How Housing Prices Will Be Affected

[mksdk]

Originally Posted by Desperate

I bought my house in 2005 for $329,000 I put 20% down and have 816 credit score. My house is now worth $182,000.

I don't mean to be off-topic (I wish you the best with your predicament) but I was just wondering out loud how low people think prices will go. If history is any guide in previous real estate collapses (though of course nothing of the magnitude of the American collapse has ever been seen before in the world) then we should be seeing house prices bottom at around the 10%-of-bubble-max price or so (give or take.)

Any thoughts?

[Sold8/06]

Originally Posted by mksdk

I don't mean to be off-topic (I wish you the best with your predicament) but I was just wondering out loud how low people think prices will go. If history is any guide in previous real estate collapses (though of course nothing of the magnitude of the American collapse has ever been seen before in the world) then we should be seeing house prices bottom at around the 10%-of-bubble-max price or so (give or take.)

Any thoughts?

All indicators point to a continued slide. In some of the worst areas like FL and CA another 25-50% is easily within reach. Rent to own ratios and affordability indexes are totally out of whack. The average person can not afford a home, therefore there will be no buyers till prices fall .

Cash Is King

[mksdk]

Originally Posted by Sold8/06

In some of the worst areas like FL and CA another 25-50% is easily within reach.

Cash Is King

25-50%? You seem pretty optimistic. May I ask why?

[Sold8/06]

50% off of today's prices will put quite a few homes in South Florida back within reach of the average buyer. An example:

I purchased a home in 1999 for 70k and sold it in 2006 for 290k. It is now worth about 205k per the county tax assessor. Another 50% off and that house will be worth 103k.

If you take the original 70k value and inflate it by 5% a year (which is close to the historical average a house appreciates) you will come up with about 102k true value today.

The great myth that was perpetrated on the public was that housing was always a good investment...something that is just not true.

cash

[mksdk]

Originally Posted by Sold8/06

If you take the original 70k value and inflate it by 5% a year (which is close to the historical average a house appreciates) you will come up with about 102k true value today.

cash

Sure, but times they are a-changing' (with apologies to Bob Dylan.) Do you think historical average appreciation rates may be compromised by current conditions (e.g. even though the houses are "affordable" for the average person, the credit drought precludes banks from lending; and pure animal fear would prevent buyers from buying even if banks were willing to open up the spigots)?

If your house hit a bubble-max of $390k then I'd guess it's bottom should be around $39k or so for the unfortunate soul you sold it to (or whomever is stuck with it by that time.) Just my guesstimation.

[Moe Bedard]

Hijacking somone elses story thread is never a good thing............

Here is your own thread........

[Sold8/06]

Apologies for the hijacking.

To Mk: An interesting thought but no I don't think prices will ever go below pre-bubble days. The rationale is housing was affordable at those rates provided the buyer was qualified to purchase. Rent to own ratios were within reason and the median price of a home was within reach of a qualified buyer earning the median income for the area.

The bubble was created by excessive liquidity and low rates. Too many non qualified people were allowed to purchase homes they simply could not afford...at any interest rate.

The problem is getting back to pre-bubble days is going to be catastrophic. The old standards in lending will be the norm: A real downpayment, good work history, proper downpayment and ratios (front and back) that are realistic.

cash

[ManicMangaManiac]

Speaking of housing prices.... my next door neighbor banged on my front door this evening to complain about one of my dogs in my back yard, and he also complained about the condition of my house's exterior (peeling paint, wood rot) and heatedly told me that my house was pulling down the value of his house and the rest of the neighborhood.

I'm sure that's true, but due to the current mortgage crisis, isn't the value of everyone's home affected, regardless of the condition it's in?? What I'm saying is that even if my house and the grounds were in immaculate condition, its value and those of others in the area still would be dropping like flies.

I told him that I was having major problems with my lender and just didn't have the money to attend to the house itself whereupon he said I should be putting it on the market. My response was that even if that were my inclination (which it is not), it wouldn't sell due to the mortgage crisis and resulting glut of homes on the market.

I really resented his telling me I should sell it. My well-to-do younger brother said the very same thing and what really pissed me off is the fact that after glancing at the wood rot, he didn't even offer to help me fix it--and he's one of the principals of a major architectural firm that specializes in major league sports complexes (he's designed the Colorado Rockies' Coors Field and the New Meadowland Stadium for the NY Jets/Giants, among other projects)!!! NOBODY has the right to tell me whether I can live in my own home or not; I pay the taxes and utilities like everyone else.

ARRRRRRGGGGGGGHHHHHHHHHH!

Sorry.. I just had to vent. I just hope to God the neighbor doesn't file a complaint with animal control about my boxer. My pets are just about the only family I have left after my mother's death; neither one of my two brothers act as if I exist. They hardly lifted a finger to help me while I was caring for our mother 24/7 in this house, and I sacrificed nearly five years of my life for her with no outside income or employment.... I got no use for either one of them, to tell you the truth.

Sally

[mksdk]

Originally Posted by ManicMangaManiac

[snip] even if my house and the grounds were in immaculate condition, its value and those of others in the area still would be dropping like flies. [snip]
Sally

It's like the old 1929 stock-market-collapse joke:

Client (to his stockbroker): GET ME OUT! SELL! SELL! SELL ALL MY STOCKS! SELL AT ANY PRICE!

Broker: Sell to whom?

[mksdk]

Originally Posted by *** Damiano

Hijacking somone elses story thread is never a good thing............

Here is your own thread........

Sorry, I didn't realize that discussing a financial collapse of historic proportions constituted "hijacking a thread."

[Moe Bedard]

Discussing what you were discussing is fine....but is was off topic of the members thread that you were posting it in.......that is why you have your own thread........

You just started posting the info in someone elses story...........that was their story thread to get information...........

So now you have your very own........

[mksdk]

Originally Posted by *** Damiano

So now you have your very own........

Oh now I understand. Thank you.

[Reality]

10% of bubble max price is possible in the most bubblelicious regions, where buying a house was not meant as a shelter for family or even a palace to show off friends and family . . . but as an ATM machine or a way to rob the bank blind. There were 100% in a year increases in some of those cases where mortgage fraud was clearly involved. Those properties can easily drop to 10% of the bubblemax price, or even become completely worthless and eventually getting seized by the county for nonpayment of property tax. That's actually quite common in FLA, NV and inner cities in the past cycles.

The rest of the country, although also influenced by the "comparables" from those fraudulent sales, will not go down quite as far as dropping to 10% of peak value, IMHO. Yes, eventually 1930's eventually did get to 10% for the nation as a whole from the peak; however, that's when people had a real choice in money, as in gold if they demanded cash coins instead of bank liability notes (deposit notes, bank notes, etc.) Today, the unit of count is the paper money, and there has been plenty inflation. IMHO, housing prices will probably go back to 1995 level, or roughly 20-30% of peak value; that's about where rent income can pay for mortgage. Of course, this assume real inflation and 30-yr interest rate stay below 9%; if that line is broken, the carry cost of houses would become much much higher and prices will have to be much much lower. Fannie and Freddie will also be bankrupt because of their duration gap.