20 replies to this topic

[Rogerdodger]

"I think the price bottom is still many months in front of us..."
I mean, what do I know from real estate, but "months?"

We sold our house in the mid 80's as a housing slowdown began here.
We rented while we waited to find a deal.
The prices continued to soften for a couple of years and then finally stabilized.

Why would anyone be in a hurry to buy now?

This may be one reason that politicians secretly desire the free flow of of foriegn bodies to enter the country as quickly as possible? They need housing:

In more and more countries, women started having fewer children than the number required to keep populations stable. Four out of nine people already live in countries in which the fertility rate has dipped below the replacement rate. Last year the United Nations said it thought the world's average fertility would fall below replacement by 2025.

MOSCOW – Russia is facing a demographic crisis so dire that its population could shrink by half within 50 years. The only obvious solution – to encourage youthful immigrants from overpopulated Asian neighbors such as China – is so politically sensitive that Russian leaders refuse to even discuss it.
Russia's challenge is a double whammy. Like most of the developed world, birthrates have fallen far below levels that would sustain the population. At the same time, Russian death rates, particularly among working-age males, have skyrocketed due to post-Soviet poverty, substance abuse, disease, stress and other ills.
Russia's population has fallen from 149 million a decade ago to just over 144 million today. Male life expectancy now stands at 59 years, with the average Russian woman living 72 years.
Demographic experts say that the country is losing one million of its population annually, and the nosedive is accelerating.
LINK

Edited by Rogerdodger, 04 August 2007 - 10:26 PM.

[Trend-Shifter]

I see a couple other problems in the pipeline... Think of what happens when someone did the right thing. They put down 10-20% and they have a good credit history. Their interest rate is fixed at a good rate. They have/had a good job. Now for what ever reason this person needs to move. Job opportunity, change school district, loss of work, transfer, etc. This person would be underwater in a declining house market. This is not a sub-prime event. The other problem is the "stable managed income" funds that holds some mortgage backed securities. They are only yielding 4% now and could lose value.

[risktaker]

In parts of the Silicon Valley, housing inventory is low and prices are still going up. A friend of mine put his house on the market last weekend and got 10 offers in a couple of days. Half the buyers are putting 50% down. I talked to another guy today who says two of his neighbors in San Jose sold their houses at higher prices recently. Nevertheless, things can change in a dime with the increase in the long term mortgage rate.

[arbman]

I think the coastal and some select areas in the metropolitan cities will not get terribly effected by the housing deflation. The reason is there are only so much land in these cities and a long list of people to move in with good income. If a nationwide deflation begins and the businesses start to go bankrupt, there is always the possibility of a mild discount, but the prices are yet to come down in my area, they are still only going up and there is almost no "for sale" sign, none. There are only 3 or 4 new constructions around my neighborhood of 2 square miles...

[pdx5]

The housing situation is really not all that complicated. It all started after 911. There was panic in the air. People stopped flying. They stopped buying. They cancelled vacations. Bla bla bla.....next thing the Fed (Greenie) goes in panic mode and starts dropping interest rates on fed funds to banks all the way down down down to 1%. That is depression level rates! The low rates enabled a lot of people to buy homes. That caused more demand for homes. RE brokers started inflating prices since the higher the price higher the commission. Stock market was in doldrums post 911. So where could the money go? HOUSING! The booming Housing market brought in the sub-prime lenders. It was a win-win situation for them. They could make a quick buck on processing the mortgage, and the risk was nill since a default on mortgage payment was no problem! The house could be sold at good profit. At my high class private golf club here in Vancouver, WA I noticed most new members were in the mortgage lending business. The speculators were flipping condo's galore and the builders went in to overdrive. Well what stopped such a bonanza for all? The house owner was happy, the real-estate broker was happy, the lender was happy. What happened is that the prices went so high that even with ZERO interest a lot of buyers could not afford the house. A chink in the armor appeared. Then the sub- prime crowd ran into ARM rate adjustments. Some sub-prime borrowers defaulted as early as 3 months after buying. It was easier to buy a house with zero down that to rent! Now it is all coming together. There is excess inventory due to builders going crazy. ARM's are squeezing the borderline borrowers. The speculators have fled the scene. And to top it all, THE FED WAS FORCED TO INCREASE RATES TO FINANCE THE DEFICIT SPENDING BY THE GOVERNMENT. Like someone noted above, even the credit-worthy borrower needs to sell the house sometime..job transfer/divorce/retirement/death..but with easy loans having disappeared, there is a shortage of buyers. Where will the housing bottom? Where it should! And that is when the income levels can justify the price. Ed Rader is correct in that a 70k incomer living with a million dollar mortgage does not jive. Nationwide it will take atleast one year may be two before house prices stabilize. I still recall an article by a 3rd generation RE sales person in California written last year. He said do not buy unless you absolutely have no choice. Wait 3 years and you will pick up a bargain. In retrospect he was so correct.

[pdx5]

I think the coastal and some select areas in the metropolitan cities will not get terribly effected by the housing deflation. The reason is there are only so much land in these cities and a long list of people to move in with good income. If a nationwide deflation begins and the businesses start to go bankrupt, there is always the possibility of a mild discount, but the prices are yet to come down in my area, they are still only going up and there is almost no "for sale" sign, none. There are only 3 or 4 new constructions around my neighborhood of 2 square miles...

I don't know if you recall that house prices even in coastal California declined significantly
some 20 years back. But you are right in that the really desirable areas will be less
affected than 95% of the average neighborhoods.

[Rogerdodger]

Them that's got shall get Them that's not shall lose So the Bible said and it still is news Mama may have, Papa may have But God bless the child that's got his own That's got his own Billie Holliday, covered by Blood, Sweat and Tears

[arbman]

Do I remember? No, I wasn't here back then. But I know that the problem was mostly due to the migration of some major industries, mostly manufacturing I suppose, at the height of the interest rates in early 1980s. The local economy here is very diverse now that a massive sale is unlikely to happen, yet there is still the high interest rate risk in the future... (I was 9 year old in 1982 and the interest rates were a bit foreign to me)

[humble1]

excellent point, iron cross ! one i had not though of and one i have not heard anywhere else. Q: do you think there will be pressure to have fannie mae and freddie mac pick up some of these loans, when things get dire a couple of years from now ?

[PorkLoin]

Cirrus: I've always assumed that we would get more CPI data from the commisar of the BLS and a Fed policy that was fearful of deflationary implications in a highly leveraged economy.

Me too, Tim. Is there the political will to take deflation over the "easy way out" of doing whatever to prime the pump? I sure don't think so, and imagine that we at least have to see the Fed going from cautious/neutral, etc., to getting both feet back on the gas pedal.

In the very long run neither the Fed (nor anybody else) can stop deflation, IMO, but we haven't even seen the Fed go down swinging yet, and I bet we will.

Doug