Some experts are saying that we are at the bottom and others are saying we are 2 years away. What is YOUR opinion?
Im far from an expert, but in my opinion…
The worst has yet to come. At the alarming rate of unemployement rate increasing, people can say what they want, but I dont see how they say it is going to bounce back.
Things are going to get REALLY bad in my opinion.
Thats what I’m sensing as well !
We would be at the bottom, with a fairly quick turn-around if it weren’t for oil prices. High price of oil is very hard on the economy, and is pushing it back under water.
Never looked at the energy angle…good point actually!
I don’t think that we’re close to anything except possibly a very short term bottom. Assuming that Barack Hussein becomes president with socialists running both houses of Congress, you’re looking at unprecedented tax increases and unprecedented spending (which is already shamefully high). Just the ridiculous cap and trade plan that the socialists promise to pass next year is estimated to raise gas prices another $1.50 per gallon. Add to that the baby boomers that are retiring. Fewer and fewer working people will be expected to provide entitlements to an ever increasing number of retirees, (not to mention the tens of millions of deadbeats who are breeding at an ALARMING RATE). The best days of the United States are in the rear view mirror. LOOK OUT BELOW!
Mike
Humm, depends on the market your speaking of.
Always remember this Fact, that Real Estate is a LOCAL Market.
Some areas have increased in Value and still going up… Check the stats.
I own multiple properties in Good Areas of Charlotte and they have all gone up in value.
Now if you are speaking of Las Vegas, we all know prices have dropped there… BUT
on the Vegas 5 mile Strip, prices went up 38% last year…
Again Very Local…
So to answer your question… YES and NO… :cool
I assume you’re refering to single family homes, because many segments of the commercial market are very healthy. In the broadest sense for SFH’s nationwide, no it hasn’t hit bottom. There are various versions of the following ARM reset chart around, including a less easy to read version by Credit Suisse:
As you can see, we just hit a peak for ARM resets last month. It takes about 9 months for the resulting foreclosures to hit the market so the bottom is nowhere in sight for a while.
This completely depends on the local real estate market and local economy. Seattle went down, now it’s going back up. Dallas has gone up 20-25% in the last year. Sacramento and San Francisco are still going down, but not as quickly as it was from October to March; this could be seasonal, this could be the market flattening. It has a lot to do with the local economy.
High rise condos in Sacramento are selling for ridiculously high prices. I can’t believe it. Single family homes in some suburbs of Sacramento are foreclosed, but they are not on the MLS. I think that the banks might be waiting until the market finds its bottom, and then they will try to get retail rather than selling for a deep discount now.
A lot of subprime borrowers got into trouble with the 28/2 mortgages. 2 years of teaser low payments, then 28 years of payments that are higher than normal. The credit markets didn’t really wake up and smell disaster until August of 2007. It really stands to reason that foreclosures will be high and median prices and dollars per square foot of residential property (at least where I am) will be going down until at least August of 2009.
I completely agree that the trends are very local.
Funder - not sure if I understand your reasoning above… I don’t think it would make sense for anyone (even banks) to wait for the market to bottom before selling their houses… If they believe that the market is going to bottom, wouldn’t they be selling now before the prices go even lower? The only reason for them to keep the houses would be if they believe that the market will go up from here… Am I missing something here?
Have a good evening!
I don’t completely understand this myself. I also am not sure how long it takes to go through the entire foreclosure process. I just know that there are homes that I know are bank owned, some of them on the market for as long as a year, sitting vacant. No sign, no MLS listing.
One variable which determines the prices stability of homes in an area is the number of homes on the market. So if the inventory of homes in an area is kept at an artificially low level, it seems to me that two things could happen. First, the banks can unload their desirable homes for retail prices now. Second, they can carry these homes for 2%, while they manipulate the supply, keeping it constant so median price levels stop falling so dramatically. If demand remains static, or even goes up, while the supply is deliberately being kept short, prices will hold or even rise.
If they flood the market with inventory now, they will have to accept the market driven trend that the comp prices are lower than a cost appraisal.
It seems to me that there is no market driven reason why median home values in my area should be flattening out. But they are.
Sacramento, CA
Oct. 1st ‘07 median price per sq/ft: $200
April 1st ‘08 median price per sq/ft: $150
June 29th ‘08 median price per sq/ft: $140
Oct 1st ‘07 median home price: $300K
April 1st ‘08 median home price: $225K
June 29th ‘08 median home price: $201K
Happy 4th of July, everybody!
NOT EVEN CLOSE>>>>
Personally, I think we’ll see a bottom in Housing when we see The OIL BUBBLE bust.
I laugh when I hear “experts” talking about SUPPLY!! SUPPLY??? Has anyone waited in a GAS LINE lately??? You can buy all the OIL and GAS that you want, It’ll cost you, but there’s absolutely NO PROBLEM getting it.
That sets up what I call “The perfect storm” My local Electric Utility just applied for a 21% RATE INCREASE due to oil and natural gas price hikes!!! And they’ll get every penny of it.
21%…that is THE HIGHEST rate increase a public utility has EVER asked for in this region…EVER!!! But wait, there’s more coming…
This winter two things are going to hit local markets. A 21% Electric Co. rate increase and Heating oil at OVER $5.00/gallon. That means the AVERAGE 250 gallon oil tank will now cost a STAGGERING $1250 to fill!!! That same tank cost $500 to fill 18 months ago!! Don’t forget…one tank is not even CLOSE to heating a home for a winter. We’ll be looking at an increase of well over $3000 for a winter heating season!! So we’ll have people getting killed at the gas pumps, and slaughtered by the heating oil bills. ANYONE on the brink of losing a home this winter is ALL DONE!!!
WATCH OIL…
When this bubble bursts (and it IS a bubble) it may signal that a bottom in the housing market is close at hand. Until that happens the housing market (in SOME areas) are screwed.
Right now OIL holds the key for the entire world’s economic future. If oil prices crack, things will get better. If they DON’T this is going to get so bad it’ll make my dire predictions look upbeat!!
In my opinion the banks which are now THE BIGGEST real estate owners ON EARTH will throw in the towel if oil stays at these levels this winter. I believe the next shoe to drop is going to be smaller regional banks failures. This is not OPINION, it has already been acknowledged by Paulson, Bernanke, and many others in that business.
At that point the banks holding this real estate will just dump it and
THAT’LL BE THE BOTTOM!!! Guaranteed… Hell they BOUGHT 'EM at the top didn’t they???
Folks always THINK these people are SMART…they’re not…they’re CATTLE. They do what all the other cattle are doing. They all loaned money to LOSERS didn’t they??? WHY??? Because the COMPETITION WAS!! They didn’t want to miss out!! Now…when the competition decides to finally DUMP the REO property they STILL can’t sell, all the cattle will do the same!!!
Just watch…This is not new…I had a ringside seat to the EXACT SAME show in 1991 here in New England.
Same circus, different clowns!!!
Great post fdjake…
Makes me think of all those people that supersized to McMansions.
Heating them ain’t gonna be no easy task.
That extra capacity, (the clamour for more square footage), hasn’t helped.
-Mike
I said it in many posts months ago here…Be prepared for the highest interest rates in decades…Bernanke (moron) will have to raise aggressively soon…VERY AGGRESSIVELY…Oil at that point will start its long awaited dissent and the US dollar will soar…
http://www.usatoday.com/money/economy/fed/2007-09-14-greenspan-book_N.htm
Point being real estate may hit a bottom short term but if interest rates shoot up like they are doing in Australia ( %7.25) you can count on real estate becoming a bad investment for a long time…Why invest in real estate if you can get high single digit or as Greenspan predicts DOUBLE digit returns to keep your money LIQUID in a money market account…The Carter days are coming and once again CASH IS KING…I can’t wait for high interest rates…
UUP?
Another to consider…DUG…(twice the inverse):
http://www.proshares.com/funds/dug.html?Overview
I like those “cyborg” ETFs… :bigthumbup
-Mike
I’d like to point out that RookieNYC called what we are now LIVING with about 18 months ago. He specifically said that we were headed for massive stagflation (when prices rise but the economy sucks)
Once again…he hit it right on the money. (literally)
jake,
your man crush on rookieNYC is duly noted.
It’s just respect man…
I look at this stuff everyday of my life trying to figure my next move.
I spend some time watching and reading the Wall St. Journal,CNBC, Barons, Fortune, ect . The talking heads there are just towing the company line for the most part. Anyone here remember the NO RECESSION HERE statements being made a few months back? How about the “second half of the year is going to be strong” Yea Right. :banghead Rookie has no axe to grind.
I have to admit, I thought he was another talking head at first, but…it’s tough to argue with a track record like his.
Call it what ever you have to…I know what I call it…
PROFITABLE!!!
fdjake,
I appreciate the respect…I just try to help others here as much as possible…The problem that I run into on these forums is too many talking heads…I have also learned that people don’t like the truth…They like sugarcoated BS…I manage money for a living,other peoples and my own…So when I’m wrong someone loses money,and I HATE to lose money mostly because it means that I was wrong…Which we all are from time to time…
To add to my earlier prediction I feel that real estate and the equity markets will move sideways to lower over the next few years…High interest rates kill real estate values as we all know,also making mortgage rates double digits…They also destroy the equity markets because companies have to spend much more to borrow as we all know…What is one to do?..Thats the million dollar question…I know what I’m going to do,I’m keeping my mental stops on my positions in the markets…As for my real estate portfolio, I plan on maintaining it because its been very profitable…If given the opp to buy more at the same or lower levels I will do just that…Overall I’m staying in a large cash position and dabbling in some high yielding CEF’s and bond funds (remaining hedged until I feel a trend has emerged)…Watching out for when Bernanke (moron) decides he wants to stop the US Dollar’s freefall and stick it straight up Saudi Arabia’s a$$ by raising rates to a decade’s high %…Oil will come down but not anywhere close to where the average American will be happy again…This process will take 3-5 years to ride out before we can taste prosperity again,or something like that…For now this all I have to add…
To those people who bought RE during the highs,my advice is bailout or hope you have your finances in order to ride out a 10 year decline/rebound before you get back to even…I wish I could research somehow what happened to RE prices during the Carter administration…I would bet they were crushed…
You may want to check to make sure that the earth is still spinning under your feet, but… I totally agree with fdjake. :shocked
Seriously, OIL is the driving force behind the current economic situation now and housing is simply following along. To some extent, the current gas prices as stimulated housing because there has been an increased demand for housing CLOSER to work.
Oil prices are in a bubble, and that too will break at some point. Well, break is probably not the right term. “Leak out” slowly is more like it.
On point on increasing interest rates. I doubt that rates will make massive jumps, but rather a slow, steady upward climb. What that will most likely do is again stimulate housing sales as people clamor to lock in a “better, lower” rate. There are many people on the fence on house buying (and selling) right now, just waiting around to see what their market actually does. A rate hike, imo, would probably spur a small buying frenzy. Nothing dramatic, but definitely a boost.
Raj