Future of US Housing Market?

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Submitted by waiting hawk on September 18, 2006 - 8:10pm

"Bought for $262,500 in 2003, sold for $95,000 last week"

"THIS is Sydney's cheapest unit. The one-bedroom unit in Cabramatta sold at auction last week for $95,000. In November 2003 it cost $262,500."

http://www.smh.com.au/news/national/bought-for-262500-in-2003-sold-for-95000-last-week/2006/09/16/1158334735688.html

Submitted by powayseller on September 18, 2006 - 8:17pm.

A 63% drop. I am called extreme for suggesting it could happen here, because we are different. Hey, are we different? Perhaps their housing bubble dwarfed ours?

Submitted by PerryChase on September 18, 2006 - 8:37pm.

I can happen here also. Never say never.

Submitted by lindismith on September 18, 2006 - 8:57pm.

I think it will happen here.

Look at an area like Encanto, where homes sold for half a million bucks, purchased with crazy loans, by people who make minimum wage.... There is no doubt in my mind that areas like that will see trouble with a capital T.

Submitted by carlislematthew on September 18, 2006 - 10:22pm.

I am called extreme for suggesting it could happen here, because we are different. Hey, are we different? Perhaps their housing bubble dwarfed ours?

Not wanting to get into this old debate, but perhaps you'll listen more closely this time. I'm game.

I, and others, have not labelled you an extremist because of your views, but because of the way you present them. You don't simply predict a 50% drop, you state it as fact and call others delusional if they don't agree with you.

You seem to have toned it down quite a bit over the past few weeks, but occasionally the old-style diplomacy creeps out. Dogs, tricks, etc...

Submitted by powayseller on September 18, 2006 - 10:38pm.

carlisle, my strong and witty writing style balances the ueber-spin meisters in the real estate and government industries. I have fun with it, and hope you do too.

Are you mad at David Lereah for saying "real estate never goes down, never has, never will" ? Are you upset with Greenspan for saying "there is no tech stock bubble, and there certainly is no housing bubble; we can identify bubbles only after the fact"?

Submitted by North County Jim on September 18, 2006 - 10:44pm.

my strong and witty writing style...

I know it's a meatball right down the middle but I'll leave the bat on my shoulder.

Submitted by sdrealtor on September 18, 2006 - 11:05pm.

Thanks NCJ,
You've inspired me to do the same.

Submitted by sdduuuude on September 18, 2006 - 11:13pm.

"my strong and witty writing style"

Caaaaan't keeeep hands from key----board.

AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAARRRRRRRRRRRGH.

Submitted by powayseller on September 18, 2006 - 11:19pm.

Thanks guys, for the compliments, although it was unexpected.

Submitted by VADCMD on September 19, 2006 - 8:29am.

Auction is different from normal purchase because it is much more risky. Bidders usually do not have the time to collect info of what they are buying, such as home inspection etc.
The houses for auction are normally far from move-in condition. And they have to pay some cash at the same day if they win the auction.
What could be worse is that the previous owner may still live the house and at this situation, the winner has to do all the legal work to kick him/her out. It is time-consuming and costly.

Submitted by PerryChase on September 19, 2006 - 9:09am.

Predictions are never "facts" and they are always based upon assumptions. Why should powayseller be held to a different standard than someone who's prediting a soft landing?

What about professionals who are still predicting appreciation? Are their views not even more outlandish?

300k median prices in San Diego sounds reasonable to me. We'll know the "facts" when they happen. Until then everything is opinion.

I happen to like powayseller's "strong witty" style. It's a nice change from the same old. powayseller's style is like a RE investment informercial but in reverse. That's OK by me because we need variety.

It's only money. Please don't take is personally.

Submitted by no_such_reality on September 19, 2006 - 8:51am.

VADCMD, good point, that wasn't a sale, that was a foreclosure and the unit was bought at the foreclosure auction.

Submitted by lindismith on September 19, 2006 - 9:05am.

yes, that is a very good point about auctions.

And Perry's right - why is she being held to a different standard? We all know a soft landing happened last year. How come some these industry people are still predicting it? How come we're not outraged at them?

I think Poway's writings are witty, and I like that she pushes the envelope. I think a lot of very good discussion, debate and analysis amongst us has come from her writing. On the days she's not on this board, it gets boring.

I don't take anything she says personally, and I'm not offended by it. I am not a home-owner, so perhaps that's why?

Submitted by powayseller on September 19, 2006 - 9:21am.

PerryChase, I appreciate your public support.

It appears that the people upset by my predictions are most likely homeowners. What I propose, a 50% nominal drop in San Diego home prices, is nothing short of scary. Some homeowners believe they are "safe" from price drops, because they bought a "superior property", in a desireable neighborhood. (A "superior property" is a property that increased greatly in value during the bubble, but will *not* go down more than 5% or 10% because it is unique, owned by someone who will not be forced to sell, and has few sales, thus commanding higher prices.) For the record, that idea is fantasy. Every property will return to its baseline: its fundamental rental ratio and the price it would be today had the bubble never happened. So even "superior properties" will see big drops. I would need information on the pre-bubble prices of these properties to make a forecast, so I will save that for another day.

They say it is my style that offends, not my message. But hey, I am just a nice girl next door, that has coffee with the neighbors and carpools to church. I believe the threat is not my style, but the message itself.

They say they don't like predictions, but they were silent when David Lereah told us for all those years that home prices never go down, real estate is a great investment, the changing demographics ensure a new permanently higher plateau. Lereah has the data that I could only wish I had! He doesn't even have to make assumptions, because he has all the data to make accurate forecasts. But curiously, when he spins around the data he already has, there are zero objections from our real estate bulls. However, my assumptions are stated upfront, I am honest and sincere in my efforts, and it causes a ruckus. It's very interesting to observe the reactions.

Submitted by PerryChase on September 19, 2006 - 9:50am.

I'm a North County Coastal homeowner. And I don't care if my house drops 50%. I bought it a long time ago and I made a conscious lifestyle decision to live there.

A 50% drop would give me the opportunity to buy something I would rather live in central San Diego city.

A 50% drop sounds like a catastrophe. But if you think in terms of dollars, it's not. It wasn't too long ago that we had median prices about $300k. And at that time, housing was alredy too expensive. Prices can revert back to the mean and we'll be fine. People in real estate related businesses will be hurt, but everyone else will be fine. Just roll back the clock 5 years.

I think that all housing will be affected by the same percentage at different times. I don't know of any downturn before where "superior" products declined a lower percentage. Actually, the supply of "luxury" housing is propertionately greater so it could well be that "luxury" housing will turn into average housing.

Another psychological point that affects feelings about real estate is that homeowners who stretched to buy feel that they worked really hard to afford their homes. Thus they feel entitled to be rewarded with housing appreciation. People stretch to buy all sorts of things. What's different with a house? Should buying a house be "rewarded" anymore than working hard for a Ferrari or a big diamond ring or a luxury vacation to Europe?

Submitted by woodrow on September 19, 2006 - 10:22am.

I enjoy PS's analysis and predicitions - it makes the forum a better read.

That being said, her analysis isn't any different from David Lereah's (she's simply a cheerleader on the opposite end of the spectrum) when she doesn't base her analysis on hard data. If there is a flaw in her "witty" style, it's that she sometimes makes wild guesses at data that is relatively easily researched, and her guesses are usually in error in favor of the argument she's making, showing her inherent bias.

Keep up the good work PS - you're a valuable member of this community. You should expect to be held to a higher standard than Lereah; after all he's being paid large sums of money for his biased opinion. And no one that I know of takes him seriously - you don't want to suffer the same fate.

Submitted by Tracy on September 19, 2006 - 11:43am.

I always enjoy PS's posts. I think she's amusing and I hope her predictions are correct.

Submitted by rocketman on September 19, 2006 - 2:20pm.

25% 35% 50% 75% ????

As soon as things turn around and Big Ass Mae gets around to strenghthing requirements for qualifying, lets say... verifiable income and debt to income ratio = < 30%. Then I will buy. Because at that time, I will qualify for a $250 - $350k 3 bedroom house in a nice neighborhood with excellent schools with 20% down and a 6-7% int 25 loan and pay what I can afford... around $2,500 (incl tax,insurance) per month (with an income over $100k). So I don't place a percentage on how far the market will fall, only what I see is realistic for working class families to afford. If that doesn't happen then I'll be renting the rest of my life.

I believe that's how far the market will fall. Graph that!

Submitted by an on September 19, 2006 - 3:21pm.

rocketman, I'm with you on this one. I don't like to place a % on the decline, it can be as little as 10% and as much as 80% depend on the economic condition. If we have hyper inflation, we all will be making $200-$300k/yr and price will not fall at all. If we go into a great depression and wage drop even more, as well as rent, then 80% is not unrealistic. It can also be somewhere in between. We'll never know how much it will fall until it's over and done with.

Submitted by rocketman on September 19, 2006 - 4:37pm.

Thanks Asianautica,

I remember my Mother, who was raised during the depression, saying to me before I bought my first house "never pay more than 25% of your gross income for personal housing expenses, add a little extra to each payment and... never ever re-finance (unless you can drop your rate 2 points and shorten the lenght)". I used this formula when I purchased my last three residences.

I believe we will be getting back to this formula before the next rise in housing begins either by Federal regulation or, hopefully, people more conscious of their financial future.

Remember: As much as it hurts, listen to your Mother.

Submitted by carlislematthew on September 20, 2006 - 9:07pm.

They say it is my style that offends, not my message. But hey, I am just a nice girl next door, that has coffee with the neighbors and carpools to church. I believe the threat is not my style, but the message itself.

Wow.

I happen to have also sold, am waiting for prices to drop, and generally agree with your predictions.

However, I often find your tone, your arrogance, and your lack of general diplomacy quite remarkable. You're an incredibly frustrating individual to debate with because you instantly dismiss others if they don't 100% agree with you. If someone disagrees with you, you believe it's because they're so kind of evil realtor/home-owner loser that's totally delusional. It's fascinating.

Submitted by carlislematthew on September 20, 2006 - 9:08pm.

Are you mad at David Lereah for saying "real estate never goes down, never has, never will" ? Are you upset with Greenspan for saying "there is no tech stock bubble, and there certainly is no housing bubble; we can identify bubbles only after the fact"?

Yes.

Submitted by FutureSDguy on September 21, 2006 - 10:22am.

Lereah Lereah Lereah. Why doesn't the NAR just present graphs titled "Commission revenue"? That's what matters to them. That would simply the same graph as the ones they show now adjusted down by a multiple of 0.06, the usual commission rate. The buyer is affected by a multiplier of -1.0. The seller gets 0.94.

Is it taboo for these guys to ever use the word "commission", the actual source of income for the NAR (or do they also have bake sales)?

We listen too much: let's talk as buyers and sellers, and let the realtors receive their pay for helping on the transactions. Let's stop letting these guys act as if they're running the show. I got boycotted because I had the nerve to do my own paperwork as a seller--that's the seed of my resentment. They make their living trying to convince everyone that selling houses is too difficult. The lord over the MLS system. And now they're meddling in the affairs of actual property owners by propagandizing the market.

Just a rant. Feel better now. :)

Submitted by powayseller on September 21, 2006 - 12:35pm.

carlislematthew, I like debates.

Submitted by NotCranky on March 8, 2009 - 9:37pm.

powayseller wrote:
A 63% drop. I am called extreme for suggesting it could happen here, because we are different. Hey, are we different? Perhaps their housing bubble dwarfed ours?

Just looking for old threads where declines were predicted or predictions were refuted. For fun, of course.In this one, Powayseller strikes again!(The real poway seller).

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