prices will be lower 20 years from now than they are today. The home real estate market is one asset that doesn't benefit from inflation due to the rising interest rates.
Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
15y
Originally posted by J Scott:
While the economy has seen growth the past 3-4 quarters
Originally posted by Article:
February Existing-Home Sales Decline following Sustained Gains
Washington, DC, March 21, 2011
WASHINGTON (March 21, 2011) – Existing-home sales fell in February following three straight monthly increases, according to the National Association of REALTORS®.
Existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 9.6 percent to a seasonally adjusted annual rate of 4.88 million in February from an upwardly revised 5.40 million in January, and are 2.8 percent below the 5.02 million pace in February 2010.
Lawrence Yun NAR chief economist, expects an uneven recovery. “Housing affordability conditions have been at record levels and the economy has been improving, but home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers,†he said. “This tug and pull is causing a gradual but uneven recovery. Existing-home sales remain 26.4 percent above the cyclical low last July.â€
Even though we had a few months of economic improvement, like J Scott mentioned, there are way too many signs that any sustained improvement is not going to happen soon. Until the government gets out of the way and lets economic forces take hold, all we will get is a roller coaster of an economy. While the government needs to be part of the economy, the debate is over how much. Alan Keynes thinks a lot while Adam Smith says not so much.
Ayn Rand said it best, "Government “help†to business is just as disastrous as government persecution… the only way a government can be of service to national prosperity is by keeping its hands off."
And one more quote from Ayn Rand that I like, "Civilization is the progress toward a society of privacy. The savage’s whole existence is public, ruled by the laws of his tribe. Civilization is the process of setting man free from men."
One of the tenets of which American was founded were private property rights. Any time the government steps in the "help", they only "hurt." That $8,000 tax credit just gave false hope to buyers and sellers.