If the housing market bubble is bursting then...

[Alphathree33]

Or has the bubble not yet actually burst, and people are just "predicting" that it will?

I still see 1br and 2br condos going for like a half million dollars in most big cities.

 

[Ryan]

Your perspective is skewed, the price of condos in big cities has nothing to do with the housing market as a whole.

 

[Demon-Xanth]

Here houses went back down to levels of about 2003.

 

[Gibson486]

the price of places in the city do not dictate how the market is doing.

 

[hiromizu]

It doesn't mean "everywhere." Some areas will always be high in demand.

 

[Alphathree33]

I should note that I live in Canada and for whatever reason, the housing market is going absolutely red hot here... prices just keep going up.

I can't tell if it's just a delayed reaction or if we're living in completely separate economic circumstances.

We SHOULD feel the pinch of any looming U.S. recession/housing troubles/dollar troubles, but we're not... and it's very odd... since we're used to feeling the side effects of American troubles.

I'm looking to buy my first home and I can afford some of the higher prices, but I'm also not dumb and am thinking about renting for another few years to see what happens.

 

[lokiju]

Supply and Demand.

There is still a high demand for condos in big cities so they will still cost a lot.

 

[Gibson486]

Originally posted by: lokiju
Supply and Demand.

There is still a high demand for condos in big cities so they will still cost a lot.

Also, places in the city are priced high to begin with. Most people who can afford a place in the city do not go down when the economy goes down and most of them do not go upside down on the mortgage.

 

[LegendKiller]

The prices are adjusting, it's just that houses are less liquid than stocks and cannot correct quickly. Give it another year or two and you'll see a dramatically different environment.

Check out the S&P Case/Shiller index, according to it prices are down in most major cities and the downturn is accelerating.

 

[Modular]

Realistically, it's not going to get as bad as some people are predicting. Once prices drop to a certain point, all the people looking for a bargain will start to buy. Once enough people start purchasing homes again the prices will begin to rise and the market will recover to some extent.

 

[LegendKiller]

Originally posted by: Modular
Realistically, it's not going to get as bad as some people are predicting. Once prices drop to a certain point, all the people looking for a bargain will start to buy. Once enough people start purchasing homes again the prices will begin to rise and the market will recover to some extent.

Where will they get the loans?

I don't think people quite realize how far this has reached. If you don't have 20% down, a good FICO, and take a more traditional loan, then you aren't getting one at reasonable rates.

The days of easy credit are gone in the mortgage market and banks are scared shitless about the prospects of getting Citibanked. Do you realize that Citi may write-down up to 16 *BILLION* for Q4-2007? Do you realize that wipes out a *huge* portion of their capital and equity?

Have you looked at how most analysts are treating this? Countrywide is down 85% from its peak. Bear Sterns is down more than 50%. Citibank is down more than 50%.

It used to be that people could finance the toxic waste of subprime RMBS by putting it into CDOs, allowing subprime RMBS to be financed. However, that market is gone and nobody wants to hold that toxic waste. That means nothing gets financed there.

Consider that up to 40% of mortgages written in the last 2 years were either subprime, or near subprime. Further consider that in California, Florida, and Las Vegas, that number has been as high as 70%.

 

[yllus]

Do any of you have any insight on the Canadian housing market? I would dearly love to see a downturn in prices in my city of Toronto in two years time. Shouldn't we see much of the same as the States?

CIBC fires two senior executives amid writedowns

The Canadian Imperial Bank of Commerce, the country?s worst-performing bank stock last year, ousted its top investment banker and chief risk officer after declaring debt writedowns of as much as $3bn (?2bn), more than any other Canadian lender.

Bah, looks like we're pretty well insulated up here.

Will it spread to Canada?

Subprime mortgages are available in Canada. But it's a different story up here. For one thing, the subprime market share is much smaller in Canada. About 20 per cent of all U.S. mortgages are of the subprime variety in 2007. That compares to just five per cent in Canada, according to industry figures.

All high-ratio mortgages in Canada ? those with less than 20 per cent down ? must be secured by mortgage insurance, through, for example, the Canada Mortgage and Housing Corporation. In addition, Canadian financial institutions do not finance more than 100 per cent of a home's purchase price, and that value must be verified with a separate appraisal.

 

[Xavier434]

Originally posted by: LegendKiller
The prices are adjusting, it's just that houses are less liquid than stocks and cannot correct quickly. Give it another year or two and you'll see a dramatically different environment.

Check out the S&P Case/Shiller index, according to it prices are down in most major cities and the downturn is accelerating.

I hope you are right. I don't live in a big city but I do live in South Florida where the prices seem like they are built in a big city.

 

[DT4K]

Originally posted by: Ryan
Your perspective is skewed, the price of condos in big cities has nothing to do with the housing market as a whole.

Of course it does. It's all related.

But that doesn't mean that all areas and all segments of the market are affected equally. Here in the Charlotte area for instance, housing prices have been about the same for the past year and a half. They haven't gone up much, but they haven't dropped like a lot of the rest of the country either. Mainly because it's still a bargain compared to other parts of the country.

The real question is whether that half million dollar condo in the city would have sold for 600k a year ago. That would be a pretty significant price drop, but would still leave you thinking "If the housing market bubble is bursting, then why are prices so high?"

 

[Demon-Xanth]

Originally posted by: Modular
Realistically, it's not going to get as bad as some people are predicting. Once prices drop to a certain point, all the people looking for a bargain will start to buy. Once enough people start purchasing homes again the prices will begin to rise and the market will recover to some extent.

Prices here really aren't dropping very much anymore. They took a huge dive and are leveling out. The places listed for a given price range now are about the same as when I put an offer in three months ago. They've gone down a little, but not much at all. All I can say, is that I'm glad I chose to rent and not buy two years ago

 

[PingSpike]

I think a lot of people are waiting for a massive correction thats never going to happen. Prices will fall in some hyper inflated, overbuilt places by a lot, and fall a little or remain stagnant elsewhere...perhaps for a long time. Plus, the government policy seems to be to inflate this problem away.

I have to acknowledge I'm a bit biased since I just bought a home last summer. But it just doesn't seem like sellers are all going to start selling their houses for 20% less then they paid for it. Most of them are just going to stay put and take their houses off the market or let them sit on the market longer.

And I think there are a lot of impatient buyers waiting in the wings. I know my personal experience can't be extrapolated to the whole country, but I do feel it gives a peak at the local market. Our apartment complex was a great deal, a lot of space for the money. Last summer while the market was taking a dump about a quarter of the ~60 or so units moved out around the same time we did. According to the landlord most were buying houses. I think around here a lot of people were like us, waiting in the wings and saving hoping for some kind of break in the market.

I have no idea about the whole countries market though. My state is pretty restrictive on development so there was never a big backlog of unsold homes in giant developments like there is in some parts of the country.

 

[bsobel]

Originally posted by: Modular
Realistically, it's not going to get as bad as some people are predicting. Once prices drop to a certain point, all the people looking for a bargain will start to buy. Once enough people start purchasing homes again the prices will begin to rise and the market will recover to some extent.

I believe we will start seeing that in the 4th quarter and then into 2009. More bailouts of bad loans will occur and housing starts are really low, meaning no new inventory coming into the market. That will help the overall market absorb the forclosures which will continue to flood for the next 20 months or so.

Bill

 

[SSSnail]

Anyways you look at it, the housing market is still too high relative to incomes in most areas, it will go down still.

 

[bsobel]

but not much at all. All I can say, is that I'm glad I chose to rent and not buy two years ago

I had a few friends I was telling that too as I was selling properties two years ago (we did move, but it was laterial from LA to SD, so that washed). People buying now are definately finding better deals than 24 months ago, gone is the multiple offers and over 100% offers that where the norm for some time.

 

[Xavier434]

Originally posted by: PingSpike
I think a lot of people are waiting for a massive correction thats never going to happen. Prices will fall in some hyper inflated, overbuilt places by a lot, and fall a little or remain stagnant elsewhere...perhaps for a long time. Plus, the government policy seems to be to inflate this problem away.

I have to acknowledge I'm a bit biased since I just bought a home last summer. But it just doesn't seem like sellers are all going to start selling their houses for 20% less then they paid for it. Most of them are just going to stay put and take their houses off the market or let them sit on the market longer.

And I think there are a lot of impatient buyers waiting in the wings. I know my personal experience can't be extrapolated to the whole country, but I do feel it gives a peak at the local market. Our apartment complex was a great deal, a lot of space for the money. Last summer while the market was taking a dump about a quarter of the ~60 or so units moved out around the same time we did. According to the landlord most were buying houses. I think around here a lot of people were like us, waiting in the wings and saving hoping for some kind of break in the market.

I have no idea about the whole countries market though. My state is pretty restrictive on development so there was never a big backlog of unsold homes in giant developments like there is in some parts of the country.

You are forgetting that tons of people got into this groove where they believed house flipping was not very risky and then got screwed. Many of them are still holding out but are getting more and more desperate to sell. Eventually, they got to give or else they will lose even more money. That will hopefully cause even more competition in the housing market since their prices will be lower. We'll see.

 

[Stifko]

Isn't the bubble always biggest before the burst?

 

[LegendKiller]

Originally posted by: Demon-Xanth

Originally posted by: Modular
Realistically, it's not going to get as bad as some people are predicting. Once prices drop to a certain point, all the people looking for a bargain will start to buy. Once enough people start purchasing homes again the prices will begin to rise and the market will recover to some extent.

Prices here really aren't dropping very much anymore. They took a huge dive and are leveling out. The places listed for a given price range now are about the same as when I put an offer in three months ago. They've gone down a little, but not much at all. All I can say, is that I'm glad I chose to rent and not buy two years ago

Both you, and the guy above, need to take a look at the Shiller Index. It shows a nice parabola for most major MSAs and a strong downward trend for the whole country. CA is getting hammered in all cities.

It's wishful thinking that this is going to reverse anytime soon. There is not *one* positive indicator to show this is going to end up leveling out soon.

 

[PingSpike]

Originally posted by: Xavier434
You are forgetting that tons of people got into this groove where they believed house flipping was not very risky and then got screwed. Many of them are still holding out but are getting more and more desperate to sell. Eventually, they got to give or else they will lose even more money. That will hopefully cause even more competition in the housing market since their prices will be lower. We'll see.

How many of those people are there really? Around here, I'd guess almost none but thats because my state has a total population of 600K.

However, I would think most professionals would have taken their licks and sold at a loss already. I remember on that property flipping show most of the "part timers" were losing their shirts already in 2006. Most sold their own home and moved into the dump they blew their life savings renovating! I'm not sure how desperate those people really are.

Again, that kind of stuff was probably more prevelant on the national market.

 

[kranky]

Originally posted by: SSSnail
Anyways you look at it, the housing market is still too high relative to incomes in most areas, it will go down still.

And that is exactly why you can't compare prices in one area to prices in another.

Where the average home price is 5x, 6x, 8x or more the average income, prices will continue to fall. They have to, because the homes are unaffordable. They HAVE BEEN unaffordable for a long time, but the fancy loan programs were around to get people financed, and propped up the prices. That's no longer the case, and those toxic loans aren't making a comeback.

In other areas, where home prices are 2x-4x the average income, the market will be stable.

I shake my head at these fancy Ph.D. analysts with their arsenal of charts and graphs they use to predict the future of real estate. All you have to do is look at incomes compared to home prices, you'll know what's going to happen. Even if prices have dropped 30% in some areas, they have a long way to go to be in concert with the incomes.

 

[bsobel]

Where will they get the loans?

Loans are opening back up. For example most of the 2nd and 3rd quarter it was impossible to get low doc or no doc investment home loans. In the 4th quarter those started showing up again.

The rules got adjusted, and all of these lendors need to make loans to make money, so they will continue to open the flood gates this year albeit not (at the end) as wide as they did last time.

Bill