Where will Real Estate Bottom?

Discussion in 'Economy' started by william the wie, Dec 31, 2010.

  1. william the wie
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    william the wie Gold Member

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    I have been looking over data for Jax Beach FL and I find the Case-Shiller data even more optimistic than ever. Looking at houses here are the trendlines

    By 1990 virtually all land within the city limits had been developed.

    In 1972 the house I live in was bought by wife for 10K.

    In 1985 we were advised to list at 40K.

    In 2000-2 some of my wife's friends bought the same model house at 100-120K for a value based on distance from the ocean of 100K for our home.

    At peak based on Zillow numbers value was about 350K.

    Current value for comparables about 210K.

    I would expect at least another 57% drop to 90K before a bottom is reached.

    What are your estimates for future decline and why?
     
  2. Revere
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    The problem is, most people who don't qualify for loans on properties on current values won't qualify even if the value drops 57%. Credit scoring and underwriting requirements aren't killing deals on debt-income ratios, credit scores are. So unless you are talking about investors who already qualify for almost as much as they have cash to buy, drops in value will still put homeownership out of reach for many.
     
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  3. william the wie
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    william the wie Gold Member

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    A tiny bit more complicated than that but not much great post.
     
  4. Revere
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    Then why the fuck do you ask?
     
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    Do you know people being turned down for loans with 50% LTV or better because of their credit scores alone? I do. Won't matter if values drop 57% then, chum.
     
  6. loosecannon
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    loosecannon Senior Member

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    because he is interested in at least a discussion of where the bottom is, not because he was hoping somebody would post a non sequitur and derail the topic off course.

    BTW despite being diversionary, he still praised your post.

    Willie, ocean side property is a horrible standard to gauge the rest of the nation by. McMansionville is gonna get slaughtered and Suburbia may a model that is doomed. But lots of RE has probably already hit bottom, in fact maybe the majority of lots/homes nationwide.

    But if the real goods services and employment economy is ripe for an extended contraction, or a relative wage decline, or a period of prolonged stagnation it may be a while before you can be sure what the bottom is.

    Typically robust recovery is what really illustrates peaks and valleys. Or hindsight in the case of stagflation and deflationary periods. Think about Japan, where was the bottom to the late 80's RE crash in Japan?

    I still believe that inflation, foreign investors or even domestic investors will rescue the RE market before prices fall anywhere near the historic trend lines from decades past. 57% more decline nationwide? Only if the whole world falls into an intractible depression.
     
    Last edited: Dec 31, 2010
  7. Revere
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    Those aren't oceanfront homes with the price he's talking.

    The mortage markets are fucked up in the opposite direction as what they were 3-4 years ago. Interest free money from the Fed is best invested in stocks than lending in the Dodd-Franks era.

    The only suburbs and mansions that are on their backs are the ones developed from 2004-2007 with buyers getting nothing down loans.
     
  8. william the wie
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    william the wie Gold Member

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    It may not have been reached and in honor of the new year I also have an S&P poll going too if you want to take a stab at it.
     
  9. Revere
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    It's not linear, kiddies. The mortgage market is the third dimension you aren't considering.
     
  10. loosecannon
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    loosecannon Senior Member

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    He specifically said that they were.

    and yet you were just saying that it was the credit worthiness gap that prevented banks from lending, make up your mind.

    The entire model of Suburbia may be one "oil shock" from complete obsolescence.

    And McMansionville will DEFINITELY be the hardest hit RE sector once all the ashes clear. "Downsizing" will be the RE buzzword of the next decade. Couples do not need 4000 sq ft of space to air condition and maintain.
     

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