The Great Turn Around of 2010

[LostCat]

I’ve been following this site now for about three years. I can recall back in 04 when a neighbor sold is home for $440k (3-bed.2-bath) right above Costco off of Morena, I though the market was going to fold. It continued upward for about a year and a half after that. It was like a second wave of buyers rushing to get in. Now I sit here at the end of 07 watching the whole market collapse, finally. Some properties are reasonable now and some are still far far too high.

Regardless, like everything in life, we’re in a cycle, right? I can recall the stock market crash of 99. Everyone was rushing to get out. all the fake companies went bankrupt and all the solid companies stood strong. If you invested into the solid companies while everyone was freaking out and jumping out of the market, you’re probably doing pretty well.

After looking at months and months of everyone’s graphs and comments, and month and months of news paper articles, don’t you think it would be safe to say that if you can actually afford to purchase a house in SD, between 2008 and 2009, it’s probably a good time to do it.

Jump in while everyone is jumping out and then jump out when everyone is trying to get back in, in 2010-2011.

With inflation rising, i just can’t see today’s prices looking out of touch or even expensive in 5 years from now.

I am sure this will stir a lot of debate. I am looking forward to comments. Righ or wrong, it’s the forever on going debate that this site continually sidesteps.

[JWM in SD]

“With inflation rising, i just can’t see today’s prices looking out of touch or even expensive in 5 years from now.

I am sure this will stir a lot of debate. I am looking forward to comments. Righ or wrong, it’s the forever on going debate that this site continually sidesteps.”

No, actually this has been discussed many times already and you are just rehashing a tire old subject.

No V recovery and sure as hell not starting in 2008. Have you seen the reset graph???

Inflation? Maybe in commodity prices but not in credit driven asset prices like oh I don’t know….housing!!!

[LA_Renter]

I agree with JWM, no V shape recovery and definitely not 2008. The argument is somewhat subjective. I’m sure people will grow tired of renting and take steps into home ownership, the 4th quarter of 2008 looks promising because the market will begin to reflect the full effects of the credit crunch. I guess the real question is when is it safe? My own personal objectives are just to not over pay and get hit with 150 to 200k hit on my equity and find myself in a situation where I have to sell. Here is my thinking right now…How bad of an economic downturn are we talking here??…..Thats first and foremost…in other words I will not buy if we are in a recession and I don’t feel secure in my job regardless of great deals on RE….That will be a biggie in 2008 and 2009 not just for me but anybody that is dependent on income for a living. If we get to a point where it appears the worst has passed and I have maintained a two income household then I’ll jump in even if there is more down side on prices. I am not trying to time the market perfectly. I anticipate sometime in 2009 right now. Thats my 2 cents.

[Bugs]

It depends on when you think the market will turn. Most people on this site don’t think that can happen before 2010 at the earliest. The second wave of ARM resets doesn’t come back to down to the early-2007 level until the end of 2010 or so.

That second wave isn’t quite as big as the first wave but it includes a higher percentage of the most toxic neg-am loans. Coming after the market has already been hammered by the first wave, I’m of the opinion that the fallout of the second wave could be worse than that of the first wave. Worse, as in causing further declines. I think that there will be buyers who will look at the levelling off of foreclosure activity in 2009 as the sign they’ve been waiting for, thereby causing a rally. Maybe even some increases in pricing. Or maybe not.

What happens in 2009 depends on how much attention is given to the ARM/Foreclosure/Supply/Sales Volume ralationships by the media. If people largely come to understand that it will be a 2-round bout and that these elements basically can’t stabilize until after Round 2 is over there might not be much of a rally inbetween rounds.

No matter what, we will have to burn off the oversupply of listings before the pricing can stabilize. It makes no difference whether that relationship settles as a result of sellers backing out of the market or by must-sell sellers being succesful in unloading their baggage.

[LostCat]

I know this has been rehashed over and over again. I am just trying to get some kind of idea of what kind of market it makes sense to get back into.

everyone is waiting for this magic day when everyone should get back in. All I am saying is, there isn’t a magic day and you can’t wait for the market. If you wait to hear that it is turned up, then it is too late already, don’t you agree?

You have to buy at the bottom or right before it hits the bottom, if you want the most for your money.

Rents are on the rise. Has anyone done any analysis as to when they believe rents will equal or come close to housing costs?

[JWM in SD]

“Rents are on the rise. Has anyone done any analysis as to when they believe rents will equal or come close to housing costs?”

Umm, what exactly do you base this on? Hopefully it is not some BS from the NAR.

“everyone is waiting for this magic day when everyone should get back in. All I am saying is, there isn’t a magic day and you can’t wait for the market. If you wait to hear that it is turned up, then it is too late already, don’t you agree?”

I agree that there is not a magic day. However, you are not talking about buying a BioTech stock here that could gap up $5 in one day. RE just doesn’t move that fast so there is more ability to time this than in stocks. The trick is in keeping a pulse on what is happening and these blogs help tremendously with that.

[cr]

Lost Cat, I think you have the right concept but your timing is skewed IMO. Here’s why, and I don’t mean to be contentious:

You’re comparing the turn around time of a stock bubble with an asset (housing) bubble. Stocks can be sold, go up, go down, or be purchased in a single day, sometimes multiple times. Physical assets like a house take months to do the same if not longer.

With inflation rising, i just can’t see today’s prices looking out of touch or even expensive in 5 years from now.

No doubt inflation is rising, but inflation is a measure of costs, not ability to pay for those costs. For that you have to look at incomes. Incomes have been stagnant if not down for the past 3 years where economic growth has been at all time highs. The translation there is wealth is not filtering down into the middle class. There’s an MSN article today on CEO’s making 364 times what you do.

Go to Zillow, accurate or not, and pick a house in your zip code. Go to graphs and look at the pre-2004 and post-2004 trends. Then follow the line from pre-2004 until it reaches the level of pricing today. My guess is it will take you well off the graph to about 2020. The point is prices cannot stay this high while incomes catch up.

And think about it, a house is like anything you buy. It wears out, get olds, breaks down, requires maintenance, repairs, fresh paint, the whole 9. But we know over the long term prices go up, while things like cars, that do the same thing typically go down. So why do houses go up? It’s because incomes do and nothing else. Dramatic increases and decreases are the result of other circumstances like the credit nightmare of the past 3 years, but over time housing has no choice but to track with what people can afford. The question is can prices hold out for the 10 years or more while incomes catch up. Factor in today’s credit market, declining wages and increasing layoffs, and the obvious answer is no way. Prices have a long way to come, and it will slow and painful.

[sdrealtor]

JWM
Actually real estate in my area gap’d up over $100,000 in January 2004 in N County. Almost no one saw the increase of that magnitude coming. Not that it would happen aaain but it already has….for sure.

sdr

[JWM in SD]

There is no protection against fraud unfortunately.

[lendingbubblecontinues]

We can just as easily see the gap down and should see clearly by next spring that this has occurred.

I think it’s already becoming pretty apparent in some fringe markets that prices fell off the kitchen counter and went straight to the floor, missing the barstools entirely.

[Ex-SD]

I think that just about everyone on this forum agrees that there will be a lot of houses on the market due to foreclosures, sellers who have to sell, etc. What we have to keep in perspective is the huge decrease in available, qualified buyers in relationship to the amount of inventory. Unless a whole new round of creative loan products for deadbeats hit the market, it’s going to take quite a while to get the inventory in line. I believe that you shouldn’t buy a home until late 2010 (at the earliest) and that the bottom won’t actually be seen until late 2011 or 2012 (if you want to pay the lowest price. Keep in mind that if you miss the bottom by just $50k, your taxes on that extra $50k will stay with you as long as you own that house. An extra $500 per year (if you stay in the house for 10 years) is $5000 more than you would have had to pay if you just wait until you know that the bottom has settled. The chances that prices will start ramping up again quickly after the bottom has revealed itself are slim to none………..so you’ll have plenty of time to look around and find exactly what you want/where you want…….. if you have a 20% down payment plus closing costs and a good credit score. Bottom line: There’s no reason to rush to be a homeowner anywhere in CA before you are convinced that the bottom has revealed itself.

[(former)FormerSanDiegan]

You have to buy at the bottom or right before it hits the bottom, if you want the most for your money.

This hasn;t been the case in the past. You could have bought in 1999 and would have missed a fraction of the gains from the 1996 bottom.

[LostCat]

I would agree that housing isn’t like stock, but over the past 5 years it has been, so why not treat it like stock? AKA the real reason why there is a piggington blog.

from what I understand, you can adjust your property tax if your value goes down.

I still think in 2010, you’ll be safe to buy. This down turn isn’t going to last forever. There are too many people like us just waiting and watching. Waiting takes a long time. If all of you can just wait for 2 or 4 or 7 years, that’s good business, i guess.

Bottom line is, no one knows exactly. All we know is right now isn’t the time. I just don’t see how this sag can last longer than 2 more years. It already had 2 years in the bank.

how does this figure.. My parents bought a house in 1974 for $27,000. It is now estimated around $640,000. It took 30-years for it to appriciate to this amount. If housing continues this trend or something like it, a $375,000 home purchase in 2005 will be work around 12-million in 30 years. This seems crazy, is it possible?

[SHILOH]

Wages remain flat and for the median wage are not keeping pace with the “median” bubble price. So– it doesn’t really matter how high the price goes – if there are no buyers who can repay the loans. There is no more free-money financing. The government cannot infuse trillions of dollars into this or handout $200K to everyone for a home. It is a VERY different world than 30 years ago.

[LostCat]

SHILOH,

so what you are saying is the future is going to be nothing like the past? What is going on in Japan right now? How much have home prices increased since their financial rise and collapse? Also, I know in europe, they have 100 year loans. The loan is actually passed on to family. If banks can make a buck off of us, they are going to bend over backwards.

[Author]

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