Let’s see if I can tackle this one.
Buyer buys home he can’t afford with a suicide option arm loan. He crossing he fingers that the house appreciates enough so he can sell or refi into a fixed loan. Prices don’t go up enough to cover the 6% sales comm, and since the buyer does not want to lose ANY money, he holds on to it. More and more unoccupied properties go on the market. Prices start going down slowly. The monster can no longer be fed with GFs. False bottom under peak pricing. Prices head back to 2001~2002 where average income buyers can actually afford the home with a fixed 10 to 20% down.
It’s amazing how emotions can be included for reasons that home prices go up, but logic, charts, and math equations are the only factors that can be used to determine how low home prices can be taken down. There was a huge overshoot on the way up, and there will be a huge undershoot on the way down. Wait for the clearance special soon. Don’t forget to bring the “Take an EXTRA 10% off” coupon that comes with your morning newspaper a couple of years from now.

Yes housing = all of those things … true. Except when it was bought just to flip, no one lives in it, its bleeding money each month and its costing MR, taxes, Interest, utilities, insurance and upkeep/fines for failing to upkeep.
It wasn’t an investment, till people started dat trading it. Now Casey Serin (imfacingforeclosure.com) owns 4 houses and is paying 550 a month rent for sharing a house with his sister in law, a house he doesn’t even own. You’d think he’d be the last person to need to rent wouldn’t you.
So I have presented a concept called “fake” estate.
Real estate is where hubby and wife (and no offence to roommates, or brothers and sisters or friends buying a house and living in it) put up some of their money, buy a house with a loan, and work hard making payments on it, and making the house a home and generally adding to the factor called “neighborhood”. These are Real people’s houses. Hence “Real” estate.
Fake Estate is where a flipper buys it, never intends to occupy it, never expects to pay for it, never thinks of maintaining it, never does anything … and hopes to cash out with some real people to buy it. AKA … “Investment” house. Or “Fake” Estate.
Here is the catch, “Fake” estate is indistinguishable in most cases from “Real” estate. So when the Fake estate dies (its all based on fluffed up demand anyway) it will take the Real estate with it.
Cool.
Cow_tipping.

Cow-tipping, I love your writing. Real Estate vs. Fake Estate is a classic!

A house is a house whether you rent or buy. What difference does it make anyway since most people move within 5 years anyway? You get everything when you rent, expect for pride of ownership. In exchange for that you have savings in the bank. Which would you rather have?

You don’t get rich from a falling market. You get out of it.

Problem is, speculation in fake estate has inflated the price of all real estate.

But what is the value of a property? Most say ultimately it what the next guy will pay for it. Then the next guy, and so on. But real estate is just not liquid enough to be priced that efficently.

Here is how the banking industry determines it. They set an estimate of market value based on appraisals, broker’s opinion, etc, throught the lifecycle of the loan that is then qc’ed by in house appraisers. This value is then tracked to an index valuation. The indexed valuation uses the property valuation at origination as a base. The base value is multiplied by a factor representing area home price appreciation (or depreciation) between the origination date and current. This indexed value incorporates changes in home price appreciation for each area. The indexed value represents the value that the property would be worth if it appreciated consistent with its area, and if the condition of the property remained stable. Thses two very big assumptions are why you need to take avm’s like Zillow, etc with a load of salt. Considering that estimates of value are rendered on distressed assets, they should e lower than the index values, but the difference should be consistent over time.

The answer to Daney’s question is simple.
Yes, your house is tied to all those things.

But, for any given house, those things didn’t become significantly better between 2000 and 2005, yet prices skyrocketed.

So, when you ask “Have these been factored into the recent downward trend in the housing market” the answer is “no – they shouldn’t be” because we are in a speculative bubble and those things weren’t factored in to the massive price increases.

It’s kind of like the weather. Yes, the weather here is great, but it isn’t 3 times better than it was in 1998.