Get out now or stick it out

[unbiasedobserver]

I have a good friend in San Diego who has been a mortgage broker for 20 years and is an eternal housing optimist up until August. He told me a few weeks ago that the average person who comes into his office now overestimates their equity by at least 100K and that’s before the realtor commission. Believe me this guy is probably being conservative, the average San Delusional homeowner has a lot less equity than they care to believe at this point.

[Arraya]

The last few sales per sdlookup in that size range 1500-1900 sq ft closed from 372K-480K. He’s already down probably 25K.

I’m sure he could rent for 1/2 the carrying costs. Getting out would be the best business decision.

[Arraya]

The last few sales per sdlookup in that size range 1500-1900 sq ft closed from 372K-480K. He’s already down probably 25K.

I’m sure he could rent for 1/2 the carrying costs. Getting out would be the best business decision.

[Arraya]

The last few sales per sdlookup in that size range 1500-1900 sq ft closed from 372K-480K. He’s already down probably 25K.

I’m sure he could rent for 1/2 the carrying costs. Getting out would be the best business decision.

[blackbox]

wow, he lost all he’s “Instant Equity”
Hard to imagine……..
haha, knife catcher alert!
On a falling market, you house is worth what you close escrow on………….

[blackbox]

wow, he lost all he’s “Instant Equity”
Hard to imagine……..
haha, knife catcher alert!
On a falling market, you house is worth what you close escrow on………….

[blackbox]

wow, he lost all he’s “Instant Equity”
Hard to imagine……..
haha, knife catcher alert!
On a falling market, you house is worth what you close escrow on………….

[SD Realtor]

Hi LostCat –

It is not a question of whether the market will go down, it is how far down will it go and how long will the cycle last. Basically you should advise your friend to take a few different looks at what scenarios may occur. One possible case scenario would be a 30-40% decline over the next 4 years. Then a slow recovery in the 3-4% per year growth rate. Alternative approaches may be a lesser decline of maybe 6% a year for a few years.

Nobody here can answer with any degree of accuracy the questions your friend is asking. However you can advise your friend to chart out a few different case scenarios over the next several years.

I would speculate (and it is only my opinion) that the market will go down, it will take a few years until it bottoms out, and then it will be a flat market for awhile, then it will appreciate slowly.

All results and speculations can be radically affected by interest rates, global events, how our economic policy will deal with the day of reckoning when we decide to really deal with the deficit and value of the dollar…. Unfortunately none of those factors will help the housing market.

I don’t mean to be to bearish but if your friend thinks hey I will stick it out another year or two and things will bottom out and get better quickly… then I think your friend is wrong. I will say there “may” be a small rally in the spring of 08 and maybe 09. So my advice would be, if your friend is risk averse, is to get out now. Otherwise make sure that stick it out means stick it out for several years, not just 2 or 3.

SD Realtor

[SD Realtor]

Hi LostCat –

It is not a question of whether the market will go down, it is how far down will it go and how long will the cycle last. Basically you should advise your friend to take a few different looks at what scenarios may occur. One possible case scenario would be a 30-40% decline over the next 4 years. Then a slow recovery in the 3-4% per year growth rate. Alternative approaches may be a lesser decline of maybe 6% a year for a few years.

Nobody here can answer with any degree of accuracy the questions your friend is asking. However you can advise your friend to chart out a few different case scenarios over the next several years.

I would speculate (and it is only my opinion) that the market will go down, it will take a few years until it bottoms out, and then it will be a flat market for awhile, then it will appreciate slowly.

All results and speculations can be radically affected by interest rates, global events, how our economic policy will deal with the day of reckoning when we decide to really deal with the deficit and value of the dollar…. Unfortunately none of those factors will help the housing market.

I don’t mean to be to bearish but if your friend thinks hey I will stick it out another year or two and things will bottom out and get better quickly… then I think your friend is wrong. I will say there “may” be a small rally in the spring of 08 and maybe 09. So my advice would be, if your friend is risk averse, is to get out now. Otherwise make sure that stick it out means stick it out for several years, not just 2 or 3.

SD Realtor

[SD Realtor]

Hi LostCat –

It is not a question of whether the market will go down, it is how far down will it go and how long will the cycle last. Basically you should advise your friend to take a few different looks at what scenarios may occur. One possible case scenario would be a 30-40% decline over the next 4 years. Then a slow recovery in the 3-4% per year growth rate. Alternative approaches may be a lesser decline of maybe 6% a year for a few years.

Nobody here can answer with any degree of accuracy the questions your friend is asking. However you can advise your friend to chart out a few different case scenarios over the next several years.

I would speculate (and it is only my opinion) that the market will go down, it will take a few years until it bottoms out, and then it will be a flat market for awhile, then it will appreciate slowly.

All results and speculations can be radically affected by interest rates, global events, how our economic policy will deal with the day of reckoning when we decide to really deal with the deficit and value of the dollar…. Unfortunately none of those factors will help the housing market.

I don’t mean to be to bearish but if your friend thinks hey I will stick it out another year or two and things will bottom out and get better quickly… then I think your friend is wrong. I will say there “may” be a small rally in the spring of 08 and maybe 09. So my advice would be, if your friend is risk averse, is to get out now. Otherwise make sure that stick it out means stick it out for several years, not just 2 or 3.

SD Realtor

[LostCat]

Will that 30/40% drop in value be in addition to inflation? Or is inflation included?

[LostCat]

Will that 30/40% drop in value be in addition to inflation? Or is inflation included?

[LostCat]

Will that 30/40% drop in value be in addition to inflation? Or is inflation included?

[patientlywaiting]

I seems to me that it will be a loss of value in nominal dollars (no inflation included). Look at what happened 1990-1996 as a guide. 6 years of declining/flat nominal prices.

1-bed condos are already losing nearly 40% off peak. SFR wise, the older neighborhoods with old, small housing stock that need remodeling (such as Allied Gardens) will be next.

[patientlywaiting]

I seems to me that it will be a loss of value in nominal dollars (no inflation included). Look at what happened 1990-1996 as a guide. 6 years of declining/flat nominal prices.

1-bed condos are already losing nearly 40% off peak. SFR wise, the older neighborhoods with old, small housing stock that need remodeling (such as Allied Gardens) will be next.

[Author]

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