June 14, 2008

In came the waves: Yahoo/CNN headline report today: "Where home prices could fall another 50%"



The first waves of selling and price declines these past couple of years were painful..

The final wave, the one that clears through the millions of vacant, foreclosed, overpriced, overbuilt, badly located, for sale and unwanted homes, the one that wipes away the rampant fraud and speculation, the one that gets home prices back to (or below) their historical averages, well that wave is just now coming ashore.

And that's just the US we're talking about - remember we still have a whole world to go.

And you know what, except for arrogant and sadly misinformed idiot ramen-eating realtors on commission who continue to destroy what little credibility they have left (do they have any left?) by calling bottom month after month after month, I think most people now see it coming.

Let the final wave of selling and price reductions now come ashore.

After all, as HP'ers well know, it hath been foretold.

Housing: It'll get worse

Hard hit cities like Sacramento, Phoenix and Las Vegas are set for more steep losses. Some real estate experts are bracing for price drops of as much as 50%.

NEW YORK (CNNMoney.com) -- With home prices plunging by more than 30% in some markets, bargain-hunters are ready to pounce.

But it may pay for buyers to wait. Many housing experts say that the worst-hit metro areas have even farther to fall, and could see total drops of as much as 50%.

"The housing boom was unprecedented in U.S. history," said Michael Youngblood, a portfolio analyst with FBR Investment Management, "and the correction will be as well."

Many erstwhile bubble cities have sustained particularly brutal hits. The median- price of a home in Sacramento, Calif. was down 35% during the three months ended May 31 compared to the same period last year, according to the real estate web site Trulia.com. In Riverside, Calif. prices fell 29%, while San Diego prices dropped 26%.

Smaller cities in California's Central Valley, such as Stockton (-39%), Modesto (-37%) and Bakersfield (-29%), also recorded steep declines.

Outside California, hard-hit markets include Phoenix (-18.8%), Las Vegas (-22%), West Palm Beach, Fla. (-32%) and Cape Coral, Fla. (-35%).

Youngblood expects that these markets will likely endure total price drops of 50% or more.

45 comments:

Anonymous said...

"In come the waves: Yahoo/CNN headline report today: "Where home prices could fall another 50%"

And they havent even begin to factor in future energy-scarcity problems and dramatically increased unemployment figures yet.

The "another 50%" estimate still only accounts for the bubble alone, with other factors equal and unchanged.

Anonymous said...

50% is sick! Unreal

venetiancafe said...

TOTAL 50%, NOT another 50%. (I wish it would be another 50%.) It should be, but who knows.

Paul E. Math said...

I could see it being another 50% decline in some of those especially bubbly areas. More, even.

The prices are going to come back down to their historic averages based on their relationship to incomes. Incomes have not only not grown, but they will decline in many areas that were especially dependent on real estate development - I'm looking at you, Florida and Phoenix.

Prices went up more than 100% so it only makes sense that they would decline by more than 50% total.

Remember also that when bubble crash they usually overcorrect. Prices will return to their historic norms and then will fall a little further. There will be some true deals to be had in 2 years.

Patience is a virtue, my friends.

DOPES said...

THAT'S WHY I BOUGHT A WAVERUNNER WITH MY COUNTRYWIDE HELOC!!!

I'M STILL RIDING THE WAVES, BUT THEY STOPPED GETTING PAID!!!

DOPES!!!

Anonymous said...

Remember that a 50% decline will wipe out a 100% gain.

For example, a $100k house increases to $200k. That's a 100% gain. That $200k house than decreases back to $100k. That's only a 50% loss.

However, as Schiller said recently, there is no reason we can't get a reverse bubble in housing. Prices can go down below, much below, where they should reasonably be. Just like they did on the upside.

million said...

wow, quite an about-face for FBR's Youngblood. i guess being ridiculed for attacking CRL and then watching as your company loses billions and your predictions turn out horribly wrong will change any ginger's tune.

Anonymous said...

Someone get Greg Swann on the phone and tell him the good news.

Anonymous said...

People buying now in bubble areas must be total ignorant to what is going on. Or listening to their knowledgeable, friendly, professional, REALTOR.

Anonymous said...

Buyer Sues Calif. Congresswoman Over Foreclosure

SACRAMENTO, Calif. -- An investor who bought a congresswoman's foreclosed home filed a lawsuit against the legislator and her bank for rescinding the sale.

James York had purchased the home at auction in May for $388,000 after Rep. Laura Richardson failed to make her mortgage payments. He claims Richardson used her influence as a congresswoman to force Washington Mutual Inc. and a subsidiary to later back out of the sale.

"They rescinded the notice of trustee sale and put it back in her name before even telling me," York said. "It's not a difficult case. It's a valid sale."

His lawsuit in Sacramento County Superior Court seeks to have the house returned to him, as well as punitive damages and costs.

Richardson, a Democrat from Long Beach, bought the house in January 2007 for $535,000. She previously told The Associated Press that it was sold without her knowledge and after the bank agreed to delay action.

The lawsuit was served to the defendants Friday.

Richardson's spokesman, William Marshall, said the congresswoman had not seen it and declined to comment. A spokeswoman for Washington Mutual, Sara Gaugl, said the company would have no comment because Richardson had not authorized it to speak about her case.


© 2008 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

LauraVella said...

We know how these predictions go...its always much worse than reported.

Get ready for a huge plunge in prices, it's going to happen even in pricy cities directly in the bay area including SF, the east bay, the south bay and even Silicon Valley.

I've been saying this all along!

wings said...

And came forth the Great Housing Wave of Kagunga.

And thy wave crested and crashed upon thine shore like a watermelon dropped from the 30th floor.

And yea, though the realtors did suffer, they raised their snouts toward the Heavens and cursed Him that created the heavens and the seas, and yea, they sobbed like spoiled brats while eating their ramen noodles.

And prices tumbled below even what Time magazine forecasted.

And any fool stupid enough to call the bottom henceforth, was slapped across the face with a hot ham sandwich and summarily pilloried in the town square like a fool.

Yo!

It hath been prophesied!

eTrader said...

If you think 50% off is unrealistic, please see this chart:
http://globaleconomicanalysis.blogspot.com/2006/04/us-vs-japan-land-prices-pictorial.html

OK. You guys would say "No, US is different from Japan".

Yes, I agree US is different from Japan. US is worse than Japan used be. Japan had much higher saving rate whereas US economy is totally depending on gigantic debt.

I won't get surprised even if I see more than 50% decline.

If you have a chance, drive up to Sacramento area to see how things get going. For those who can't afford the gas to Sacramento, I recommend to visit http://sacrealstats.blogspot.com/

Anonymous said...

I could see it being another 50% decline in some of those especially bubbly areas. More, even.

The prices are going to come back down to their historic averages based on their relationship to incomes. Incomes have not only not grown, but they will decline in many areas that were especially dependent on real estate development - I'm looking at you, Florida and Phoenix.

-Rich in Fl says

Alright West Palm Beach made HP! I agree 100% with the comment above and here is why. West Palm's economy thrives on 3 things. Tourism, Healthcare, Real Estate not in any specific order but everything else is a service stemming from these 3 things. The only other job to get out of is to work the county or state. Since the state of florida has to cut massively on it's 76 billion dollar budget (not sure but close to it) by billions there will be no county or state positions. Instead they will get rid of people. All other services are declining like lawn service, pest control, pool etc.. Because people are cutting back on extra expenses and the services are getting squeezed by gas prices. Need gas to cut grass! Golf courses!! There are everywhere! Incomes are going to plummet due to people will work for anything to try to get by. This sucks!!!!!

I have been to phoenix ! It reminds me of West Palm in so many ways. Boring!! The only thing better they have is sports teams!

Swann's Way said...

Keith, Swanny just reposted an attack on you from 15 months ago calling you an idiot. Given how the last fifteen months have gone, telling him that "Your cockiness and arrogance is only matched by your incompetence" has only gotten much more true over time.

Swann's peachy-keen real estate seminar (since he can't sell houses, he now sells seminars) last time featured sales talks for RE agents on "The Way of The Hunter" and "The Way of the Farmer".

At his next conference in Orlando, I suggest new sales talks:

"The Way of the Grifter"
"The Way of the Three-Card Monte Player"
"The Way of the Dumpster Diver"
"The Way of the Ignorant Pompous Greek-Quoting Faux Philosopher"

Pay Lay Ale said...

Anon:

"Prices can go down below, much below, where they should reasonably be. Just like they did on the upside."

Exactly, this happens in every market. Markets overshoot in both directions. You can see a 50% haircut, and then another 50% on top of that.

k.w. - Southern Ca. said...

It's only natural, and to be
expected that housing prices keep falling.

Veronica Lodge said...

RE: The final wave and the resulting 50% drop in real estate prices.

Prices will fall until they stop falling. Then, prices will stabilize for a long time at this bottom level.

Prices will only go up again when the majority of buyers and lenders are convinced that the real bottom (not another of the many false bottoms) has finally been realized.

By this time, the real estate market will have over-corrected to the extent that prices will have dropped below those of the mid-1990s. With a global depression in full swing, even these bargain-basement properties won't be selling.

V.L.

Anonymous said...

Sir John Templeton predicted that real estate in the USA will be had for 10 to 20 cents on the frn from peak prices.

In other words an 80 to 90 percent drop from peak. At the time everybody called him a lunatic. But he isn't often wrong and when he is wrong he isn't wrong for long.

This was years ago...he was early and correct on dot con too..

devestment said...

The way I see it, there are bargain hunters still on the sidelines to eliminate.

As soon as their money is gone and sales go completely flat, it will be irrelevant what percentage prices have dropped.

I recall in past RE bubbles, there is a point where there is simply no one in the market.

At that point the mid range houses compete with the bottom priced homes.

Coming soon to a town near you 2009/10.

Who wants a land anchor that you have to feed every month while it continues to go down in value and bleed your paycheck?

Frank@Scottsdale-Sucks.com said...

HAHAHAHAHAHAHAHAHAHAAAAAAAAA!!!!!

So if Phoenix Metro overall is 50% then figure 80-90% in Alt-A-Central Scottsdale.

ForWhomTheTollBuilds said...

"The Way of the Ignorant Pompous Greek-Quoting Faux Philosopher"

You know, he's not widely read enough to make a real difference, but in a sick way you have to acknowledge that his ability to stave off reality with words is hardly to be matched.

When you think of all the half-truths, lies and misinformation spewed by the REIC in support of this bubble, none of them ever made it an issue of *morality*.

Swann took it to a whole new level. You weren't just "missing out" by not participating. You had a specific kind of rot in the pit of your soul where "splendor" should have been.

His is the PRAVDA of Real Estate blogs.

Anonymous said...

I'm an appraiser in California, I do a lot of REO properties and banks are now requiring a 30 day liquidation value and they are using it to list the properties. Trust me MAY-JUNE 2008 will go down in history as one the biggest real estate declines in the history of the world.

Anonymous said...

Prices will not go up until everyone of the 8 year kids turn about 26 years old. About 18 years or so.

JAWS said...

I keep waiting-hoping for some sign of a change here in Las Vegas. So far, new Hummers at every intersection. Everybody else drives a gigantic truck or SUV. Price of gas?? Doesn't seem to matter. Just lots of huge, ugly vehicles. However, I am seeing "for lease" signs dotting the strip malls here and there. I heard this week that Trump Tower just isn't selling as expected. Took a drive down there Wed., gee, I wonder why. It's a real tall, gold, sterile looking high-rise in the middle of freeway on/offramps, gravel fields and industrial dump stuff. Couldn't believe my eyes. I guess Ivana was smart getting rid of her piece-o-sh*t land before the meltdown. Trump Tower isn't even that close to the Strip. On the Strip, however, the high-rise condo construction is just jamming. Little people mover equipment is everywhere, and cranes are going up and down and falling into the street from what I hear. If the Strip wasn't such a pain in the neck, I'd probably hang out there more often just to try and catch a falling crane, photo-op that is.

JAWS said...

Anonymous, about that 30 day Liquidation Review - I don't know what that is - is it at the beginning or the end of a RE transaction and WHY do the banks do it? Oh, and what is it?

Anonymous said...

Greg Swan must be suicidal

corvinus said...

If you factor in house prices versus gold, silver, oil, and Euro/forex prices, it's already a 50%+ bloodbath.

Anonymous said...

Even at another 50% down, I am still upside from what I paid for my house in 91 the year of the last downturn.

And I have a paid off mortgage plus a cap on prop tax increases. Ask me if I care.

Swann's Way said...

More from Swann's repost:

"People like Keith [...] hate their own lives so much that they lash out at everything. His sole goal, motive and intention is to spread his own internal misery to as many victims as he can latch onto, thus to justify by pandemic wreckage the wreckage he has made of the incomparable gift of human life."

and earlier in the post,

"I invented the idea of the custom real estate sign, was grasping for it through two generations of our signs before it was physically possible."

Hear that, pathetic bubblistas? You have the incomparable privilege of living at the same time as the titan who invented the custom real estate sign, and yet you mock him. Schoolchildren for generations to come will marvel at how civilization could have possibly existed before the custom real estate sign. Yet you, like Keith, live your sniveling pathetic little lives without achievement, and without acknowledging the greatness that walks among you.

Anonymous said...

50 percent drops? What type of employment picture exists in these markets? None? Next-to-none? What type of people live in these markets to allow this type of price escalation / crash?

I couldn't begin to imagine a builder being willing to cut prices 10 percent let alone 50 percent. They wouldn't begin to budge. "I'll give you a free sunroom, but no cash discount. We can't do that."

Guess I gotta move...

Anonymous said...

I hope a good chunk of HPers will join me in taking a nice comfy seat back on the fence!

Good Time Charlie

Reality said...

It wouldn't take high unemployment rate to crash some of the comparable by 50%. People were buying personal ATM machines, not shelters, at the top of the market bubble. So how much is a broken ATM machine that is unable to spit out any money really worth? How about one that has $5000 a month contracted rental cost?

I saw a house in the next town that sold for $259k in 2004, and got foreclosed for $150k this January, and now is on the market as REO for $120k! The Zillow estimate is still $300k.

Jake said...

The first poster really had it right....the projected fall in prices, is still only considering the present environment!!

It isn't factoring in future energy price hikes, oil shortages, looming scarcity issues, food prices going through the roof--(again due to transportation, oil scarcity and price issues), unemployment increases, and more CREDIT COLLAPSE beyond anything we have seen before.

Do you REALLY THINK those 600K McMansions that are a 45 minute commute to the city are still going to be desirable when the proposed occupants can't even afford to heat and cool HALF of them, or can't afford to fill up the tank each trip??

People--The coming energy crisis is going to make us forget all about the housing crisis!! We have either hit peak oil production, or will hit it soon, and no one is prepared for what comes next. I am seriously AFRAID.......

HP'rs....Will you check this out and tell me what you think?? Is this for REAL??

http://www.lifeaftertheoilcrash.net/

Anonymous said...

LMAO!!

"Slapped in the face with a hot ham sandwich"--?!!!

Add dripping horseradish, carmelized onions and arugula and it is a punishment fit for the likes of Greg Swan for sure.....

Greg Swan--The TURBO DOLT of our times.

Anonymous said...

"Even at another 50% down, I am still upside from what I paid for my house in 91 the year of the last downturn."

only an idiot would say that with the prospect of having that much equity wiped out.You should of cashed in your chips when everyone was buying.

Anonymous said...

More from Swann's repost:

"People like Keith [...] hate their own lives so much that they lash out at everything. His sole goal, motive and intention is to spread his own internal misery to as many victims as he can latch onto, thus to justify by pandemic wreckage the wreckage he has made of the incomparable gift of human life."


hey...cool, Keith. you, like Oppenheimer viewing the destructive power of the atom bomb, have become an honorary "destroyer of worlds"!

Macaca

Anonymous said...

GOITTA SEE FOR MYSELF THE SHILL BIDDERS AT THE AUCTIONS....... TO PROVE FOR MYSELF THE SUCKERS GAme continues...............

Paul E. Math said...

Swann's Way, "You have the incomparable privilege of living at the same time as the titan who invented the custom real estate sign, and yet you mock him."

I read that and thought the exact same thing. That's what he holds out as his towering achievement: the custom real estate sign. How did we ever live without it? It's a real sea-change. A paradigm shift, if you will. You can keep your E=MC-squared - me, I'll take the custom real estate sign, hands down.

Rudi said...

Zillow a home in the bubbliest regions of California (Sac, IE, SD). Look at the ten year chart for said home. To determine what to bid on that home, look at its 1998value. Don't pay more than that price unless you don't mind buying a depreciating asset. Personally, I think it will go below '98 pricing, but that's just me.

www.zillow.com

donald said...

"Yes, I agree US is different from Japan. US is worse than Japan used be. Japan had much higher saving rate whereas US economy is totally depending on gigantic debt.

I won't get surprised even if I see more than 50% decline."

The U.S. won't copy Japan for 2 reasosns:

1. Japan house prices appreciated much more than U.S. house prices did.

2. The Japanaese population is DECLINING, while the U.S. populatiuon is increasing.

These points are discussed in a NY Times article publsihed a few months ago titled "Home Sweet Investment." You can Google it, as I am too lazy to dig up the link.

--Donald

i've had it said...

Wait until the Alt-A's and Option ARMs start to reset in late 2009...they go thru 2012 and are higher in value than all of subprime. These two types of loans were given to people who couldn't document their incomes...that is, they were sold to a ton of folks who purchased multiple properties in order to flip them. If you think subprime has been bad, wait till these loans reset!

Anonymous said...

Wow, I remember just a couple of years ago cnn.com had a list of areas where housing might be in trouble, and they listed Los Angeles as an area where possibly a %10 percent decline might occur. That list has been off their site for some time now, never to be seen again... It looks like they have moved from the cheerleader camp to the reality based camp (at least as far as housing goes)
-JDF

Anonymous said...

Want to make sure the decline runs it's full course? So we get a full reversion to the mean (or even an overshoot), and no remaining "unfair" elevated prices?

Then we must make sure we the people (and the banks and regulators and insurers) do one thing:

We MUST make sure than ANYONE who bought near the peak and is getting foreclosed or mailing in their keys is NOT ALLOWED to finance any more house purchases, EVEN WITH ADEQUATE VERIFIABLE INCOME. These people must have DEAD CREDIT and should not be trusted to pay on their debt obligations--for YEARS--so they LEARN THEIR LESSON and so they can't re-speculate and reinflate any parts of the bubble as soon as they think the bottom has arrived and presented another speculative buying opportunity.

If you think you can find someone who was SCAMMED into a bad loan, and you are a private lender, then go ahead and try to help them STAY in a house--ON YOUR CORPORATE DIME, NOT THE TAXPAYERS.

But if they've don't pay, or can't pay, or won't pay, and they quit the premises, THEN THEY RENT FOR 7-10 YEARS TO EARN BACK THEIR BUY-RIGHTS. OR, THEY PAY CASH. PERIOD. NO EXCEPTIONS.

Anonymous said...

Life After Peak Oil


I believe it's true.

Roman burned, what makes us so special?