January 12, 2008

Homes will be cheaper a year from now than they are today in nearly all markets worldwide


Is that statement True or False?

48 comments:

Anonymous said...

Statement is true, but predictions are way off. The US with only a 5-10 percent price drop. Give me a break. A year from now we'll be talking 50-70% off in US especially Kalifornia.

sad but true said...

False.

EU member states are poised to have a 60 –70 % property price decline across the board.

Remember, the entire EU economy was based on hype, a closer look at fundamentals reveals an unsustainable financial environment.

Europeans do not earn enough to pay for the average cost of living;
it simply cannot go on without something breaking.

Anonymous said...

above poster meant to say "true" right?

keith said...

Chart is from The Economist over a year ago

I'd like to see a new one from them

I do give them credit though for calling the housing crash global before people even admitted one was underway

andy in nz said...

can't see a problem with the NZ number.

then another 10-15% the year after...

SeattleMoose said...

Statement true...numbers way off. The U.S. markets will experience anywhere from 20 to 70 percent declines depending on froth/runup. I think the national average decline will be in the mid 30's with midwest holding percentage lower and the coastal bubble areas pulling it higher. I predict the "low" in 2013 but a recession could expedite this by a couple of years.

Edgar said...

Homes will be cheaper next year.

Not in my 'hood. It's different here.

Anonymous said...

False. Do not see it happening in certain areas of the US. There are areas that are still outrageously priced tear downs, and because they are close to the ocean or in a vacation area, the prices are just not falling. Please convince me they will. I have seen "price reductions" of small amounts, but the average home is still asking $599k and it is a piece of crap.

Anonymous said...

Is the paltry 10% drop in US values based on our sleaze government planning to have inflation quickly catch up with current property prices, or the Fed dropping interest rates to 0%-1%?

Buy stock in helicopter shares

Anonymous said...

Here is a sample listing from my area:

$899,000
Point Pleasant Beach NJ 08742
3 Beds
1 Bath
1 Partial Bath
Listing # 20707362

It is really sick!

Anonymous said...

Mainstream economists are predicting 20% - 30% declines in the U.S.

The only thing I can say for sure is that this is the biggest bubble the world has ever seen.

Imagine when the unemployment rate gets high in the U.S., and the rest of the world's bubbles start popping.

Anonymous said...

Just look at schillers housing price indicator. Go back to 98 when when graph went verticle. Prices will revert to the mean, that is 98 prices. The fed ain't going to inflate the banks out of anything, you have that little wage problem. Without caculating the effects of the coming depression US house values will fall 40 to 80% depending on location.

Ola Dunk said...

Slowly back to a little above normal?

Nah....

Frank@Scottsdale-Sucks.com said...

It's true. Even realtors here in SoCal have begun to admit that. When realtors admit that houses will be cheaper in a year, you KNOW things are bad.

because they are close to the ocean or in a vacation area, the prices are just not falling

You have it totally backwards - the biggest crash markets are in ocean/vacation cities - San Diego, Miami, Vegas, Scottsdale, OC, etc etc.

"Ocean/vacation cities can't crash" is exactly the line of b.s. that created all the hype and inflated prices in the first place.

Mark in San Diego said...

"a little wage problem" as one Anon said. . .yup, that about sums it up. . .$10 to $15 an hour jobs ain't gonna cut it when starter homes are 300 to 500K. . .$15 an hour sounds good until you realize that is only $31,200 a year!!. . .I see hiring signs everywhere, but I have called a few, and most retail around San Diego start at $8 an hour or less, Direct TV had some "hiring" adds, and I called them and finally got a hiring range of $12 for a technician, then $15 after a year. . .ExpressJet, the new regional airline has jet pilots at around 40K, and second in command, not even that!. . .remember when jet pilots earned 150K???

Business from Greyhouse Bus to airlines, have used bankruptcy to cut wages, so wages today in real dollars are less than 10 years ago, and in inflation adjusted, at near poverty levels.

Anonymous said...

I don't really gives a fuck what happens anywhere but within 10 miles of where I currently sit. As long as houses are cheaper here, I couldn't care less what happens anywhere else.

Anonymous said...

Just look at schillers housing price indicator. Go back to 98 when when graph went verticle. Prices will revert to the mean, that is 98 prices.

Prices didn't go verticle until after the dotcom ponzi scheme collapsed. Besides, you left out inflation. This crash will have a strong psychological effect though. The NASDAQ is still off the March 2000 highs by 50% after 8 years of inflation. Stocks like MSFT and CSCO won't reach even their nominal highs again for decades. Imagine 8 years and your investment is down 50% while inflation is raging. That will be the real estate market over the next few years.

Anonymous said...

Let's see 1920's major stock bubble then crash followed by WWII. Roaring 2000's (10's?) with housing inflation followed by crash of the bubble, war with Iran WWIII? God I hope not but this is looking like the scenario.

Anonymous said...

Housing is getting too expensive for the average person. We should have the government take over housing. Home will be given to households based on needs. Large families will be assigned to McMansions. Single people and childless couples will be assigned to one bedroom apartments. The government will streamline everything and cut the red tape that goes along with finding a realtor, finding a house, applying for a mortgage and so on. Imagine nomortgage payments, free rent, no property taxes, insurance and all the hassles.

Anonymous said...

If, and its a big if, lenders really do stick to the max of 3X income, then prices have to drop at least 30%, probably more. A $60,000 income only gets you a $180,000 mortgage and thats assuming you're not loaded down with other debt like many are. With all the McMansions that were built in the last few years there's not enough households with above average incomes to sustain current prices.

Anonymous said...

If the rate cut measures taken by CBs in US and Europe work their way then inflation will take care of house drop. Otherwise inflation adjusted house price will decline by about 10%.

Anonymous said...

You've got to be kidding with that chart? Right?

The US with only a 10% drop at most and Spain way ahead with a 30%drop. Who made the chart? One of the many loser Euro haters that frequent this blog?

mikela said...

that chart was done by NAR

Keith, you have been infiltrated by evil minions

Prepare for exorcism

RP said...

The date of the article was 2005. . .

Anonymous said...

We can consider that prices will drop more than 30 %. It is apparent that if that happens on a national scale, a huge majority of homedebtors will be upside-down. When is makes financial sense for all of the upside-down homedebtors to default, what is to stop an implosion of the entire mortgage/banking/real estate system. Sure it seems likely the corrupt politicians will take care of the big bankers, but stopping inflation means implosion. This is gonna get real interesting.

Anonymous said...

I say close to 50% off in the better economy states such as NY, and 60%+ in Cali.

The economist is a joke. Homes are already more than 15% down accross the US. In 3 years they will tank.

uknowwhoiyam said...

That Economist article is from June, 2005.

Anonymous said...

God, I hope they keep falling. The price of a decent house in NoVA is still in 500K or higher and they are nowhere near worth THAT. You can count on rent being half the price of a purchase, and that is without taxes and insurance!! Blahh...who needs THAT?

We want to buy, but just signed a lease for a year to watch things settle for a while.....Now with all the bank shytt happening, I hope rates don't go to the moon!!

Anonymous said...

I don't know what planet you are on Keith but things are just fine and dandy here in Chicago. Houses are not selling as fast as they once were but a nice house that was listed for 680K sold for 665K. Oh what a large drop right Keith? Keep dreaming. Prices may dip but in the long run, they will keep going up.

RayNLA said...

Kieth don't insult us by asking crazy questions? Of couse this is true!

The question I have for everyone in the United States is...

Got Real ID?

Big Cheese said...

What about South East Asia? New condo construction in BKK is at $400 per square foot and rising? While average income is $8800 per year.

Most people are buying pre-construction (all units sold out) and flipping for a profit. And then the units are only 50% occupied. Sound familiar?

Asia is also in a bubble.

-BC

keith said...

The chart's old folks - the takeaway is the the Economist knew Spain and the UK were going to crash fast and furious

I think they'd have the US at 30% off if they could today. And Spain and the UK perhaps 40% - 50%

abuismail said...

Theres no country in Asia, Middle East of Africa in that list.

I have doubts about Asia in the near future, but the Middle East and North Africa are growing fast.

Plant a garden said...

Only 10% off in the US? Florida is already seeing 50-60% price drops. Lennar is trying to dump new houses at 60% off. I have an offer that's 50% off my original asking price of $865K, and I'll be happy to take that if the bank approves the short sale. The bank finally woke up and isn't holding out for my first born. I admit, I was a greedy a-hole and have been riding this thing down since 2005. Should have been a clue to me that something was wrong when I felt EMBARRASSED to list for $865K. My conscience is coming back to life...I'm torn between wanting to pay my debt in full and keeping food on the table. I am planting a garden this year. The boss at work is devoting some ground at the office for a community garden. He's a student of the Great Depression and sees the writing on the wall as well.........

Anonymous said...

Key word is: "cheaper", no?
Factor in the dollar's demise and then we can talk :-)

All these houses will be 'public housing' for all the illegals that will come swarming into the US. Good times ahead.

Oh yeah...and Hitlery will be in charge of the new worker's paradise...

Tanker said...

True. Europe's housing bubble is bigger than our own. And it's starting to roll over, too. Here's a quick article about it written last March.

http://tinyurl.com/2khcvz

happy homeowner in the stix said...

We should have the government take over housing. Home will be given to households based on needs. Large families will be assigned to McMansions. Single people and childless couples will be assigned to one bedroom apartments.

Oh, yeah, that will work out just great, Kommissar!

Especially if we want the entire US to look like it was invaded by Soviet shitboxes in five years.

sandman said...

I've mentioned this before in discussions here around USD inflation and buying foreign investments.

Europe for certain is in the same boat. What will the CEB do? Eventually, they will likely the same thing as Uncle Ben.

If this is true, then...

The big question is do we get global inflation? Also, are those European investments really that insulated - even if one assumed de-coupling? Ditto for Asia.

I'm dubious about blinding investing overseas. I think you have to pick your spots. I believe Europe may lag the US, so maybe in the near term it is OK to long the European market temporarily.

Perhaps when I close several long US puts, I need to find some good puts in Europe.

Any suggestions or thoughts?

k.w. - southern, ca. said...

Until people can start affording the many over-priced shacks across this country, prices have no choice but to keep dropping.

Either that, or expect a bunch of abandoned houses full of squatters.
And no one wants to see that in their neighborhood.

depresso said...

Spain will certainly fall more than 30%. The amount of overbuilding was mind-boggling.
The spanish governemnt has a "solution" though - a plan worth $5 billion euros, to demolish all "illegally" built homes on the coast - that could be about 20% of all homes on the Costa del Sol, for example.
I wonder when will the US government come up with a similarly ingenoius plan.

depresso said...

This is brutal: Spain bulldozes its concrete costas

k.w. - southern, ca. said...

I have to hand it to Frank from Scottsdale - he's telling it like it really is.

As someone who lives along the coast, it's really way over-rated. Here, you'll find as much (or more) drug use and vandalism as you may within the inner-cities,
along with terrible parking and more narrotic behavior.

It's the beach city youth - not non-residents - who are often the cause of many problems here, but people would rather believe it's non-residents who are the problem - it sounds so much nicer.

Prices here were inflated more than most areas of the country, and therfore will drop that much more.

For anyone who doesn't believe this, take a drive down the coast and you'll see forsale sign after forsale sign - and we're just getting started.


Frank@Scottsdale-Sucks.com said...
It's true. Even realtors here in SoCal have begun to admit that. When realtors admit that houses will be cheaper in a year, you KNOW things are bad.

because they are close to the ocean or in a vacation area, the prices are just not falling

You have it totally backwards - the biggest crash markets are in ocean/vacation cities - San Diego, Miami, Vegas, Scottsdale, OC, etc etc.

"Ocean/vacation cities can't crash" is exactly the line of b.s. that created all the hype and inflated prices in the first place.

mortgage said...

Te whole of US real estate will crash except for Manhatan NYC. It's location location location.
Mortgage

Peter T said...

"nearly all markets" - how many markets are needed to falsify the statement. I don't want to say that house prices are not in for a big fall in many places, but some areas like Germany, Switzerland, Japan (not by chance all big saving countries) haven't seen exploding prices in the last years.

LauraVella said...

Anon said:"We want to buy, but just signed a lease for a year to watch things settle for a while.....Now with all the bank shytt happening, I hope rates don't go to the moon!!"


Realtors are lying when they say: interest rates are low, this makes it is the best time to buy!

Paying top dollar for a house with hardly any interest to write off is not the correct way to buy a house.

Can anyone say leveraged Asset?

Anonymous said...

The REAL value of the homes will continue to decline, but the NOMINAL prices of the homes may not decline very much, as the FED inflates their way out of this housing slump.

For those homeowners who are highly leveraged in their homes (with high mortgages balances and no/low equity), the REAL price declines may not affect these homeowners much with respect to their house, as long as the NOMINAL prices do not decline much.

However, there are other obvious repercussions related to inflation.

For those who own their homes free and clear, and are still able to sell their $400k house for close to $400k; these homeowners won't be able to buy as many goods with their $400k once it sells, since it won't be worth as much as it was.

That is, those people who actually didn't leverage themselves as much could be hurt more, as their equity is eaten away by the possibilities of inflation.

Anonymous said...

sad but true, US will be the most impacted by overpriced home due to speculation and huge Realestate stocks ... EU will be in a better a shape because of less gamblers except spain an GB. But in EU Realestate stocks are low.

In regards of chart Jan 13 : house price to rental ratio, you can extrapolate a 30 % loss in US in next 4 years to reach P/E<25. And same for Spain/GP.

But this can be reached with inflation thanks to Benmark helicopters.

Lazy Euro Socialists. said...

The EU housing bubble, especially Britian, was fueled by money from Russia and the middle east crime and terrorist organizations.
It was one big money laundering scheme. After 9/11, the patriot act spooked all the islamic "charities" and euro/asian crime organizations, so they started washing their money in British real estate.
The british banks welcomed them with open arms and lax anti-money laundering legislation.
Remember all the news programs about how London was going to takeover NYC as the financial capital of the world? Then they would show clips of saudis and russians driving ferraris around Notting Hill and Chealsa neighborhoods where condos were skyrocketing in prices.
No wonder Barclay's is franticaly trying to hide its losses.
Yahh, the U.S. is going to get hit hard by the housing ponzi scheme collapse, but Europe is going to take it way worse. Your already seeing the begining of this with the rapid declines in Spain's real estate markets and skyrocketing inflation.