Housing Prices Will Fall at Least 50%

[Anonymous]

Very well said.

In my opinion it’s irrelevant if the real estate crash triggers recession/depression, etc. Bottom line, whatever happens will be a natural correction to an unnatural economic situtation. For the people whose lives and income are purely dependent on the bogus real estate based economy of the last few years, then too bad for them. This is called natural selection.

Maybe some unemployed estate people will go to trade school and learn some useful skills that actually benefit our country and economy in the long run.

[PD]

Although I agree that whatever happens will be a natural correction, I don’t think it is irrelevant if the crash causes a recession/depression.

A housing crash will hurt some a lot but people who don’t have to move will be able to ride it out. A recession will have much wider repercussions and a depression will be even worse. How is that irrelevant? Even people who sold before the crash could find themselves in bad shape due to a lost job.

[Anonymous]

I don’t think a depression is irrelevant, you are right it could hurt a lot of people. My point is that let’s not make real estate the scapegoat for our country’s economic woes. If anything real estate helped buoy the economy unnaturally. Now let the chips fall as they may. America’s economic problems are far more deep to be able to say that the real estate bust is the cause of all the problems that we may seen in the future.

[PD]

I agree with that. I don’t see real estate as a scapegoat. I do think a housing crash could be a trigger for bigger problems. The stage has been set by many factors. All we need is a flashpoint and real estate could be it.

[Bugs]

I think you meant “pre-bubble” prices. I also think it depends on how you qualify “pre-bubble”. I would quality “pre-bubble” as pricing that was perhaps above the long term trendline but still within the standard deviation of +25% or so. Under that definition, we’d only need a 30% or 35% correction in most areas to get there. That’s still a massive correction and it would still hurt a lot of people – some badly enough that they wouldn’t recover.

If you define “pre-bubble” as anything over the trendline then we are talking about corrections of up to 60% or more. If you’re talking about rolling prices back to 1994 then those prices were undervalued relative to the long term trend.

Of course, these numbers apply to SD County. I think a couple markets might be in for a little worse than what we get, but most markets won’t be hurt as badly because most markets are not as overextended. Some markets are not significantly overextended at all – they’ll only suffer to the extent the indirect damage reaches them.

[PD]

I read an article today where a realtor attributes the increase in listings to slow sales in the fall (meaning everything has been just fine this spring). He says the increase is due to people who took their house off the market last fall when it did not sell and have now put it back up for sale.

WHEW! Nothing to worry about folks! The glut of homes for sale only reflects a problem last fall!

I think there are a lot of good realtors out there who HAVE to convince themselves that everything is fine. How else could they sell overpriced home to nice families? It would be hard to look at yourself in the mirror if you KNEW that you were shepherding good people toward financial ruin.

[PD]

I read an article today where a realtor attributes the increase in listings to slow sales in the fall (meaning everything has been just fine this spring). He says the increase is due to people who took their house off the market last fall when it did not sell and have now put it back up for sale.

WHEW! Nothing to worry about folks! The glut of homes for sale only reflects a problem last fall!

I think there are a lot of good realtors out there who HAVE to convince themselves that everything is fine. How else could they sell overpriced home to nice families? It would be hard to look at yourself in the mirror if you KNEW that you were shepherding good people toward financial ruin.

[powayseller]

Yes – how useful is our economy, when it is booming because we are buying and selling homes to each other. Very sad. The housing market leads the economy. Very sad.

[powayseller]

I think prices will drop more in San Diego and other bubblicious cities. Perhaps down 2-3% in places like Omaha, NE which didn’t have a price runup. This large drop in many large cities could cause a big recession. Depression would be caused by fall of dollar, large trade imbalance, loss of petrodollar…

[Beach Rat]

A 50% drop will happen for one reason and one reason alone! Appraisers!!! Say an initial decrease of 10-20% in home values hits over the next few years driven by natural fluctuations, a large portion of the 80% of non traditional loans that have been issued experiencing trouble and lack of demand caused by a declining market. Not to mention higher interest rates and the fed telling lenders they should make lending practices more stringent. Once prices have dropped 20% the market will change. Few people will be looking to sell because they just lost 20% of their homes value and it is no longer in their best interest. Also the people who choose to treat real estate as a home and not investment do not add to the stability of the market because they do not factor into the pricing of homes say 6 months after purchase. After a drop of 20% the market will stagnate for a while and the only people who will be selling are distressed owners and banks. This will prompt low ball offers from the people on the sidelines further driving down prices. If these low ball offers persist of the course of a few years this could drive the price greatly over time. Now comes the appraiser. The only thing they have to base home values off of are the comparable sales which a majority of will be distressed sales/REO’s. Depending on how bad the stagnation is they may not have many comps to choose from. Not to mention most appraisers fear getting sued and loosing their license so they will implement the “C.Y.A.” rule and go conservative on their prices and use a negative time adjustment factor. After all the market is declining! I believe that a 10-20% correction is just the start. Then we will be having the argument that the comparables don’t reflect my homes value, which is true as long as you aren’t forced to sell.

PS: I love Appraisers! They are an interesting group of people most of which I know go into business for themselves because they have a “problem” with voicing their opinions!

[powayseller]

Our problems were temporarily alleviated by another asset bubble. When that dissipates, the true economy shall be revealed. Housing was a temporary fix.

What will be the next asset bubble, or the next bandaid? Or is it possible that we can actually improve this economy so it prospers on our productivity and exports?

As of today, our economy prospers because we have the reserve currency. The more we buy from other countries, the more dollar they get. If they don’t want their currencies to appreciate and hurt their exports, they must use those dollars to invest back in the US. Funny game: the more we import, the more liquidity we get. How long can this game go on?

[Anonymous]

Lol bugs. No question the govt orchestrated this whole thing. They are just trying to figure a way out that is painless, and there is none. They have to figure out what else to reinflate, to re-create the wealth that will be lost. If they do it in commodities, which seems to be the current plan, they kill the economy with inflation.

This offsets what they are trying to do in the first place. Interesting times!!!!

[Anonymous]

CoimbatoreCitizeN
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India

[Anonymous]

Coimbatore City has become a hot spot for investers of real estate. There is a huge demand for vacant lands, appartments, houses and office spaces in Coimbatore. Pricewater Coopers study on Coimbatore city reports Coimbatore is most suitable for setting up an IT Park and Coimbatore was selected as top growing cities.

[PD]

It seems a little fishy that this old thread has been resurrected within hours of Docteur taking PS to task. Anybody else think it a little strange?

[Author]

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