Anyone have any ideas how long it will be before we sort out the subprime mess?

[fisheerman]

Just wonder if anyone has thoughts on the outlook for the US housing market and how long we stay in this downturn?

5 years?

-fish

 

[Gooberlx2]

Depends on your area. Some places weren't even touched by the downturn, others will struggle for some time yet.

 

[sao123]

Originally posted by: fisheerman
Just wonder if anyone has thoughts on the outlook for the US housing market and how long we stay in this downturn?

5 years?

-fish

the artifically inflated prices (from people flipping houses) is what caused this problem in the first place... so you want to solve the problem just to create it again?

:confused

 

[dullard]

It is really location dependant. In fact, it is subset within the location dependant. Take Manhattan for example, it was the first area to show losses in the news for this downturn (4% slide in median prices in late 2005). Yet now, Manhattan just hit record highs. If you look deeper (ie read the article), the ultra high end is booming yet the low end is slagging. So, keep that in mind; your particular subset of your location may not follow national trends.

Next, consider what you consider to be a definition of a recovery. Many areas took 6 to 15 years to recover from previous housing downturns (read text to see the 15 year examples). But, that was just for prices to return to what they were 6 to 15 years before. If you include inflation adjustments, make that 15-25 years for full recovery.

Some areas may never recover. We may never see the type of subprime lending that we saw before. And many towns do eventually become ghost towns. Even cities of moderate size might not ever recover. For example, Youngstown, OH dropped 40% of its population and is now just bulldozing large areas of houses into park land.

So the answer is: 0 years, 10 years, 20 years, and No-Recovery-Ever depending on the details.

 

[dullard]

As for my estimates of a national recovery period, I'd wager 2-3 years until we hit the bottom. Then it'll be a gradual increase up from there.

By the time 1-2 years have passed, most of the dangerous subprime ARM loans will have reset (pretty graph). Thus, the people who have mortgages that they can't afford will hit the point where they realize that they cannot afford their homes. After that it'll take 6-12 months for the homes to go on the market (willingly or through foreclosure). Thus, the flood of homes for sale without many buyers (polls say they definately are not buying any time soon) will last 2-3 years. Although, you can see that other ARMs will keep resetting for a bit longer, and even people with fixed loans may have problems too.

I really don't know how long it'll take to recover what was "lost". We really have to fall much further than I expect we will fall until we reach a point where housing is truely affordable. But, instead of falling that far, I think we will instead have massive inflation catch salaries back up. So, prices will probably stabolize in 2-3 years and possibly slowly rise, but at a rate lower than inflation. That will happen until we reach parity, or until there is another senseless boom. To give that a rough estimate, I'd say 10 years for everything to return to levels where houses are affordable.