Will we see a selling panic in housing?

[bsrsharma]

“20% – 40%” doesn’t describe the story. I think from now on, the behaviour will be “bimodal”. Below $500K range, a somewhat disorderly drop, lower $/sqft being covered up by fairly unchanging transaction prices as people get better and more homes for their precious and fewer $. Above $500K is where the fun will be to watch. As the market practically empties out to everyone but cash buyers, there will be quite a scramble for anyone unfortunate enough to sell. This also implies no takers for the least desireable properties which will end up getting abandoned/boarded up/converted to vice dens a la Detroit.

[bsrsharma]

“20% – 40%” doesn’t describe the story. I think from now on, the behaviour will be “bimodal”. Below $500K range, a somewhat disorderly drop, lower $/sqft being covered up by fairly unchanging transaction prices as people get better and more homes for their precious and fewer $. Above $500K is where the fun will be to watch. As the market practically empties out to everyone but cash buyers, there will be quite a scramble for anyone unfortunate enough to sell. This also implies no takers for the least desireable properties which will end up getting abandoned/boarded up/converted to vice dens a la Detroit.

[NotCranky]

What you are saying makes sense to me HWG. I don’t see the constructive proactive tendancies in the system. I say this because of the denial of the housing bubble and especially the denial that the housing bubble and resultant implosion would/will torpedo the economy with a direct hit.

I hate to say it but maybe they should put a moratorium on resets and tighten lending standards for new loans and maybe a few other things that are probably beyond my sphere of understanding? I’ll be leaving the blog now that I suggested that.
Just food for thought.

[NotCranky]

What you are saying makes sense to me HWG. I don’t see the constructive proactive tendancies in the system. I say this because of the denial of the housing bubble and especially the denial that the housing bubble and resultant implosion would/will torpedo the economy with a direct hit.

I hate to say it but maybe they should put a moratorium on resets and tighten lending standards for new loans and maybe a few other things that are probably beyond my sphere of understanding? I’ll be leaving the blog now that I suggested that.
Just food for thought.

[(former)FormerSanDiegan]

Some perspective:

A 20% decline in an area like Clairemont from today’s prices for example would likely result in near-equilibrium of monthly carrying costs for purchase versus renting.

3/2 ‘s in this area are about 500-520K. 20% decline would be 400-416K. Rents are in the 1900-2100 range for 3 BR/ 2 BA. Let’s pretend that I am a first-time buyer and me and my spouse make a combined 100K. Once the price drops below about 425K or 450K we would likely choose to buy over renting since after tax considerations the monthly carrying costs of purchase would be within a couple hundred bucks of renting. Assume a 30-year fixed rate loan.

Depending on changes in rates and rents, this is how I see the bottom.

[(former)FormerSanDiegan]

Some perspective:

A 20% decline in an area like Clairemont from today’s prices for example would likely result in near-equilibrium of monthly carrying costs for purchase versus renting.

3/2 ‘s in this area are about 500-520K. 20% decline would be 400-416K. Rents are in the 1900-2100 range for 3 BR/ 2 BA. Let’s pretend that I am a first-time buyer and me and my spouse make a combined 100K. Once the price drops below about 425K or 450K we would likely choose to buy over renting since after tax considerations the monthly carrying costs of purchase would be within a couple hundred bucks of renting. Assume a 30-year fixed rate loan.

Depending on changes in rates and rents, this is how I see the bottom.

[kev374]

for prices to come down sharply there has to be a psychology shift. And what you mention may be the factor that causes it to happen. It’s possible that when sales drop off a cliff sellers with equity will start panicking and realize that they better start undercutting to realize whatever gains they can. It’s the “better get something than lose it all” train of thought.

[kev374]

for prices to come down sharply there has to be a psychology shift. And what you mention may be the factor that causes it to happen. It’s possible that when sales drop off a cliff sellers with equity will start panicking and realize that they better start undercutting to realize whatever gains they can. It’s the “better get something than lose it all” train of thought.

[cr]

To better answer the topic question, you’d have to define panic. Is it a run on the banks? Is it that everyone wants to sell and no one wants to buy? Does everyone buy/sell their stocks, and put the $ in a mattress?

One thing I’ve noticed from past cycles, and the past few years, is it always gets worse than generally expected. People’s expectations are typically based on what just happened, not what happened the last cycle and not what the data suggests, which is where us Piggingtonians differ. There’s another thread on here with the article that outlines the sentiment during the ’89-’96 downturn, and you could all but replace the years and averages with current ones.

I think the recent past sets an expectation of leveling prices, but we know they will drop more than most expect. As they do I think people will panic. But panic and do what? My first thought is they won’t buy. As demand wanes, prices/values will drop more. Throw into the mix the effect of rising foreclosures, tightened standards, and the reamining new construction that is still finishing, prices have nowhere to go but down.

20% decline? Maybe in a year from now, and maybe again a year from then, but it will vary from area to area, and buyer to buyer.

I believe most people won’t want anything to do with housing as an investment a year from now and several years thereafter. People will start saying “wait to buy, prices are falling.” I think many of the flippers, investors, or shoddy agents/brokers affected by this will panic, and move onto new careers/investments. For the homeowner it depends if they can afford their home. For the renter, I think they start to feel more comfortable not owning, and delay a decision to buy even longer.

[cr]

To better answer the topic question, you’d have to define panic. Is it a run on the banks? Is it that everyone wants to sell and no one wants to buy? Does everyone buy/sell their stocks, and put the $ in a mattress?

One thing I’ve noticed from past cycles, and the past few years, is it always gets worse than generally expected. People’s expectations are typically based on what just happened, not what happened the last cycle and not what the data suggests, which is where us Piggingtonians differ. There’s another thread on here with the article that outlines the sentiment during the ’89-’96 downturn, and you could all but replace the years and averages with current ones.

I think the recent past sets an expectation of leveling prices, but we know they will drop more than most expect. As they do I think people will panic. But panic and do what? My first thought is they won’t buy. As demand wanes, prices/values will drop more. Throw into the mix the effect of rising foreclosures, tightened standards, and the reamining new construction that is still finishing, prices have nowhere to go but down.

20% decline? Maybe in a year from now, and maybe again a year from then, but it will vary from area to area, and buyer to buyer.

I believe most people won’t want anything to do with housing as an investment a year from now and several years thereafter. People will start saying “wait to buy, prices are falling.” I think many of the flippers, investors, or shoddy agents/brokers affected by this will panic, and move onto new careers/investments. For the homeowner it depends if they can afford their home. For the renter, I think they start to feel more comfortable not owning, and delay a decision to buy even longer.

[SD Realtor]

Tone, the sarcasm was an easy way to illustrate my point without typing several paragraphs. That point is that different areas, and different housing types will depreciate at different rates. Do you yourself really believe Solana Beach, Del Mar, Scripps, and neighborhoods where most of the people who post here will drop 20% in a matter of months?

Honestly, do you believe that?

Now can places like El Cajon, Eastlake, downtown condos, UTC condos drop 20% in a matter of months? Perhaps, or at least there is a higher probability.

I think that a rational statement would be,

“Locales that cater to buyers that traditionally relied upon riskier finance vehicles that are now not available will suffer substantially faster then previously thought. Furthermore locales that have substantial inventory that is distressed will indeed suffer more and will be prone to a “chunk downward”. Locales that have both of these factors have a very high probability of seeing tremendous depreciation in a short time. ”

To me, that is a more rational, way of stating the premise.

Indeed I think over time the decline will creep all over. However to me it is much harder to quantify how much and when.

Realtor

[SD Realtor]

Tone, the sarcasm was an easy way to illustrate my point without typing several paragraphs. That point is that different areas, and different housing types will depreciate at different rates. Do you yourself really believe Solana Beach, Del Mar, Scripps, and neighborhoods where most of the people who post here will drop 20% in a matter of months?

Honestly, do you believe that?

Now can places like El Cajon, Eastlake, downtown condos, UTC condos drop 20% in a matter of months? Perhaps, or at least there is a higher probability.

I think that a rational statement would be,

“Locales that cater to buyers that traditionally relied upon riskier finance vehicles that are now not available will suffer substantially faster then previously thought. Furthermore locales that have substantial inventory that is distressed will indeed suffer more and will be prone to a “chunk downward”. Locales that have both of these factors have a very high probability of seeing tremendous depreciation in a short time. ”

To me, that is a more rational, way of stating the premise.

Indeed I think over time the decline will creep all over. However to me it is much harder to quantify how much and when.

Realtor

[beachhunter]

I love the realtor bashing on this site.. I was so sick of the lazy bastards I thought I should get my license… that was many years ago. We get bashed for being stupied and having a blank look on our face when told of problems in lending.. we my friends not all are dumb.. would you consider a 30 hour work week, traveling around the world twice.. working any where any time you want.. Mba in economics and understanding the ins and outs of one of the biggest money making industries.. not to mention in tough times like survive in 95.. one of my best years until the 2001-present run.. I’ve been pushing the same stuff for years 30 year fixed, buying with in your means and having a plan to get to zero debt.. I’m only 40 so i’m sure there is more to learn but beating up on someone who makes more $$, enjoys what they do and in honest and dependable is not the best of things..plus the most important part.. it’s not what you go it’s who you got.. 2 cents
25% OFF 2004 PRICES THEN I WILL TELL MY CLIENTS TO BUY

[beachhunter]

I love the realtor bashing on this site.. I was so sick of the lazy bastards I thought I should get my license… that was many years ago. We get bashed for being stupied and having a blank look on our face when told of problems in lending.. we my friends not all are dumb.. would you consider a 30 hour work week, traveling around the world twice.. working any where any time you want.. Mba in economics and understanding the ins and outs of one of the biggest money making industries.. not to mention in tough times like survive in 95.. one of my best years until the 2001-present run.. I’ve been pushing the same stuff for years 30 year fixed, buying with in your means and having a plan to get to zero debt.. I’m only 40 so i’m sure there is more to learn but beating up on someone who makes more $$, enjoys what they do and in honest and dependable is not the best of things..plus the most important part.. it’s not what you go it’s who you got.. 2 cents
25% OFF 2004 PRICES THEN I WILL TELL MY CLIENTS TO BUY

[(former)FormerSanDiegan]

We get bashed for being stupied

Classic !

But seriously, there are some good agents out there and I have one that I trust for my RE needs. But I would add that I just wouldn’t want him proof-reading my child’s homework, if you know what I’m saying.

[Author]

Posts