When will the housing market bottom out?

[Greenman]

A home down the street from me came on the market today at about 50% of it's peak value. I think it's a hell of a deal, but I'm also wondering how much further down the market can go. I've been thinking that it would be stable and perhaps going up a bit by mid summer, but I not ready to spend 225k on wishful thinking. I'd like to hear your opinions.

This would be investment property, it looks as though I can rent it out for enough to make the payment. Btw, I'm in California, the Bay area, where prices generally start at insane and go up from there.

 

[LegendKiller]

Another 6-12 months

 

[Capt Caveman]

Reports say that prices should continue to fall and possibly bottom out at the end of the year. However, it really varies by location. I know in Boston/Cambridge, MA area, prices have actually been very stable and going up for new construction/newly renovated properties.

Inflation is also expected to increase which will raise interest rates on fixed mortgages. A lot of variables and no easy answers.

 

[Greenman]

Originally posted by: Capt Caveman
Reports say that prices should continue to fall and possibly bottom out at the end of the year. However, it really varies by location. I know in Boston/Cambridge, MA area, prices have actually been very stable and going up for new construction/newly renovated properties.

Inflation is also expected to increase which will raise interest rates on fixed mortgages. A lot of variables and no easy answers.

Ain't it the truth.
It's a lot easier to speculate when it's not my money, funny how that works.

 

[Jhill]

FWIW Merrell Lynch said yesterday that they predict prices to drop 15% in 2008 and another 10% in 2009.


That is just a prediction though, and a lot of Million dollar + homes are figured into that as well.

 

[alkemyst]

if anyone knew it would make this easy.

We are still in a downward spiral and I don't see an answer anytime soon...if anything we are heading for a crappy bout of economy over the next 5 years.

 

[sniperruff]

well, this is like asking how low will C go. i'd like to buy a bunch of C to offset my loss but... how low will it go?

 

[cliftonite]

I think it will take another 2 to 3 years.

 

[Capt Caveman]

Originally posted by: Greenman

Originally posted by: Capt Caveman
Reports say that prices should continue to fall and possibly bottom out at the end of the year. However, it really varies by location. I know in Boston/Cambridge, MA area, prices have actually been very stable and going up for new construction/newly renovated properties.

Inflation is also expected to increase which will raise interest rates on fixed mortgages. A lot of variables and no easy answers.

Ain't it the truth.
It's a lot easier to speculate when it's not my money, funny how that works.

fwiw - I left the Bay Area a couple of years ago b/c the housing prices were so whacked. Sadly, I can probably afford to live there now.

 

[Greenman]

I understand that no one knows the answer, thats why I asked for opinions. Some of you are involved in lending and watching market trends, some of you just have a different view on what will drive the market one way or another, those ideas are worth listening to, especially those that I don't agree with, as I might might be missing a piece of the picture just from being pigheaded.

 

[ponyo]

If the numbers work, I wouldn't worry about housing bottom or what not. If you can bring in more rent than mortgage, what does it matter? You should buy now and rent it out.

 

[IHateMyJob2004]

No offense, but you haven't seen what is going to happen to rent prices when the markets do hit rock bottom. While the rents make sense now, what will you do when you competitors (other renters) have to drop their rental prices 30% to compete with other renters?

In my opinion, I might buy a rental property next year. Housing prices should bottom by then. The thing is, if I do take the leap, I will assume current rent prices for valuing the property, but I will also make assumptions about what could happen to rental prices. I'll make sure I can absorb any drop in rental prices with my own cash flow.


JHill,
Ignore analyst banter.

 

[Scarpozzi]

Originally posted by: Naustica
If the numbers work, I wouldn't worry about housing bottom or what not. If you can bring in more rent than mortgage, what does it matter? You should buy now and rent it out.

Just remember that your interest rates for investment properties are higher than primary residence mortgages...

 

[Slew Foot]

My analysis shows that price declines should continue through 2009 is CA, and then be flat for a few years before increasing. Way too many homes for sale and foreclosures will keep prices down, and the slew of alt-a, prime resets are set for 2009-2011.

 

[her209]

Its going to really bottom when the Apocalypse comes... I'd wait.

 

[SSSnail]

My prediction (for California specifically) is whenever housing around here reach an acceptable price to income ratio, people that can actually afford to buy a house starts buying houses again, that's when it'll bottom out. Looking at current listings, the average has to come down at least another 30%, however long that takes.

2 years.

 

[FoBoT]

this really really depends on location, exactly where you are talking aboot

 

[her209]

Originally posted by: SSSnail
My prediction (for California specifically) is whenever housing around here reach an acceptable price to income ratio, people that can actually afford to buy a house starts buying houses again, that's when it'll bottom out. Looking at current listings, the average has to come down at least another 30%, however long that takes.

2 years.

Either that or when rent is X% of a 30 year mortgage.

 

[IronWing]

April 11, 2010

 

[NoShangriLa]

According to the Canadian Minister of Finance announcement last week, the US market will drag the Canadian economy down in the near term for 2 years till 2010.

If the announcement is an indication, then the US market will continue to tank for another 1-2 years before it start to recover.

IMHO, it is wise to purchase a house as an investment if the rent covers the mortgage, property tax, and maintenances.

 

[woodie1]

Depends on the location. I'd expect there to be troubles in some areas for 2-3 years.

 

[Greenman]

Originally posted by: Scarpozzi

Originally posted by: Naustica
If the numbers work, I wouldn't worry about housing bottom or what not. If you can bring in more rent than mortgage, what does it matter? You should buy now and rent it out.

Just remember that your interest rates for investment properties are higher than primary residence mortgages...

Yup, about a point higher. I already talked to a lender and I'm approved for the loan, so thats not an issue.
If rents drop a lot and business slows down, it could put me in a very tough position, that's the only real concern I have. The other side of the coin is that if the market hits bottom this year and starts back up in two, I'd be in very good shape, with a big bucket of equity to leverage me into another property.

 

[Capt Caveman]

Originally posted by: Greenman

Originally posted by: Scarpozzi

Originally posted by: Naustica
If the numbers work, I wouldn't worry about housing bottom or what not. If you can bring in more rent than mortgage, what does it matter? You should buy now and rent it out.

Just remember that your interest rates for investment properties are higher than primary residence mortgages...

Yup, about a point higher. I already talked to a lender and I'm approved for the loan, so thats not an issue.
If rents drop a lot and business slows down, it could put me in a very tough position, that's the only real concern I have. The other side of the coin is that if the market hits bottom this year and starts back up in two, I'd be in very good shape, with a big bucket of equity to leverage me into another property.

Note, rents may not necessarily go down. With more people losing their homes, they're forced to rent, increasing demand.

 

[necine]

It'll bottom out whenever normal people can buy houses. I'd say 2 years.

 

[Greenman]

I don't agree with the assessment that the market will bottom out when prices come in line with income, not here in the land of fruits and nuts anyway. Were talking about a trillion dollars (pulled that number out of my ass, but I'll bet it's not far off) worth of equity evaporating. I just don't see how the CA economy could take that kind of hit and keep going. And where the hell would all the people walking away from their homes live? Seems like the rental market would explode with the greatest demand seen since the end of WWII