Originally Posted By EighthDwarf This just out, home prices fell by 19.1% year-over-year in the first quarter of 2009. Some fun quotes in the article: "there are no signs home prices nationally have hit bottom" and "All 20 cities showed monthly and annual price declines, with nine setting annual records. Fifteen cities posted double-digit drops and Phoenix, Las Vegas and San Francisco recorded declines of more than 30 percent." Anyone think our economy can recover without real estate recovering first? I don't. <a href="http://finance.yahoo.com/news/SampP-Home-prices-fall-by-apf-15344712.html?sec=topStories&pos=4&asset=&ccode=" target="_blank">http://finance.yahoo.com/news/...=&ccode=</a>
Originally Posted By RoadTrip Yes, but what is not shown there is the difference in price between "regular" sales and "lender mediated" sales. In the Twin Cities there is close to a $100K difference in average sales price. What these figures show is that the foreclosures are finally being sold in LARGE quantities, driving down the overall average sales prices. That is a GOOD thing because before housing can come back the market needs to get rid of the backlog of foreclosed properties. My home recently sold (after 35 days on the market) for 97% of what we purchased it for in October 2005. If you include the money we kicked back to the buyer for closing costs we STILL sold for 95% of what we paid. My experience is certainly not unique. Your data is not wrong; it just does not present an accurate picture. The only averages that really mean anything right now are those that separate the type of sale.
Originally Posted By RoadTrip Article to back up my post: <<Bargain hunters took advantage of good deals on distressed properties and lower mortgage rates in April, pushing Twin Cities home sales up sharply from a year ago. Pending sales -- those with signed purchase agreements -- rose to 5,211 last month, up 23.8 percent from a year ago, according to data released Tuesday by Twin Cities-area Realtor associations. But the increase was entirely because of foreclosures and other distressed sales that dragged the median sale price down 25 percent, to $153,000.>> <<The median sale price for lender-mediated homes in the Twin Cities was $120,000 in April, down 21.5 percent from a year ago. Excluding those sales, the median sale price was $205,000, down 8.5 percent. "The very, very advantageous prices ... are driving the median prices," said Havig. He expects that much of the distressed inventory will be moved by the end of the year.>> Complete article: <a href="http://www.startribune.com/business/44786677.html?elr=KArksLckD8EQDUoaEyqyP4OW3ckUiD3aPc:_Yyc:aUUs" target="_blank">http://www.startribune.com/bus...Yyc:aUUs</a>
Originally Posted By Sport Goofy << What these figures show is that the foreclosures are finally being sold in LARGE quantities, driving down the overall average sales prices. That is a GOOD thing because before housing can come back the market needs to get rid of the backlog of foreclosed properties. >> What the data show is that houses will sell at the right price. Foreclosures or not, there is not enough demand or wealth left among home shoppers to afford the prices of 2006. Even after the foreclosures are "cleared" from the marketplace, there is little likelihood that housing prices will make any meaningful rebound. Look at housing prices in Japan vs. their early 90s bubble bursting to see what our future holds. If you are waiting for the rebound, be prepared to wait decades.
Originally Posted By EighthDwarf Yes, but distressed sales destroy home values - and that's my point. The low prices simply mean there are far more sellers than buyers, which to some extent is a natural correction of the excesses of the 2002-2006. But the deteriorating values are going to put more stress on the banks, make consumers feel less at ease (although you wouldn't know it by today's numbers) and create more drag on the economy. The administration's approach of capitalizing the banks fails to address the fact that too many people are walking away from their homes (for good and bad reasons). If the distressed inventory gets cycled through the market by the end of this year (as your article states) then we might be okay. But I am less optimistic about that than the person quoted in the article. We need to see some real declines in distressed sales before we can turn the corner and I'm just not seeing it.
Originally Posted By RoadTrip We'll see. I think home prices will stabilize in 2010 and increase by 2% in 2011. Will we ever see $400K starter homes again? Of course not (except in the very few markets that will continue to support that type of pricing). If you get rid of the smoke and mirrors mortgages very few can afford that. But prices will slowly climb again. In MOST areas of the country the decline hasn't been all that devastating on a long-term basis. Median and average sales prices have dropped to where they were in 2003; and that is still relatively high compared to where they were in the 90's. Source: <a href="http://investmenttools.com/median_and_average_sales_prices_of_houses_sold_in_the_us.htm" target="_blank">http://investmenttools.com/med...e_us.htm</a>
Originally Posted By Sport Goofy << Median and average sales prices have dropped to where they were in 2003; and that is still relatively high compared to where they were in the 90's. >> As median and average incomes continue to decline with the sour economy, the prices will have to fall further to remain affordable.
Originally Posted By RoadTrip Average incomes will increase in 2010, so your argument is a non-starter.
Originally Posted By Kar2oonMan I wonder if there is a middle ground between unbridled optimism and unbridled pessimism? If so, I'd like to start a housing tract there. ; )
Originally Posted By Sport Goofy ^^ Invest in nursing homes. We have an exploding demographic market for those in the near future.
Originally Posted By fkurucz <<Only if you are employed by the federal government.>> Absolutely. Globalization will continue to to grind down wages and benefits in the private sector. There is no light at the end of the tunnel.
Originally Posted By fkurucz <<This just out, home prices fell by 19.1% year-over-year in the first quarter of 2009.>> According to zillow.com, our old house in Escondido, CA (which we sold in 1995) has lost about 50% of its peak price. Its still supposed to be worth almost 100% more than its 1995 price, so it could (and probably will) decline even more.
Originally Posted By Hans Reinhardt San Francisco Bay Area home prices fell 41% in April. <a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=atBfoEWN00Ww&refer=home" target="_blank">http://www.bloomberg.com/apps/...fer=home</a>
Originally Posted By EighthDwarf My opinion here. I think there will be continued downward pressure on real estate prices because there are SIGNIFICANT incentives to homeowners to walk away from their homes. Until those incentives go away, you will see more and more distressed sales. For example, the more home prices go down, the more upside down people are in their houses. Meaning there is a longer time required to recupe those losses. If banks will let you get out of your house and forgive the amount you owe (tax-free I might add), wouldn't you be a fool not to walk away if you owed six figures or more? Most people walking away from a $500k mortgage today (when their house is only worth $350k) can save a tremdous amount of money by walking away, taking the credit hit, and buying a home 2-3 years from now. They will likely be able to buy their same home for $300k in the future. So when the prices eventually go back up to $500k, the "irresponsible" person will have $200k in equity while the "responsible" one will have $0 in equity. That's our government's attempt at fixing the real-estate market: creating incentives for irresponsible behavior. Great job guys.
Originally Posted By RoadTrip I believe you are misinformed. The Obama plan DOES NOT INCLUDE mortgage forgiveness. <<The president's initiative calls for allowing 4 million to 5 million ineligible homeowners with mortgages through Fannie Mae or Freddie Mac to refinance their home loans at lower rates. To accomplish this, Obama said he would remove restrictions that prevent Fannie and Freddie from refinancing mortgages valued at more than 80 percent of a home's worth. Housing Secretary Shaun Donovan stressed that homeowners don't need to be delinquent in payments to get help. The plan also offers financial incentives for lenders to reduce the mortgage payments of as many as 4 million homeowners who are at risk of losing their homes. Under the $75 billion Homeowner Stability Initiative, lenders would cut mortgage payments to no more than 31 percent of the borrower's income.>> Source: <a href="http://www.npr.org/templates/story/story.php?storyId=100831129" target="_blank">http://www.npr.org/templates/s...00831129</a>
Originally Posted By fkurucz <<For example, the more home prices go down, the more upside down people are in their houses. Meaning there is a longer time required to recupe those losses. If banks will let you get out of your house and forgive the amount you owe (tax-free I might add), wouldn't you be a fool not to walk away if you owed six figures or more?>> Just be sure that your state has non-recourse laws. And all refi's are recourse, so if you were to walk away from a refi the lender could (in theory) come after you.
Originally Posted By fkurucz <<You guys sure don't know where the heck to buy houses.>> Its all about timing.
