This, HP'ers, is the most important post-crash article written by a MSM source to date. The question now is will other MSM take Business Week's lead and start reporting the truth, versus the NAR and Fed BS, or will the REIC lies and spin continue?
Fifteen years. Oh, what a bubble it was my friends. Party of the century. Now comes the hangover.
Housing: Curb Your Enthusiasm About A Recovery
Home prices still have room to decline, and it may take 15 years or more to reach new inflation-adjusted highs
Housing booms are short and exciting. Housing busts, on the other hand, are long and painful. So don't put much faith in those oft-heard assertions that the worst is already over.
Prices are likely to fall further in many markets in 2007. In some others, prices may rise, but at less than the rate of inflation. A BusinessWeek analysis of the past three decades shows that if history repeats itself, it's likely to take 15 years or more for many parts of the country to get back to their inflation-adjusted peaks.
The biggest losers will fall into one of these groups: cities like Detroit that are suffering economic contractions; cities like Los Angeles, San Diego, and others in California where prices are extraordinarily high and have barely begun to adjust; and cities like Miami, Las Vegas, and Phoenix that have a huge overhang of unsold houses or condos.
Advice to homeowners: If you need to sell and you're not getting much interest, cut the price by an extreme amount. If you make halfhearted cuts, you'll remain overpriced and you'll follow the market all the way to the bottom
The inventory of existing homes shot up 34% from October, 2005, to October, 2006, and now stands at nine months' worth of condos and seven months' worth of single-family houses at the current rate of sales. That backlog will take a long time, and a lot of price-cutting, to clear out.
December 18, 2006
FLASH: Business Week predicts housing crash nowhere near bottom, will take 15 years to recover
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51 comments:
I Hope this will shut the stupid mouth of Alan Greenspan and hopefully people will begin to realize what a liar he was and still is.
Hopefully, others in the lazy MSM will see articles like this one and start to do a better job. Maybe as the home builders and realtors lose more money and don't have as much money to spend on advertizing, the MSM won't feel bound to give them so much positive spin.
Tar and Feathers anyone?
Best advice a homedebtor will ever get, but few will listen to:
"If you need to sell and you're not getting much interest, cut the price by an extreme amount. If you make halfhearted cuts, you'll remain overpriced and you'll follow the market all the way to the bottom"
One good sign the HELOC ATM is no longer printing funny money: I am searching for a used car. Tons of them out there with low miles from owners that can not trade them for what they owe dealers (buy retail, trade blow wholesale if you are stupid, lazy or both and buy from a car dealer!)and now need to pay their now upside down, negam DITECH TIMEBOMBS! Just look at the deals. Anyone who restrained from buying a house in the least five years and either rented or just paid their mortgage off like folks did in the 1950's is going to do just great. If you owe, you are owned, brokerd and controled by the hard money machine that brought you Capital One! Whats in your wallet, sucker? Paper or plastic?
Timber!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
15 years is a long time. And I realize that the prediction is for an inflation adjusted return, but I'm not sure that, given the incredible amount of money our gov't is going to have to print in the next 15 years that it'll be easy to find another investment that can possibly keep up with the price of any tangible asset like a house. Gold/oil maybe, but over the next 15 years, a house is probably as good an anti-dollar bet is there is out there.
This article seems incredibly optimistic to me.
"Home prices still have room to decline, and it may take 15 years or more to reach new inflation-adjusted highs."
Are they telling me that in 15 years we should expect houses to be just as overpriced (note the word inflation-adjusted) as they were in 2005?
This was a monumental, historic bubble. Inflation adjusted prices have never been as high as they were in 2005. I sure wouldn't expect them to get back to this anytime soon.
Now, had they left off the term "inflation-adjusted" then maybe I could agree. In 15 years I would expect the nominal price to approach the highs of 2005. With inflation that would put houses right back to historical norms.
Keith-Great advice. I apparently was ahead of the power curve on the price cut maneuver. My house languished for 6 months in a flipper glutted price overinflated new riverfront developement in Wilmington Delash*thole. I slashed the price by 10% relative to fall 05 prices and 15% relative to the supposed market value for the home. I got an offer that had all the skids greased, waiving all contingencies, 30 day close. I took a huge loss, but was able to move forward with my life and not having that cloud over my head was well worth it. I just got a wayward letter from the HOA and they are leveling a special assessment to do work the developer blew off, add that tot the skyrocketing property taxes and crime in Wilmington and it was a solid positive move. Friends just sent me a link announcing a new shopping center near by, but that will take years & will only bring the area down not up as it will just attract more criminals, panhandlers and homeless to the area.
The advice to cut the price heavily is good. When it actually happens we will be at the equinox of the crash. The point of steepest slope on the sine wave of the bubble. i.e. We will be halfway to the bottom.
Of course, when this steepest drop actually comes about is still a big guess with obstinate and choiceless homeowners clinging to their boat anchor houses as the ship goes down.
Guys, buy that inflation hedge in Buffalo, NY.
For $120K-$150K, you can find a nice Victorian (or like place) in western NY which should assuage any fears of being upside down on your mortgage. Within a 10-15 years repayment program, that place should be yours outright and you'll have either a retirement home or a place to sell if you need the cash in the future (ala inflation hedge).
Yeh, great Idea, if you want to die of a coronary behind a snow blower!
"if you want to die of a coronary behind a snow blower!"
Use your cash to buy two or more self-propelled snow blowers. Plus, the snow is only a foot or so more than Boston where everyone "has to buy" or be priced out forever.
there's no amount of spin can distort the truth.
>> Friends just sent me a link announcing a new shopping center near by, but that will take years & will only bring the area down not up as it will just attract more criminals, panhandlers and homeless to the area.
Yeah, that's what always happens when a new shopping mall is built. Go away dumbass...you're not as smart as you think...
Whoa, holy Mother of All Assumptions, Batman!
What's the assumption?
That housing WILL get back to the recent, preposterous peak, even after inflation adjustments.
And why will this happen? Why isn't housing pretty much flat with inflation plus (modest) upgrades? It's a commodity. The purpose of it is not different from 50 or 150 years ago.
This is not like stock equities where you own shares of a business with people working to make money by making products or services. A house just plain sits there and prevents you from freezing to death.
A house is something you use.
By the way, true real estate moguls made their money by political means. They buy cheap land which is cheap due to zoning and regulatory restrictions. Then they become best buddies with the City Council or whoever has power over those regulations. Voila.
That's known as 'flipping laws', and is very profitable.
Note how horribly these same people whinge and wail when it's in the other direction due to environmental issues. My heart bleeds.
Upstate New York has very high property taxes, very limited access (very expensive airline ogipolopoly) and no jobs.
On the upside, when global warming really takes off it could be OK.
But realistically in that event, Vancouver would be the best place (the new San Diego), and it's expensive already.
I was glad to see that this article was not actually all that negative. It mentioned that some regions will experience moderate increases. It also suggested these ridiculous prices will return (even accounting for inflation) within 15 years, knowing that EVERYBODY gets a mortgage with an amortization period greater than 15 years.
To me, this relatively optimistic view means that we definitely have NOT hit the bottom. In a psychological phenomenon as this bubble and ensuing crash is, the bottom does not occur until all optimism has disappeared.
Yes, I think this is still just the beginning for MSM stories declaring only a distant end to these home price declines.
One of the Anons mentioned Wilmington. DE or NC? Thanks.
Concerning Buffalo/Upstate NY, true, property taxes are higher than average, however, consider this... the region has experienced a thirty year bear market across the board but yet, it doesn't resemble Detroit or South Central LA with widespread crime and gangster elements ruling the place.
What that tells me is that the region has adapted to a world of decreasing opportunities which makes it a perfect place to retire in (as oppose to actively seeking employment) whereas the rest of the so-called information enabled cities (see Boston, NYC, Chicago, SF, DC, etc) have developed a false sense of security on the continuation of the American century indefinitely.
What'll happen is that these A-cities will experience a shock when the world starts to revolve around the Shanghai/Beijing (manufacturing) to Moscow/Vladivostok (energy) axis of power during the next twenty or more years. That's when the Boston to DC youth (of all races) will start to form gangs and raid the formerly gated a/o individualized McMansion communities in search of cash or valuables. Since the Buffalo region has never offered any hope to its young, this wouldn't be a problem there.
Business week also predicted the death of equities, what makes you think this headline is any more accurate.
When others are encouraging you to sell, it must be time to step up and buy.
Gold bugs where full of themselves in 2003, when the stock market was supposed to be going to 3000, and how an ounce of gold would equal it. They where full of it then, and their predictions now will also be found to be wrong.
This article doesn't even touch on the amount of foreclosures happening nationwide. It only touches the surface of how difficult it is to sell a home. The numbers to watch are the foreclosures.
Finally a voice of reason.
================================
amigauser said...
Business week also predicted the death of equities, what makes you think this headline is any more accurate.
When others are encouraging you to sell, it must be time to step up and buy.
Gold bugs where full of themselves in 2003, when the stock market was supposed to be going to 3000, and how an ounce of gold would equal it. They where full of it then, and their predictions now will also be found to be wrong.
Last I checked, gold was over $600 an ounce.
equivalent message in 2001:
It may take 15 years for dot com stocks to get back to their previous high P/E valuations!
You can saw whatever about this MSM article being truthful but 15 years until we reach inflation adjusted highs doesnt say much. Based on this article ' it`s still the best investment!
285,000 inflation adjusted for 15 years is 440,000.
So here is the translation;
My Scottsdale condo I bought at $126,000 in 2001 that hit a paper high of $280,000 in 2005 now sits at $245,000. It will creep up to $320K in 5 years, Hit maybe $399K in 10 years and in 15 years hit
440K!
Time to read the whole article & understand math guys!!! This could be the best pro-real estate article I´ve actually ever read...
Other glorious moments in BW history....
Named Kenneth Lay of Enron as one of the "25 Top Managers" of 2000.
- January 2000
With over 50 foreign cars already on sale here, the Japanese auto industry isn't likely to carve out a big slice of the US market.
- August 2, 1968
"The Wall Street crash doesn't mean that there will be any general or serious business depression"
- November 2, 1929
No asshole, here is the translation. YOU'RE FUCKED and you are trying to spin out of it.
"So here is the translation;
My Scottsdale condo I bought at $126,000 in 2001 that hit a paper high of $280,000 in 2005 now sits at $245,000. It will creep up to $320K in 5 years, Hit maybe $399K in 10 years and in 15 years hit
440K!
Time to read the whole article & understand math guys!!! This could be the best pro-real estate article I´ve actually ever read..."
Great article!
Once the MSM talks about something serious, it's OVER. DONE. Put a fork in it.
It will creep up to $320K in 5 years, Hit maybe $399K in 10 years and in 15 years hit
440K!
YAYAYAAY and in 30 yrs itll be 880k!! and in 60 yrs itll be over 1.5M!!!!!!!! YOUR RICH B!!!!!!TCH!
There won't be any dollars in fifteen years. We will have a new currency, probably common to all NAFTA/CAFTA countries, and it will have an exchange rate 25% or less of the old greenback.
People with fixed-rate debt (like traditional mortgages) will make out like bandits. People holding bonds or living on fixed incomes will be holed-up in cardboard shacks eating dog food.
No actually it will only take 30 years for him to be a rich bitch.
In 1970 the median price of a home in the US was $23,000. In 30 years it went to $138,000 and that was before pre-bubble.
Assume his condo drops to $175,000 by 2008 which would be a drop of 38%. Judging by the 1970-2000 performance, his condo will be worth $1M in 2038. By 2068 it will be worth $6M.
He is so fucked!
"YAYAYAAY and in 30 yrs itll be 880k!! and in 60 yrs itll be over 1.5M!!!!!!!! YOUR RICH B!!!!!!TCH!"
Yeah but this will be different because the the US economy is in the shits, the dollar will be worthless, all manufactiring jobs are going to Cina, middle east is unstable blah blah blah.. Sounds just like what happened between 1970 and 2000 and yet the median price of a home increased by 600%
QUICK RECAP OF 1970 - 2000
WARS:
Vietnam '70-'75
India/Pakistan War '71
Israeli - Arab war '73
Soviets in Afghanistan '79-'88
Iran/Iraq war '80-'88
Israel invades Lebanon '82
Persian Gulf War '90-91
US troops to Somalia '92
Kosovo War '99
POLITICAL SCANDALS
Watergate '74
Iran Contra '87
Clinton impeached '98
FINANCIAL
1970 GM has 50% market share
US off gold standard '71
Oil embargo '73-'74
Oil embargo '79
Severe recession '81-'82
Stock market crash '87
Severe recession '90-'91
NAFTA signed '93
Mexican currency crisis '94
Asian currency crisis '97
Dot bomb begins '00
2000 GM has 28% market share
Anyone think the next 30 years will be any different?
::Anyone think the next 30 years will be any different?
Here's the difference...
1970-1991... Cold War in full swing, hi-tech materials and electronics research could not leave national labs and security clearance areas like Raytheon/TRW/Lockheed. Japan Inc worked on public domain, commercially available technologies. S Korea and Taiwan manufactured some electronic components.
End result, US maintains tech lead over every country on the earth including Japan Inc which simply improved upon finished goods.
Today, 2000+, all research, high and low tech being moved to SE Asia, China, Korea, former USSR, Bulgaria, etc. End result, come 2035, IP is all over the globe, the US loses tech edge, everyone else catches up, dollar devaluation, world economy moves along w/o the US.
There you have it.
Sure thing. The US is being left behind and everything is moving to Asia.
Toyota direct investment in US
1990: $2.5 Billion
1995: $6.1 Billion
2000: $10.6 Billion
2005: $13.9 Billion
Toyota Employees in US
1990: 12,657
1995: 19,302
2000: 28,195
2005: 32,003
12.25 Million Toyota vehicles assembled in the USA since 1988. Of those, 7 million were exported.
"Today, 2000+, all research, high and low tech being moved to SE Asia, China, Korea, former USSR, Bulgaria, etc. End result, come 2035, IP is all over the globe, the US loses tech edge, everyone else catches up, dollar devaluation, world economy moves along w/o the US."
"Sure thing. The US is being left behind and everything is moving to Asia."
Again, leave out Japan Inc and their mature, public domain technology (i.e. the car).
Look at Intel in Moscow, Huawei in China, Samsung in Korea, etc. Now, contrast that with US based Teradyne, Polaroid (bankrupt), DuPont, IBM, etc. These R&D tech focused American industries are calling it a day and moving research abroad very quickly.
Many of my engineering friends (and recent grads) are looking for jobs in finance or consulting. That should tell you where tech jobs are heading.
Skytreker - your post had nothing to do about the topic. Post that kind of stuff to bubbletalk or send me a note to do a thread on it
threadjacking is poor form
Amazing that Japan has no army, lived on a few small islands, and had one of the largest economies in the world. I recall a Christian proverb, "Blessed are the meek, for they will inherit the earth."
This housing bubble is not yet a big deal. We are yet seeing a relatively low foreclosure rate and only a few banks or S&L's in trouble. In the 1989-1992 S&L collapse more than a hundred banks went bankrupt. What is disturbing is that while the homeowners/renters ratio jumped to new highs, so did the number of subprime loans being written. This insidious housing bubble might yet be a threat.
:Amazing that Japan has no army, lived on a few small islands, and had one of the largest economies in the world.
What I think was an even greater miracle was that throughout the 80s and 90s, they pretty much bankrolled much of east Asia's development so that today, we have a complete economic zone from the Singapore/Indonesia archipelago all the up through China/Korea and Japan. If you ever tour these nations, you'll be astonished at the number of production facilities out there.
After the 90s, however, China's taken over the role of Japan (and going beyond it), and is actively investing in local nation's development, like Vietnam, so that places like India, today's services outsourcing darling, become obsolete in place of a greater east Asian economic bloc. You see, while the white collar workforce in the US and UK was worried about India (as if a nation with poor infrastructure could compete with the west), the real worry's coming from east of it.
"In the 1989-1992 S&L collapse more than a hundred banks went bankrupt."
I thought Freddie and Fannie were mopping up the toxic loans so that only the tax payer suffers than the banks themselves.
Yep, India's a big joke.
A country where power failures, road collapses, floods, etc happen round the clock and where a lot of facilities were originally British made and operated back in the 50s and 60s. This place has got a long way to go before it can compete against the likes of a China, Japan, Taiwan, Korea, or Singapore.
It was only a matter of time before we'd hear of outsourcing failures via Wipro and TATA. In addition, running IT support and call centers doesn't elevate a 3rd world nation into 2nd or 1st world levels. A nation has to start with manufacturing and then add services on top of it or else it's another commodities nation like Brazil or Bolivia but with English speakers. Although Vietnam is on the rise, I suspect that the English speaking service centers will be more Phillipines based than Indian in the near future. And given the Chinese ex-pat influence in Manila, I also suspect that China will have a hand in it.
A year ago, people were warned to sell or be left out of the housing boom profits of the century. A few sold and reaped their rewards. Most didn't want to hear it and now their homes sit on the market, some with their stupid measly price "cuts", waiting for the spring bounce.
Now they're being warned to drop prices big time or risk chasing the market all the way to the bottom.
My guess? Some will take the advice and get out while the getting's still pretty good.
And most will chase/race to the bottom.
At least the good folks at Business Week won't be accused of suckering people in, unlike these realtors, etc. who are still telling people everything's hunky, temporary lull.
2005 Employment in Silicon Valley
Software: 93,650
Semiconductors: 59,240
Computer Hardware: 54,490
Innovation services: 48,340
Biomedical: 33,660
Electronic components: 23,410
Creative services: 10,700
Cluster Employment: 344,630
Source: California Employment Development Department
Austin Employment 2005:
Computer/mathematical: 39,799
Engineering: 25,888
Source: U.S. Employment and Training Administration
Boston Employment 2005:
Computer/Mathematical: 102,550
Engineerig: 66,320
Life, Physical Science: 34,800
Source BLS
Yup. No more high tech jobs in the USA. All gone to Kore and Bulgaria.
"Today, 2000+, all research, high and low tech being moved to SE Asia, China, Korea, former USSR, Bulgaria, etc. End result, come 2035, IP is all over the globe, the US loses tech edge, everyone else catches up, dollar devaluation, world economy moves along w/o the US."
Anyone think the next 30 years will be any different?
Monday, December 18, 2006 11:09:31 PM
I know that one guy with that condo will be a millionare!
Assume his condo drops to $175,000 by 2008 which would be a drop of 38%. Judging by the 1970-2000 performance, his condo will be worth $1M in 2038. By 2068 it will be worth $6M.
-----------
Out of curiousity, can you tell me how much my $1.88 hotdog will cost me in 2068????
"Yup. No more high tech jobs in the USA. All gone to Kore and Bulgaria."
False sense of security much like that NSF shortage of 650K scientists report via 2000. Never happened.
Can't win with you jokers. You say all tech jobs are gone. I show you they aren't. You then say it's flase sense of security. I provide you with facts you provide me with emotions. Can't ever win an argument against emotion so I won't even try. You're right. The millions of high-tech jobs in NorCal, Austin and Boston are all illusions. Google, Apple, HP, Cisco, Oracle, salesforce.com, Dell, EMC, Akamai or Biogen don't really employ anyone. All those buuildings are actually empty. All the cars in the parking lots are fake. The rush hour traffic on Rte 128 in Boston or the 101 in California is all one bg illusion.
"Yup. No more high tech jobs in the USA. All gone to Kore and Bulgaria."
False sense of security much like that NSF shortage of 650K scientists report via 2000. Never happened.
How am I "f`d"??? I bought my condo for $126K. Read: $126K. If it does go to $178K who cares! I will take the 50K and reinvest it some day. It`s not like I don`t have other investments hee-haw.
This blog used to be good when it was a bit more realistic. Now its like all gloomy & doomy and trying to incorporate the entire economy. Obviously from someone with limited credentials (do we even know them?) a lot is left to be desired.
"I have a gret housing website that people post on, now let me rip on Bush & Iraq!" nice formula...
Hey guys, I live in Mass and I believe we have half the tech jobs today as we did during my uncle's generation during the 80s with DEC, Data General, Wang, Arthur D Little, Prime, Polaroid, etc. Back then, Wang even had its own school to train engineers for its firm in addition to a heavy recruiting/co-op focus at both U Lowell and Northeastern suburban offices. I suspect part of this was to siphon off the DEC/Raytheon pipeline of new graduates (and subsequent applicants).
Now, Akamai, Genzyme, EMC, and few others are stable and to some extent, are recovered from the '01/'02 downturn, however, the region isn't nearly as buoyant as it was back in the good old days. Also, MIT/Lincoln Lab, one of the nations leading DoD sensor research facilty had shed some 20-25% of its headcount from the SDI peak of the mid 80s. I knew a lot of people from there and that place was the breeder for development stage enterprises to an even greater extent than many Kendall Sq associates like Draper Labs. I suspect that Mass's startup culture will continue, however, the chances of another DEC, a megafirm with 100K employees, will never be seen again.
Also, I'm hearing that Oracle, the Silicon Valley software megalith, has a huge dev/support center in India which employees some 18K there.
http://www.oracle.com/global/in/pressroom/OracleinIndiaStory.html
And recently, they've announced USA headcount reduction, by a couple of thousand, to help streamline all the mergers with Peoplesoft and Siebel. So if people are overall negative on tech, it makes sense.
Dude, it's not just Lincoln Lab. Throughout the 90s, all national labs including Livermore, Los Alamos, and Brookhaven have had their budgets cut.
And as for Oracle Corp, even Larry Ellison said that IT was in a consolidation period and wouldn't be creating jobs the way it did during earlier times. I know a lot of engineers and the ones who want to actually design and build software aim for Google whereas those who want pre-MBA experience try for Oracle or Accenture since those places mainly hire Americans for consulting and sales positions rather than hard core development.
Yeah, Microsoft still hires techies but cmon, all they pretty much do is maintain spaghetti code and reverse engineer other people's frontends like Zune vs iTunes or Explorer vs Netscape/Mozilla.
These shifting patterns are pretty well established and just because a position is earmarked as a "tech job" doesn't really make it an R&D position for corporate America. Those types of careers are dying in place of a business/sales-like consultant.
http://thoughtsfortheopenminded.blogspot.com/2006/12/flood-myths-examining-story-of-noah.html#comments
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