Housing Meltdown: Analysts Expect House Prices To Drop 30%

[fleshconsumed]

Originally posted by: ebaycj

Originally posted by: Phokus

Originally posted by: Vic
My condolences if you live in CA or FL. Otherwise, this probably doesn't apply to you.

NY, CT, MA, WA (off the top of my head) and quite a few other states would probably qualify.

Here's hoping that IL (Chicago + Chicago burbs) keeps growing slowly in value (or at least holding value) as it has been for the past 5+ years...

I hope you're not implying that house prices in Chicago suburbs have been growing slowly because they haven't. They skyrocketed like the rest of the country.

 

[nullzero]

Originally posted by: WhipperSnapper

Originally posted by: nullzero

Real Estate Bubble Meltdown

This is a given... however what many people do not realize is that the majority of americans have all their savings and perceived wealth in their homes. This massive contraction in home prices directly effects consumer confidence and spending patterns... Soon people will realize that this is the massive reshifting and death of the middle class.

Why are high, increasing housing prices necessarily good for the middle class? It's good for people who already own homes but bad for people who want to buy them. When you have to pay a huge amount of money for a house, you're also going to end up making interest payments (giving money to the rich people who own the banks). Might it be better for the middle class to have lower housing prices, making it easier and less expensive to buy a house while leaving money left over for other types of investment (instead of paying interest)?

I think the middle class would be better off if housing prices were lower and they ended up giving less money in interest to banks.

The majority of the middle class owned their homes before the run up... This group of people are mainly age 30s-50s and the perceived wealth and strong consumer confidence from the appreciation of homes was what has stimulated this economy since the tech bubble burst and the 9/11 attacks.

 

[senseamp]

It sucks for some people, but at the same time, artificially inflated housing prices should not be confused with economic gains.
I am a middle class renter. I will be buying in 2 years, for me, a collapse in housing will be a great economic gain in terms of purchasing power of my salary.

 

[Vic]

Originally posted by: senseamp
It sucks for some people, but at the same time, artificially inflated housing prices should not be confused with economic gains.
I am a middle class renter. I will be buying in 2 years, for me, a collapse in housing will be a great economic gain in terms of purchasing power of my salary.

Only if you plan on paying in cash.

 

[Slew Foot]

Originally posted by: Vic

Originally posted by: senseamp
It sucks for some people, but at the same time, artificially inflated housing prices should not be confused with economic gains.
I am a middle class renter. I will be buying in 2 years, for me, a collapse in housing will be a great economic gain in terms of purchasing power of my salary.

Only if you plan on paying in cash.

Im assuming the implication is that loans are going to be difficult to get except for only the most uber prime of customers?

High housing costs are one of the worst tihngs for a society to have. It diverts energy from raising families to working to keep shelter, which leads to stupid rowdy kids, which then leads to a lack of intelligent workers for the next generation.

 

[wyvrn]

Originally posted by: Rainsford

Originally posted by: Jhhnn
Not yet, ScottMac. If the Japanese real estate bust is any kind of a model, it'll take many years for prices to begin to recover...

Banks and politicians want an easy letdown, otherwise it'll ruin them, and they'll likely get their way, even if they have to destroy the value of the dollar and let inflation run rampant to achieve it...

The difference is that the United States has too much real estate variety to be exposed to a unified market like Japan (pretty much) has. Certain areas in the US were just ridiculous (Arizona and Texas especially) for no particular reason, similar to what happened in Japan. But in many areas of the US where housing prices shot up, there was a reason...lots of growth and not a lot of land left to build on. Those places are certainly not immune to the market, but since their value is built on solid ground, instead of on the allure of cheap mortgages, they will not drop so low and will recover quicker. People still need places to live, good real estate is still a good investment.

Texas? Do you have a clue what you are talking about? TX is the most stable RE market in the nation.

 

[Rainsford]

Originally posted by: ebaycj

Originally posted by: Rainsford
I hate to say it, but this is a good time to NOT be a financial dumbass. I bought a place about 6 months ago, but I have a fixed mortgage and don't plan on selling for years or borrowing against my equity. I hope the market absolutely tanks, that would be a good time to refinance at a low, fixed rate.

Good luck with that.

Let's say your place is $250k, with $50k down (so $200k financed). If the market tanks and the value of your place goes to $200k, and you want to refinance, you will have to either (a) pay off the bank's appraiser to appraise it at $250k, or (b) come up with an extra $40k in cash for your new down payment, or (c) re-fi $200k at 100% borrowed / 0% down.

If you are a homeowner in any way/shape/form, you should NEVER hope the market tanks, it just means lost money for you.

Sorry, I meant the mortgage market...I think real estate prices in my area will stay relatively stable, things just won't sell nearly as fast.

 

[Rainsford]

Originally posted by: wyvrn

Originally posted by: Rainsford

Originally posted by: Jhhnn
Not yet, ScottMac. If the Japanese real estate bust is any kind of a model, it'll take many years for prices to begin to recover...

Banks and politicians want an easy letdown, otherwise it'll ruin them, and they'll likely get their way, even if they have to destroy the value of the dollar and let inflation run rampant to achieve it...

The difference is that the United States has too much real estate variety to be exposed to a unified market like Japan (pretty much) has. Certain areas in the US were just ridiculous (Arizona and Texas especially) for no particular reason, similar to what happened in Japan. But in many areas of the US where housing prices shot up, there was a reason...lots of growth and not a lot of land left to build on. Those places are certainly not immune to the market, but since their value is built on solid ground, instead of on the allure of cheap mortgages, they will not drop so low and will recover quicker. People still need places to live, good real estate is still a good investment.

Texas? Do you have a clue what you are talking about? TX is the most stable RE market in the nation.

I was actually just repeating things I'd heard, but after doing some research, it appears I was wrong. Not about my general point, but in terms of the examples I gave. But I think the argument is still there, certain areas of the US will be much harder hit because their growth was based on artificial conditions rather than actual growth in value. That was pretty much the situation Japan had to deal with, but in the US I think there are a lot of places that have legitimate reasons for increased prices...I expect those places won't tank quite so readily.

 

[Nemesis 1]

Man . I just don't see were I lost money in any of this as far as property values go. Were mywife and myself is going to feel the pain is in the Retirement founds we have. As Banks recoupe their lost money from bad investments threw Stock market munipulation. Stealing the money from retirement funds. In the gize of lower stock market.


A lot of these bankers should be heading for prison . But none will. America she once stood proud and strong indifferant to the world around it. But is now the hiding place of foul beast . Who use her power to force their will upon the world . May her punishment be quik and painless. God willing.

 

[BeauJangles]

Originally posted by: Nemesis 1
Man . I just don't see were I lost money in any of this as far as property values go. Were mywife and myself is going to feel the pain is in the Retirement founds we have. As Banks recoupe their lost money from bad investments threw Stock market munipulation. Stealing the money from retirement funds. In the gize of lower stock market.


A lot of these bankers should be heading for prison . But none will. America she once stood proud and strong indifferant to the world around it. But is now the hiding place of foul beast . Who use her power to force their will upon the world . May her punishment be quik and painless. God willing.

wat?

 

[blackangst1]

Originally posted by: BlinderBomber

Originally posted by: Nemesis 1
Man . I just don't see were I lost money in any of this as far as property values go. Were mywife and myself is going to feel the pain is in the Retirement founds we have. As Banks recoupe their lost money from bad investments threw Stock market munipulation. Stealing the money from retirement funds. In the gize of lower stock market.


A lot of these bankers should be heading for prison . But none will. America she once stood proud and strong indifferant to the world around it. But is now the hiding place of foul beast . Who use her power to force their will upon the world . May her punishment be quik and painless. God willing.

wat?

totally wat lol

 

[yuppiejr]

Movement in the market, up or down, is good for investors with at least half a brain. People who borrowed the inflated equity in their homes while it was over appraised or purchased a property they could not afford on a risky loan need to deal with the consequences. So do the banks that made the risky loans to underqualified borrowers. Short term, housing prices will dive - foolish investors who treated their home as a piggy bank and the banks that borrowed them money will flush out and the supply of low priced homes will flood the market. Qualified buyers will see opportunity (investors and first time homebuyers alike) and start purchasing properties which will eventually increase price, hopefully at a more realistic rate of appreciation than the insane 12%+ per year growth of the last half decade.

This is newsworthy only in that it demonstrates why people should not treat their residence as a credit card or buy into mortgages that they can't afford based on promotional interest rate packages, etc. Banks that made too many risky loans to unqualified or irresponsible buyers need to feel the pain as well and get smarter about who they loan money to, particularly on an obviously overvalued piece of collateral. The idea being floated by the usual wealth redistribution socialist crowd that the government somehow needs to bail people out for being financially irresponsible is pure idiocy and will only lead to more pain in the housing market. The market is perfectly capable of dealing with this sort of adjustment without "help" from the US government.

 

[WhipperSnapper]

I read this Business Week article last night. It contains a graph showing the general historical trend for housing prices (appreciation of 0.2-0.4% each year). Then, early in this decade, there's a huge spike. In order for it to be corrected and for housing prices to "stay in line" with the historical trend, the prices will need to continue to drop. Here's a link:

http://www.businessweek.com/ma...+news+index_best+of+bw

(The graph was in the print version of the magazine but I don't see it online.)