If you are waiting to buy a house, WAIT!

[Neubarth]

The housing market continues to deteriorate. Thursday's report on May pending home sales was down 30% from the prior month and nearly 16% vs. a year ago. The market weakness spans the country. Sales in the Northeast, Midwest and South fell more than 30%, the bright spot, the West, only fell 21%.

The news comes after last week's record low new home sales in May, which plummeted nearly 33%. Experts say the expiration of the new homebuyer tax credit is to blame for the sudden market softness.

Unfortunately, the market could get worse and prices could fall further, says Richard Suttmeier of ValuEngine.com. High unemployment and struggling community banks are two main causes. Saddled with bad housing and construction loans, local banks will continue to restrict lending.

Plus, the failure of the Obama administration's mortgage modification program means a steady flow of short sales. “People are going to be surprised when they see there have been short sales,” which negatively impact appraisals in the local community, says Suttmeier.

How low can prices go?

Using the S&P/Case-Shiller index as his guide, Suttmeier suggests homes across the country could lose half their value. “If it gets back, like stocks, back to the 1999-2000 levels, that’s another 50% down in home prices,” he says.

 

[Douger]

I sold in 2005 for 875.
I found a " real value" site that shows it's current " will sell" price at 320.
That's 15 grand less than I paid in 1996.
Post 96 I did 100 plus in upgrades.
I figure by 2013 a bank will then own it and let it go for 200 or under.

If you "need" to buy a house now / Find another country.
If are B.W.'d, and glued to all things empire, buy some ag exempt land with plenty of water and a good soil test from the county ag co-op.Far away from the battlefields....aka cities.
It's a far better move than sitting on stocks, bonds, IRA's or, Dolares.
It'll be like being one of the few with a lifejacket on a sinking ship.

 

[Neubarth]

As previously stated, I see only deflation or near to deflation for the short term. When that deflation turns to inflation I can not predict, but when it does, house values will follow.

 

[crait]

Please post your source and the source of said 'experts.' Thank you.

 

[Terral]

Hi Neubarth:

The housing market continues to deteriorate. Thursday's report on May pending home sales was down 30% from the prior month and nearly 16% vs. a year ago. The market weakness spans the country. Sales in the Northeast, Midwest and South fell more than 30%, the bright spot, the West, only fell 21% ....

Housing prices are going to continue the downward trend for many reasons:

1. Too many JOBS are being Outsourced overseas to places like India.

2. NAFTA Offshoring of the U.S. Manufacturing Base. Jobs are going overseas, which means fewer and fewer American Workers can afford to make an offer on your house.

3. 23 Guest Worker Programs bring in 1.5 MILLION Foreign Nationals to 'displace' U.S. Workers from JOBS. That means fewer and fewer American Workers can afford to make an offer on your house.

4. 20 to 30 Million Illegal Alien Foreign Nationals are stealing identities and JOBS from American Workers and nobody in Government is doing one thing about it. "Worker Displacement" is a cycle that NEVER ENDS, as Illegal Aliens displace American Workers, then American Workers must go out and displace more American Workers from JOBS. That means fewer American Workers can afford to make an offer on your house.

5. Foreclosures and Bankruptcies are skyrocketing, which means more and more Short Sale houses on the market. Too many foreclosed houses on the market means prices will go DOWN and more bankruptcies means fewer and fewer American Workers can afford to make an offer on your house.

6. No matter what any Government Office says, unemployment is skyrocketing through the roof and the Government is LYING about the numbers. The real unemployment number is somewhere around 20 percent and escalating higher, which means fewer American Workers can afford to make an offer on your house.

7. People know that prices are going DOWN, so they wait and wait for the housing market to find a bottom. However, there is NO BOTTOM in the housing market so long as all of these conditions remain for the current Economic Depression.

8. Fannie Mae and Freddie Mac Mortgage-backed Security Portfolio Values are going DOWN, as house prices continue to collapse right before our eyes. This means that more and more foreclosed houses must be thrown onto the open market, which will LOWER housing prices again.

If you buy a house today, the same house will be worth LESS tomorrow. Do not buy today, when you can buy for less later down the road ...

GL,

Terral

 

[B. Kidd]

FANTASTIC deals to be had here in Vegasland.......
70 percent of homeowners here are 'underwater'.
RETIREES, you are invited!!! Come one, come all!!!

 

[judyd]

I don't understand the reasoning in the OP statement. Did you mean it's a bad time to sell? Because then I could agree with you. On the other hand, it's an ideal time to find a home you couldn't have afforded two years ago, and the interest rates are at an all-time low! If a person has a steady income and a downpayment, this is an excellent time to buy.

 

[Tom Clancy]

Sold my house for 400K more than i paid for..

Must be the addition of the Jacuzzi, and that only cost around 1K..

Also, It was in CA, so Location is everything there.

 

[JakeStarkey]

Now is the time to continue investing and managing in middle-level rental property.

 

[B. Kidd]

Now is the time to continue investing and managing in middle-level rental property.

Thanks Jake.

I can only add to that, ESPECIALLY, in Vegasland!

 

[Trajan]

How low can prices go?

Using the S&P/Case-Shiller index as his guide, Suttmeier suggests homes across the country could lose half their value. “If it gets back, like stocks, back to the 1999-2000 levels, that’s another 50% down in home prices,” he says.

I am sorry but, really? I just don't see it, if median housing prices drop to 2000 levels this country is Greece...no shit. I think hes really reaching.

Now, I do agree the market is still warped to hell, we are carrying folks into 2 and even 3rrd defaults, loan mods are BS. The money has got to come form somewhere the banks are being paid for defraying their costs, I know they are, yes they are taking a loss but we, are paying the catastrophic side of the loss. And they are blowing money out of a water hose just trying to pop a punch drunk boxer for another round, they are not letting the market find a bottom...

I have good equity, I am not behind, never missed a payment, not under water etc...so I got a call from my lender out of the blue 2 months ago, he says because I have a jumbo FHA loan (2 years old just before the bottom fell out) and have never missed or been late, I could have my loan 'streamlined' a reward for good behavior so to speak.....

They dropped a point off my rate, just like that...of course I was wary , my first question was how do you make money here because I am not paying, he said they get 300 basis points on the loan and a fee for doing it, from the FHA, meaning you and I....unreal.

 

[Big Black Dog]

We've spent about two years remodeling the two houses on our 300 acre farm here in northwestern Illinois and we have them both exactly like we want them. There is this guy that keeps showing up about every 3 or 4 months wanting to buy our place and he's willing to pay in excess of 2 million. However, we refuse to even entertain his offers to buy and we tell him not to come back but he still does. He's been here four times already. I'm not sure but what I think he's interested in doing is to turn our place into a housing tract. That would be really awful because our farm looks so nice. Maybe I'll buy a Pit Bull...

 

[B. Kidd]

Float the farm, get a pitbull.
Or, if you are up in years, someone will eventually get it for a 'tract anyways.

 

[Neubarth]

I don't understand the reasoning in the OP statement. Did you mean it's a bad time to sell? Because then I could agree with you. On the other hand, it's an ideal time to find a home you couldn't have afforded two years ago, and the interest rates are at an all-time low! If a person has a steady income and a downpayment, this is an excellent time to buy.

It may be an excellent time to buy, but six months from now might even be better if we continue to see deterioration in housing prices all across the land.

You might be able to buy THAT house for 335,000 today, but if you wait, you might be able to buy it for 315,000 in half a year.

 

[william the wie]

With all due respect for the nation as a whole real estate is never coming back. As late as 1963 I could look around and see the remnants of the 1926 crash in Key West and even back then housing in the Keys was not cheap by national standards. It was more obvious on Stock Island, now part of Key West, but it could also be seen if you knew where to look on Key West proper.

The Keys are a resort area and will come back as fast as any place in the country from a real estate crash. Detroit will not come fully back from this crash, Las Vegas may or may not, the redneck Rivera (Gulf Coast) will take a long time coming back but the Keys will be one of the top ten fastest appreciating areas in the Americas by the time the rest of the country hits bottom. Until that news hits I would not buy.

Also the wrong time line is being used to measure the bubble. Try starting in 83-85, a shakeout in 91-93, full throttle 94-03 and afterburner 2004-6. Recovery will not start prior to reversion to the mean with a countervailing drop below trendline or going below the prices of homes in 81-82 before going up.

 

[JakeStarkey]

With all due respect for the nation as a whole real estate is never coming back. As late as 1963 I could look around and see the remnants of the 1926 crash in Key West and even back then housing in the Keys was not cheap by national standards. It was more obvious on Stock Island, now part of Key West, but it could also be seen if you knew where to look on Key West proper.

The Keys are a resort area and will come back as fast as any place in the country from a real estate crash. Detroit will not come fully back from this crash, Las Vegas may or may not, the redneck Rivera (Gulf Coast) will take a long time coming back but the Keys will be one of the top ten fastest appreciating areas in the Americas by the time the rest of the country hits bottom. Until that news hits I would not buy.

Also the wrong time line is being used to measure the bubble. Try starting in 83-85, a shakeout in 91-93, full throttle 94-03 and afterburner 2004-6. Recovery will not start prior to reversion to the mean with a countervailing drop below trendline or going below the prices of homes in 81-82 before going up.

I am following some of it but you lost me with the conclusion of 81-82 as the baseline. What other trends converged then to give you that line?

 

[william the wie]

With all due respect for the nation as a whole real estate is never coming back. As late as 1963 I could look around and see the remnants of the 1926 crash in Key West and even back then housing in the Keys was not cheap by national standards. It was more obvious on Stock Island, now part of Key West, but it could also be seen if you knew where to look on Key West proper.

The Keys are a resort area and will come back as fast as any place in the country from a real estate crash. Detroit will not come fully back from this crash, Las Vegas may or may not, the redneck Rivera (Gulf Coast) will take a long time coming back but the Keys will be one of the top ten fastest appreciating areas in the Americas by the time the rest of the country hits bottom. Until that news hits I would not buy.

Also the wrong time line is being used to measure the bubble. Try starting in 83-85, a shakeout in 91-93, full throttle 94-03 and afterburner 2004-6. Recovery will not start prior to reversion to the mean with a countervailing drop below trendline or going below the prices of homes in 81-82 before going up.

I am following some of it but you lost me with the conclusion of 81-82 as the baseline. What other trends converged then to give you that line?

Not trends but balance sheet and statistical effects.

When you overshoot in a bubble you then have to get under the trendline by the same amount in terms of purchasing power before recovery can begin. (reversion to the mean.)

What complicates matters is that debt writedowns have a bigger multiplier effect than money creation. This is why Japan has experienced mild deflation over the past 17 years despite massive stimulus: writedowns can and often does destroy money faster than it can be created. Writedowns are a charge against bank capital and new or renewed loans are in proportion to bank capital. (Several balance sheet effects: increased leverage that results in higher interest payments out and lower interest payments in; lower collateral levels of performing assets and reduced recoveries from collateral sales; and a long laundry list of other ungood effects.)

Either debt service expense for performing loans increases disproportionately with even mild deflation or refinancing destroys bank capital. Any which way or in any proportions this destroys more money sometimes within the banking system and sometimes in the wallets of consumers because the marginal returns on borrowed money goes down for both borrower and lenders. Once deleveraging becomes more profitable than borrowing the money supply starts really shrinking.

So 81 or 82 housing prices are the likely bottom since they predate the housing boom and would result if homeownership shrinks to 40% and rents temporarily increase to double the cost of mortgage payments. That would be reversion to the mean again as in 1926-56.