Real Estate Market / Inflation / Recession / Depression (Denver: mortgage, foreclosures, debt)

[2bindenver]

Silver Lining For Housing Market On Front Range, a story from cbs4denver.com, reports that there's a silver lining for Colorado's Front Range, despite the downward trend of the national housing market. According to real estate experts, metro Denver has been pretty stable compared to the rest of the country and is poised for a quicker recovery. Glenn Mueller, University of Denver Real Estate Professor said, "Job growth that actually creates demand for housing is actually as good or better than many other places in the country, so on the demand side, things look relatively good." Real estate brokers say while prices have dropped a few percentage points, there's other indicators that should give home sellers a reason to feel optimistic.

[Bideshi]

Originally Posted by 2bindenver

, "Job growth that actually creates demand for housing is actually as good or better than many other places in the country, so on the demand side, things look relatively good." Real estate brokers say while prices have dropped a few percentage points, there's other indicators that should give home sellers a reason to feel optimistic.

When the Titanic began it's final slide into the icy deep the stern rose high into the sky! How many clinging to the rails astern high above the water below were optimistic about the future of the ship?

[Bob from down south]

Originally Posted by 2bindenver

Real estate brokers say while prices have dropped a few percentage points, there's other indicators that should give home sellers a reason to feel optimistic.

Yeah...Prozac, Librium, and Valium are indicated, among others.

Home prices will fall until they line up with incomes again. Period. Historic average is 2.8 times annual income. Current prices are still way above the waterline.

Buy now, lose later. Caveat Emptor, bay-bee.

[Charles]

Originally Posted by Bob from down south

Home prices will fall until they line up with incomes again. Period. Historic average is 2.8 times annual income.

Do you think this will apply to Southern California too? If not, maybe what ratio 3.5? 4?

If the latter number then it's about $60K * 4 = $240K. That's probably less than half of what it is now.

[jazzlover]

Originally Posted by Bob from down south

Yeah...Prozac, Librium, and Valium are indicated, among others.

Home prices will fall until they line up with incomes again. Period. Historic average is 2.8 times annual income. Current prices are still way above the waterline.

Buy now, lose later. Caveat Emptor, bay-bee.

Yeah, and that assumes that incomes stay stable or rise. One of these days, the Fed may figure out that it can not inflate the American economy out of this mess (or we go the way of the hyperinflation like what brought down the Weimar Republic in Germany--and brought Hitler to power), and the Fed will then raise interest rates to break the back of inflation. When they do, we will likely have a) a lot of unemployment and b) price deflation of all but scarce commodities (oil comes to mind). That will mean significantly declining incomes and another round of real estate deflation.

[Bob from down south]

Originally Posted by Charles

Do you think this will apply to Southern California too? If not, maybe what ratio 3.5? 4?

If the latter number then it's about $60K * 4 = $240K. That's probably less than half of what it is now.

I think it especially applies to SoCal. I lived in the Inland Empire area for five years, and left near the beginning of the last housing collapse in the early 90s.

The sustainable 2.8 income-to-housing price ratio is based on a historic model of apportionment of family income. Much has been surmised about why CA was "different," but I think we're finally seeing some harsh proof that in CA they were just using more smoke and bigger mirrors than everyone else. If anything, California would be a candidate for a lower sustainable ratio due to the extra tax burdens driven by their seeming inability to say "no." The cost of their overreaching and business-stifling environmental regulations, the costs of unchecked immigration flows across the US-Mexican border, etc, have their state income tax at or near the highest in the nation already (9.9%), and the state government is still dangerously close to broke. Furthermore, the costly risks of natural disaster due to earthquake, fire, and mudslides raises insurance costs.

I think the current housing implosion is already putting that area into a special level of economic Hell...foreclosures actually outnumbered sales in Jan-Feb across the state. I've seen a good number of credible projections of 50-60% declines in median prices in these areas...and in fact, I think more than that is possible. Just look at real-homes-of-genius » Dr. Housing Bubble Blog for a good, graphic look at what's wrong with CA housing. What those people did to themselves is insane--arguably the logical conclusion of the bubble mania...and easily an order of magnitude worse than the generalized damage occurring all across the looted plains.

[Bob from down south]

Well, the unemployment hammer is dropping now.

With Friday's non-farm payroll numbers, and downward adjustments to the Jan-Feb unemployment figures, we now see the loss of 232,000 jobs in Q1 2008. Nearly a quarter of a million new unemployed, on top of those we don't count anymore, i.e. the underemployed and those who have already given up looking for work. That's gonna leave a mark.

That is the indicator I have been dreading...this is a powerful feedback mechanism that threatens to accelerate into a vicious spiral down. Put together with the alarming spike in defaults in consumer credit occuring just as we're getting started with falling employment--auto loans and credit cards in particular, it raises the hair on the back of my neck.

We have a sizeable population of dangerously overextended people, and now they're losing their jobs. Unemployed people with maxxed out credit don't buy stuff. And they expect us to feed them.

[Bideshi]

I'm in aerospace and see headlines of airlines going bust and manufacturers laying off every day. We all quietly expect layoff notices soon and many younger guys are terrified. Like most americans they are just one paycheck away from foreclosure. I am close enough to end game that it doesn't worry me so much, but the option of working part time in retirement will vanish if the economy really tanks hard. They won't need burger flippers or Walmart greeters if there are no customers. I pray it won't get as bad as it looks like it may.

[multitrak]

the s&p500 is UP nearly 35% from its march bottom and the "bad" news (wall of worry) just keeps rolling in...sounds positive for stocks in general to me! a fact of business life is that management hiring and firing decisions are usually inverted to the business cycle: they tend to expand near cycle tops and contract near cycle bottoms...i know it's true for the oil business and i can't see why aerospace would be any different. instead of lowering your job expectations, look into consulting part time if you settle in cos. people with your experience will be badly needed when the aerospace cycle moves up again...

[Charles]

Originally Posted by multitrak

the s&p500 is UP nearly 35% from its march bottom ...

What? No way.

^GSPC: Basic Chart for S&P 500 INDEX,RTH - Yahoo! Finance