HOW LOW WILL IT GO % and TIME FRAME

[latesummer2008]

The magic question is Where’s the Bottom ? I am in Santa Monica and the latest numbers look pretty dismal in higher end markets (LA County) for the month of January as reported by the LA TIMES Sunday Feb 25.

I am interested in when to buy and how much of a drop from the peak for the Westside of LA in particular, but feel other high end markets in So. Cal are in the same boat. SD seems to be leading all down the river. Please post your opinions on local markets here based on SQ FT numbers and NOT MEDIAN prices.

my prediction Sta. Monica -45% from peak (Aug 05)
TIME to Buy (Sept 08)

[kev374]

I’m predicting a 45-50% drop too but I can’t say how exactly it will play out, whether it will happen in 3yrs or 10yrs, that is the tricky part. My personal feeling is that the exotic/subprime reset in 2007 and 2008 will depress prices in one huge go and revert them back to 2002 levels. 2008 4Q we should see at least a 30% drop since I don’t see any sufficient demand with the absence of speculation or exotic lending.

Interest rates are going up, the fed is already concerned that CPI is trending in the wrong direction (i.e. up!!), I suspect that late 2007 they may have to jack up rates again, this is additional fuel to the fire for all the resetting ARMs.

I feel we cannot use history as a guage because we have had a rise in values that has never occured on this scale in history. I predict the downfall is also going to be one of a kind.

We may also enter a deflationary spiral aka Japan, why not?

[Raybyrnes]

Many would argue with an upcoming election interest rates will remain low. Low rates during these periods of interest rateresets will extend the time frames for owners and increase their liquidity. Additionally while many lenders are tightening standards others are now loosening them by extending 40 years terms.

[kewp]

Yes, we are definitely in uncharted waters. Who knows what the future will hold.

My only ‘prediction’ that I’m reasonably comfortable with is that 2007 will be the year the bubble ‘pops’ and public perceptions shifts. How many years it takes for all this to unwind is anybodies guess.

If history is any gauge, then there will likely be big losses in a short time frame (typical crash), followed by a slowing downward trend as the more rational folks return to the market. There are alot of renters on the sidelines with money in the bank, remember!

[latesummer2008]

Yes, I too believe we will have a swift collapse once the public realizes we are in a freefall ( 2 years later ). And, since we have NEVER had a bubble in Real Estate like this, the down side is generally worse, not to mention the exotic loan debacle that is just now starting to sink in. Sub Prime wil be the first link to fail along with the ultra high end market trying to cash out before the shit hits the fan. Kind of like eating at the food chain from both ends before the whole thing collapses. As I see it, pure panic by the end of next summer as it really begins to sink in this summer. Banks should be unloading a ton by the end of next year with all their REOs. Than another 2-3 years before a new round of first time buyers are suckered in and gradual appreciation by 2010.
This summer will be interesting when the inventory goes nuts and the buyers are in total control. I might consider nibbling around the bank REOs during the end of next summer if something looks to good to pass up.

[JWM in SD]

Just won’t give up there will you raybyrnes? Good, you keep on spouting that nonsense right into the downturn you moron and I will be laughing at you all the way…

[4plexowner]

Raybyrnes – I was surprised the first time I saw how little mortgage payments change as we extend the period from 30 yrs to 40 yrs

Here are the numbers for a $400K loan at 6% fixed:

30 yrs – $2398/mo

40 yrs – $2200/mo

50 yrs – $2105/mo

Since the Japanese were offering 100 yr mortgages before their market dropped by over 65% let’s consider that payment

99 yrs – $2005/mo

[DaisyDuke]

Thanks 4plexOwner for your information. I had wondered how the 40 year mortgages were going to slow this dripping iceberg from complete meltdown. I can see that the payment difference isn’t really that substantial. Tell me, Japan really had 100 year mortgages? Crazy! Certainly didn’t ameliorate, shorten or stop their crash. Facts are good! Knowledge is power!

Thanks so much! DaisyD

[PerryChase]

Let’s not forget.

1) Interest only mortgages = Repayment period = Infinity.

2) Teaser rate mortgages + Option ARM = Repayment period = infinity = you owe more than you borrowed

How can the repayment period of Interest Only Option ARMs be extended?

[hipmatt]

My guess is 40-50% off of summer 2005 prices in 2010 + or – one year.

[4plexowner]

100 year mortgages in Japan:

http://news.bbc.co.uk/1/hi/business/2027576.stm

NewYorkTimes also has an article online but they require registration

[Happy renter]

My prediction is 50% drop from 2005 price in san Diego. Some areas are still appreciating , like LA. According to the last housing market cycle: It peaked in 1989 and the bottom was in 1996. So, it took 7 years to hit the bottom. This time the hosue maket peaked in 2005, so the bottom may in 2012. However, we may see around 25-30% price drop by next year, 2008. Then, it will drop slowly to hit the bottom by 2012.

[bob007]

There is little difference between starter of this thread and the speculators of CA real estate market. I would not expect huge drops in real estate especially in good family neighborhoods. There is little incentive for the lenders, real estate industry and others to commoditize the business. The only thing to produce huge drops would be massive job lossses. I would expect significant number of folks reading this message board to be out of work. The most important thing is that do not expect big increases in real estate property values for the next 20-30 years.

[bob007]

There is little difference between starter of this thread and the speculators of CA real estate market. I would not expect huge drops in real estate especially in good family neighborhoods. There is little incentive for the lenders, real estate industry and others to commoditize the business. The only thing to produce huge drops would be massive job lossses. I would expect significant number of folks reading this message board to be out of work. The most important thing is that do not expect big increases in real estate property values for the next 20-30 years.

[sdcellar]

Yes, the 100 year mortgages are especially humorous because the only real next step is an interest-only loan and that will put an additional five bucks a month into your pocket. Yippee!

And oh wait, a bunch of people have those already, so a 40-year would be a step backwards (at least to the available cash challenged). Yessiree, 40-year mortgages will stop this thing!

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