This entire historic ridiculous bubble is going to get washed away folks, and then some.
We'll be back at prices last seen in the 1990's pretty soon.
But oh, what a bubble it was. The biggest financial bubble in the history of humanity. The perfect storm of greed, corruption, ignorance and incompetence.
And to think, nobody saw it coming. Right?
Home Prices Seem Far From Bottom The American housing market, where the global economic crisis began, is far from hitting bottom.
Home prices across much of the country are likely to fall through late 2009, economists say, and in some markets the trend could last even longer depending on the severity of the anticipated recession.
In hard-hit areas like California, Florida and Arizona, the grim calculus is the same: More and more homes are going up for sale, but fewer and fewer people are willing or able to buy them.
October 18, 2008
New York Times article: "Home Prices Seem Far From Bottom"
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A single female co-worker just bought an old house in downtown DC for $400k. She was asking me about places to get old fixtures, because the renters had completely stripped it. "It was a good price," she said. For once I just held my tongue. What can you say? "It's guaranteed to drop like the rock you just crawled out from under?" "This is still the worst time in the history of the United States of America to buy a house?"
Yes, words failed me.
Why -43%? Why not lower than average as everything can overshoot on the way down as well?
Best time to sell is when everyone says buy. Best time to buy is when everyone says sell.
When Time magaizne and NY Times say don't buy, that's when I start buying.
Qweefie, you always say don't be a perma-bear or perma-bull. I think you should start taking your own advice one of these days.
Prices in my zip (high $$$/sq.ft. part of downtown Tucson, and yes, there is such a thing) are tumbling by double-digit percentages, but only one property out of the 53 currently listed has had an offer in weeks, perhaps because any dope can go on zillow and see that 90% of the sellers still ask more than they paid despite making no improvements (or, in one case, burning the home to the ground). I expect another 25% drop here, easily; more would not surprise me.
Its definitely time to buy a house. That way every day after your purchase, for nobody knows how long, your new home will be worth less. You need to do this to help jumpstart the economy. If it doesn't work out for you, don't worry, Uncle Sam will be there for you.
The pendelum always swings past the median
I think the bottom will be a little bit higher than this scheme predicts.
1. This correction is proceeding slower than the previous two corrections. The blue line predicts the index should be at 120 in 2008, and the red line predicts the index should be at 130 in 2008. In fact, the index is still at 150 - Schiller says existing home prices have declined 18% from peak and online inflation calculators say we've had 8.5% inflation in the past 2 years, which means there was a 25% decline in the inflation adjusted index (.82 x .915 = .75).
2. A trend line of previous bottoms (1949, 1976, 1984, 1998) has a steeper slope (2 points per decade) than the green overall market trend line (1 point per decade)
Either way, the most I would pay for a house is the 1998 price of a comparable unit, adjusted for inflation, plus 2%. I would only pay more if the quality of the local neighborhood had dramatically improved in the past decade, or if the regional economy had improved in a SUSTAINABLE way.
(The economic growth of the New York city region has been based on the growth of the financial industry, which was in turn based on bad loans. This unsutainable economic growth contributed to price increases in NJ, Long Island and Conneticut - which explains why the boom started later, peaked later and will bottom later than in the pure bubble areas of California, Nevada, Arizona and Florida.)
Once I find a place I can afford (maximum down payment 1/3 of my net worth, maximum loan 2X my annual income), which is not overpriced ('98 price, adjusted for inflation + 2%), I will buy even if the market is still declining. I'll catch that knife, just like Buffet is doing with stocks. Why wait for an absolute bottom, which is hard to determine, if the price is good? I just want a place to live, where I don't share control of my surrounding with a landlord.
The dream is dead.
NOW IS A GREAT TIME TO BUY!
What is the condition that caused the post war peak to remain high and start a new trend line? Is our administration/ industry attempting to establish a new tren line? It seems to me that our industrial output after WWII sustained such growth and now there is no way in hell we can maintain that same level. I'd think 43% or more before a turn around.
Summary: Bottom in 2011 - 43% fall from the peak.
So we are not even half way there yet...
1998 prices? Yeah OK. Maybe after that dream comes true, you can try out for the Dallas Cowboys QB job. It's about as likely to happen.
Sacramento is already -50% off peak.
1998 here we come :)
http://sacramentolanding.blogspot.com/2008/10/perfect-storm-sacramento-median-50-off.html
It's always a good time to by real estate. ;)
Soft Landing 08 - I love that name.
Anonymous said...
1998 prices? Yeah OK. Maybe after that dream comes true, you can try out for the Dallas Cowboys QB job. It's about as likely to happen.
October 18, 2008 5:37 PM
Exactly! 1998 in their dreams. We are going way past that to at least 1993 and probably even to the 80s. Houses are going to be about as valuable as a used car. The old saying from the depression dust bowl era that you can live in your ride but can't ride in your house will once again become conventiuonal wisdom.
the idiot "refuse to buy high" is going to do just that and instead of getting fair price he is selling himself into slavery like all the dolts who got us into the real estate problem have done...cash only and affordable 2 times income average.....average////
There is an obvious problem with the graph. Notice that other corrections have always overshot the mean as they regressed. To say that the bottom will be in 2011 is to not account for the significant overshot seen in all previous corrections.
"The pendelum always swings past the median." Indeed!
1998 prices? Yeah OK. Maybe after that dream comes true, you can try out for the Dallas Cowboys QB job. It's about as likely to happen.
You sound like one of the Tards that said prices would not decline at all a short year ago. Crawl back under you rock.
"Lost Cause said......There is an obvious problem with the graph..."
Yep. Ola Dunk and Anonymous 4:24 pointed it out as well...
If you extrapolate around a third of the '97-'06 runup in negative overshoot(what occurred '79-'84 and '89-97) you get a bottom around 85-90% well past 2014.
Is it just me, or are there 11 years 2000-2010; WTF?
Anon said:"It seems to me that our industrial output after WWII sustained such growth and now there is no way in hell we can maintain that same level. I'd think 43% or more before a turn around."
Agree. More factories opening, more production. Expansion, based on JOBS.
No decent paying JOBS... housing prices collapse.
How many years has this country been closing down manufacturing??
Lots of empty office space here in the bay area. How can the economy sustain itself on "paper pushing" type jobs, internet 'click' advertisng jobs, or better yet, fast food jobs??
We have long ago reached the end of the line for high paying jobs, and house prices have to reflect a new reality.
Early 1980's here we come.
.
I totally forgot about all the 'soft landers' out there!
How do you feel now during a crash landing that doesn't have an end?
.
43% correction sounds right, but the cost of borrowing money will be significantly higher in 2011. Perhaps we are at a bottom now with relatively cheap money at 7% on a fixed 30yr. Waiting 2-3 years for the bottom in price terms could cost you more. Unless... you can pay cash.
Isn't it time the economy stopped growing and reached a stable level. What's with this obsession with "growth" anyway?
Check the data from the 2000 census: that should give a reasonable estimate of bottom prices for non-bubble areas.
Right on - because in a well run capitalistic society the price of goods should decrease. greed is the ongoing problem........
Maybe 43% would be the trough if this housing bubble had not fundamentally damaged the American economy. This bust will rival that of the 1920s and 1930s.
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