Any real estate experts out there ?
Can anyone share their thoughts on what they think may or may not happen in this market ?
Will markets like San Diego and DC go up or down by more then 20% ?
Any real estate experts out there ?
Can anyone share their thoughts on what they think may or may not happen in this market ?
Will markets like San Diego and DC go up or down by more then 20% ?
The local bishop wrote:
Any real estate experts out there ?
Can anyone share their thoughts on what they think may or may not happen in this market ?
Will markets like San Diego and DC go up or down by more then 20% ?
Housing prices in the DC area have already started to decline. There are some VERY desireable areas where the prices haven't dropped yet, but generally speaking, the prices are dropping. Don't know anything about San Diego.
From what the "experts" say, the decline has already started, but there will remain some very hot spots. Hint: the hot spots are in places that families rather that hip urbanites will be interested in. People want two things, safety for their families, and security. The cities, while very fun for the younger crowd, don't always offer much for those with kiddies, so those so inclined are leaving the big city areas.
good for me the DC area is always going up. there's so much movement of people in and out due to military/regime changes/immigrants and the business cycles around such movements that prices should always continue to grow in most parts of the area. Lucky for me that I own a house in a very desirable area, meaning that I will continue to earn returns from renting it and when I do eventually sell it.
But overall the housing market sucks. sell now.
Buy oil Stocks, chinese ADR's, Precious Metals, or Euros because our economy is about to get a little bumpy.
Be careful, the IAAF just outlawed Altitude Tents and Houses. I'm sure that also include "housing bubbles" used to temporarily altitude-ify a house.
what are you talking about? The economy is not going to go through a 'bumpy' period at all. Its only august and september that stocks and most prices in general lag behind yearly growth rates. Oil uncertainty is also holding most markets back. Short term you should be looking at some core stocks like JNJ, HUM, UNH, and other medical providers and perhaps some Food stocks like Archer Daniels, Budwieser, or Heinz. Even banking stocks will do well, C, BAC, Wachovia. Stay away from semi's and technology companies until after labor day. I agree oil and gold plays are much better now that real estate is bursting but its not the end of the world so these shouldn't be much more than 20% total of your portfolio. Oil is lucrative, yes, but alot of this oil hype is overblown because when more production comes online prices should ease and so will their stocks. And the dollar? please. I know this country is in debt up to its eyeballs but that doesn't mean the dollar is worthless. The dollar will continue to be the worlds reserve currency for some time due to 1) low inflation in the U.S 2) our credit is very high 3) we are the largest most influential economy in the world. Stop your end of days investment guide and start acting like a normal person.
IM(NS)HO The bubble has burst~~~ as has been said some markets will remain strong because of the "grow a family" issue and relocating Baby Boomers. Some areas will see a revert to normal 2-3% growth but growth will be in segmented parts of the market only but still strong enough to give an area an overall up trend.
If you're leveraged up to your tits with "Home Equity Products" you're in deep shirt!!
Even the normally irrational but ongoing high-end Manhattan
Co-op market is stagnent in growth.
Small house big plot might be a up tick with energy costs skyrocketing but this is few and far between, land that abuts Public Trust- or other no build by law-land will always remain attractive.
Location,location,location will always sell.
So are you saying that you think Boston, DC, San Diego and other high priced areas wont drop much in price ?
wineturtle wrote: Location,location,location will always sell.
That's what I'm hoping for when we have to sell this place. Where we live, I think we bought at the peak, just before the bubble burst. We have neighbours who've had their houses on the market for months - these are very nice places that would have sold the same day last spring.
We've been in this same boat before - bought in lower mainland BC in 1994 as the market was beginning to peak, then sold in 1997 a couple years after the peak, and the year following the closure of the local army base (which affected the local mark quite dramatically). Luckily we didn't lose much (maybe 5 grand if I recall). Mind you, we've been very lucky with the last two transactions in 2002 and 2005 each earning 25-30%, so even if we take a big hit this time, we'll still come out ahead (I think...)
My motto: buy high, sell low!
Pete wrote:My motto: buy high, sell low!And the corollary to my motto: easy come, easy go!
So are you saying that you think Boston, DC, San Diego and other high priced areas wont drop much in price ?
The exact opposite. The high priced regions are overpriced and inflated, (except for the most desireable areas within them, e.g: Beacon Hill) so they will crash the farthest.
It happened here to some extent in NYC back in the early 90's, but this time I think it will be worse.
In California, San Diego & San Francisco markets have pretty much flat-lined and home prices are barely higher than they were a year ago. In LA, homes are still up double digits from year-ago levels, but the rate of advance is slowing.
If past experiences are any guide, home prices could decline 10% in nominal terms in the LA, SF & SD markets.
From 1990-1994, median home price fell 10% in SF and about 20% in LA, though some of that decline no doubt had to do with the budget cuts in the defense industry that caused a lot of people in LA to lose their jobs. It was not until 1997 or 98 that median home prices in SF returned to their 1990 peak and in LA, it took until 1999 or 2000 to return to the 1990 peak.
On a national level, home prices will probably show very small nominal advances for a few years and decline slightly or stagnate in real terms. A lot depends on what happens during the next two years with the economic and interest rate cycles. Best case scenario: the economy slows to 1% or 2% growth for a few quarters, avoiding a recession but also reversing the increase in inflation & getting the Fed to cut short term rates, both of which could push mortgage rates lower. That could keep the housing slump from turning too ugly. Worst case: inflation picks up some more, causing long term rates & mortgage rates to rise and the Fed is forced to manufacture a recession.
gold plays are much better
and low inflation in the U.S
If you think both of these two are true, you must think those doods in India are going to be buying a lot of gold for their wives.
I would hesitate to buy in San Diego right now. It is a nice place to live and all, but how things are run down there for the past few years has been pretty screwy. They need better representatives.
Real Estate has a ton to do about location. The growth cannot continue at the rate it was going. I see a slowdown to housing prices increasing to normal levels in the near term. Housing prices should grow about at the rate of inflation.
It won't be easy money and those who speculated and bought who hoped to flip for a profit might lose now that ARMs rates have increased. It is getting to be a buyers market now. Lots of inventory. But if you live in the house and plan to stay for over 5 years, buying a house will probably be a good investment unless the area you buy into turns to be a crime infested rat hole.
Home prices have more to do with economic growth than interst rates. I see stable economic growth. We might have slower growth once the full impact of the fed rate hikes fully hit (there is a lag). After that (even though there is talk about the fed raising rates more to hold off inflation - which I think they should hold off on doing) I see long term rates going down a little and see continued stable growth. I don't see inflation as a problem right now.
The large run up of real estate values was largely driven by psychology. It was tipped off by the lowering of interest rates to historic lows in an effort to prevent a major recession following the dot bomb crash. The lowering of interest rates tipped off the upward climb of housing prices more money could now chase the same house. That combined with a lot of money fleeing the stock market and looking for the next hot sector caused that climb to gain momentum.
The thing is that at the start of the run-up real estate really was a good investment. Preceding the dot bomb crash rents had risen sharply and there were quite a few positive cash flow properties on the market, or at least lots of properties where the fundementals were good. Median prices were inline with median wages & mortgage payments inline with rents. However once things really started climbing then psychology took over. The whole "real estate never goes down", "by now or be priced out forever", and "get rich quick" mentality took over. Look at all the TV shows and magazine articles on "flipping" that started to pop up. Throw the large scale emergence of creative financing - so called "toxic loans" on top of that and things went pretty crazy for the last 5 or 6 years.
Now the psychology has clearly shifted. Now its - "Why buy today when it will be cheaper tommorrow?"
I see two possible scenerios playing out.
Senerio 1 - The Fed choses to stop raising interest rates. Housing prices start to decline, demand for rentals increases, rents start to climb. Rents and mortgage payments meet in the middle at around historic multiples (say prices down 20% rents up 20% over 2-3 years). Major inflation - rents rise - cost of living rises - labor costs rise - consumer product prices rise. Dollar gets weaker. Over the long term standards of living drop, US loses some of its international economic power/standing. Bad news for everyone, but homeowners make out alright if they can hold.
Senerio 2 - The Fed stays in inflation fighting mode. Interest rate hikes resume. Housing prices start to decline. Interest rate hikes and drop in housing prices throw economy into recession mode. Rents don't rise due to recession and job loss. Housing prices really tank. Deep recession, but no inflation. Interest rate hikes eventually stop. At this point housing prices are down 50% from peaks. Economy starts to recover. There was a really rough period for a few years, but in the long term standards of living return to normal. Sucks for everyone for a few years, but homeowners who bought in last year or two are really screwed.
Thats my theory, for what its worth (not much).
I like your assessments in general, but a 50% decline in home prices on a nationwide level is so far from the realm of reality that it is laughable. Even in local markets (i.e. New York, Chicago, LA, San Francisco) there is no precedent for anything to close to 50% declines in nominal home prices. The only areas where you could see a 50% deline would be within certain tiers of homes in affluent communities (i.e. homes priced over $3MM in Atherton or Malibu).
Are you in the biz ?
This is a fun thread to bump up every few months...
- nothing really to add. We'll discuss this again in another few months when there's a few more people on my side. The areas that people like to say are immune to any downside, (Cali, DC, Boston, New York) are actually the areas that will be hit the hardest. Once again, I'll not respond to anyone spouting the "they aren't making any more land...my area is different..." crap.
This is what I wrote on 2/23/2006
General observations:
Foreclosures are soaring. Inventory levels are at record or near-record levels. Speculators account for a huge portion of home sales in the last few years. They have purchased these homes with interest only loans and other creative finance options. Interest rates have been going up. There's a few more hikes in the works. After those, we can only speculate on the fed's plans. We've been flirting with an inverted yield curve. When 3 and 5 year ARMS adjust, the people with these loans will HAVE to sell because they can't afford to have their payments double.
The party was over last June. A 50% drop in home prices from June 2005 levels would not be unexpected. I won't respond to this thread anymore because of the obvious flaming to come and I'm not going to convince anyone of anything they don't want to hear. However I'll bump this thread about every six months and we'll see then.
The local bishop wrote:
Are you in the biz ?
In general, if you want to know something about real estate, you should ask in order:
1. Finance people that aren't in the real estate business
2. Old people that lived during the depression
3. Your neighbor
4. Your dog
5. Jimmy Hendrix
6. Your mort. broker
7. Your real estate agent
[quote]Californian wrote:
I like your assessments in general, but a 50% decline in home prices on a nationwide level is so far from the realm of reality that it is laughable. Even in local markets (i.e. New York, Chicago, LA, San Francisco) there is no precedent for anything to close to 50% declines in nominal home prices. The only areas where you could see a 50% deline would be within certain tiers of homes in affluent communities (i.e. homes priced over $3MM in Atherton or Malibu).
Let me rephrase that: I can see 50% declines in terms of real price, not nominal, in some of the most overheated housing markets over the next 3-5 years (even with no nominal decline in price a property will lose 12-16% dues to inflation over five years). Traditionally prime areas in SF, NYC, etc... will fair much better. The other areas which saw more modest run-ups (non-coastal areas) will obviously see more modest declines.
The areas that are really in trouble are those that have never been considered prime, yet have seen prime prices in recent years. For instance, 500 sq. ft. one bedroom TICs in Bayview/Hunters (crummy SF neighborhood) point selling for 500K are going to tank, but 500 sq foot condos in Pac Heights (Prime SF) selling for 700K will do much better (example exagerated for effect).
While 50% declines are unprecedented, are 200-300% the gains over 5-6 years that some areas have seen.