Pimco head say's Real estate market 20% over valued

Bill Gross is head of Pimco (a huge bond trader) His research has determined that real estate vaues could fall another 20% before this shake out is all over.

Bottom line… Who know’s?? This guy IS right a whole lot of the time though. CNBC has more on it’s site.

And it’s all regional.

I think it is interesting that he belives renting single family houses will be a good opportunity

It’s all regional is the BIG point. Here, our ‘average’ appreciation is only about 2% annual and a few years ago while everyone else was enjoying 15% yearly appreciation rates, we were in a recession (heck, practically a depression) and real estate values suffered on the whole.

Last year, we had a 10% increase while those previous jumping markets around us are slowing up.


I may add that it is a wonderful part of the country to live in. I used to have a customer in Hickory that I called on. It is a great place to raise a family and the cost of living is in control.

Real estate is different in every part of the US. Each county is different. In Florida, SW FL boomed with some of the highest appreciation rates in the country from 2002-2005 then crashed in 2006 at 20-40% a yr. But move up the coast to the center of the state in Orlando and Ocala area and in 2006, prices were up about 5-`10% in some of those areas. South Florida saw a major drop as much as 30% in some areas in 2006 but yet I seen some neighborhoods selling at the end of 2006 higher than during the peak times in 2005 which was odd.

I do not know about other states but Florida is moving aggressivly with our new governor to bring real estate prices back up and stablize them really. One of our price drop factors is the high cost of insurance and property taxes at 2% of the sale price. (avg home over 360K means 7200 a yr in property taxes with an avg ins bill of $3600-6000) But now insurance rates have dropped slightly and be re-structed with can lower or stablize rates but out best thing is, Florida has a big push to get rid of property taxes on all homes with a Homestead Exemption by raising sales tax from 6% to 8.5%. We would be the first state in the US with no property tax or income tax… As of now, they are rolling back real estate taxes to 2001-2002 levels as all our cities governments have to use the budgets from that fiscal yr to operate. This will also lower NOO properties about 20-40% in taxes we hope.

if this happens and the typical buyer sees a saving of over 7K a yr on taxes and ins we will see our market strenghten alot.

Just a little perspective… Pimco, led by Bill Gross was one of the worst performing bond funds last year, primarily because of his large bets on corporate credit spreads and his bet on the fed easing. I have done a lot of business with some of his traders, as well as his Chief Investment Officer… I can assure you that they are no dopes… however, they do not move the markets like they used to-- they have been WAY off for the past couple years. Gross’ recent calls have been more wrong than right.

As usual, EXCELLENT comments!!

A lot of smart people here.

First off, the economy itself is at “full employment”

It may well be that real estate as a sector has some adjustments to make. the excesses of the past several years are legend and probably need correction. This has happened before, by the way. If memory serves, Denver in the late 80’s but I’m sure that smarter people than I can come up with many examples of markets that corrected for a couple of years, then grew hot again as the dynamics of supply and demand entered in. San Francisco Bay Area in the early 90’s in one with which I have personal experience.

As any wall street trader will tell you, the market is the market and you can’t fight it. Successful peoiple seek to understand and to go with it, or better yet, be ahead of it.

Television programs like Flip This House, with their months of lag between production and airing, offer a highly distorted view of the market and the expected results.