[logline]

I think the gift we got in 2010 was a once-in-a-lifetime offer. Those who recognized it and weeded out the naysayers have increased their standard of living... in many cases, tremendously. I guess the lesson is to learn how to see opportunities when they arise.

That doesn't mean Las Vegas house prices won't go down. I actually think they might dip a little, but not to the insane lows we saw back then.

[007 license to sell]

I see that there have been a few people wondering what's going on with the Vegas Valley foreclosures.

There was an article in the local paper that addressed just that.
Notices of default jump 128 percent in Nevada

Click on the link below to view:

Notices of default jump 128 percent in Nevada | Las Vegas Review-Journal

[BBMW]

At some point, the extremely low interest rates we've had for the last several years (since before the recession) will end. When this happens, you'll likely see the mother of all real estate collapses.

Remember, before this period, mortgage rates hovered around 7%. What are they now 4-4.5%? Do the math as to what the change to buying power would be for the same payment between the two rates. That will tell you how far prices would have to drop.

Okay, out of curiosity, I ran the numbers. For the same mortgage payment, a payment that would support a $250,000 house only supports a $185,000 house (going from a 4.25% to 7% mortgage). That's a 26% drop.

[ND_Irish]

Originally Posted by BBMW

At some point, the extremely low interest rates we've had for the last several years (since before the recession) will end. When this happens, you'll likely see the mother of all real estate collapses.

Remember, before this period, mortgage rates hovered around 7%. What are they now 4-4.5%? Do the math as to what the change to buying power would be for the same payment between the two rates. That will tell you how far prices would have to drop.

Okay, out of curiosity, I ran the numbers. For the same mortgage payment, a payment that would support a $250,000 house only supports a $185,000 house (going from a 4.25% to 7% mortgage). That's a 26% drop.

This is an excellent point and one which I rarely hear people discussing. If you look at a chart of 30-year fixed rate mortgage rates, it is troubling to say the least. Here is one from the St. Louis Fed: http://research.stlouisfed.org/fred2...raph.png?g=Jzj. If you believe in reversion to the mean, mortgage rates at some point will likely rise significantly. Using data from Freddie Mac going back to 1972 for 30-year fixed rate mortgages (Primary Mortgage Market Survey Archives - 30 Year Fixed Rate Mortgages - Freddie Mac), I calculated the average rate from 1972 through 2013 using their annual averages. The average 30-year fixed rate for that period was just over 8.5%, and we have had average rates that high as recently as 2000. Using your numbers and a 30-year fixed mortgage rate of 8.5%, the price of the house would need to be approximately $160,000, or approximately 36% lower, to have the same monthly payment.

[logline]

Originally Posted by BBMW

At some point, the extremely low interest rates we've had for the last several years (since before the recession) will end. When this happens, you'll likely see the mother of all real estate collapses.

Remember, before this period, mortgage rates hovered around 7%. What are they now 4-4.5%? Do the math as to what the change to buying power would be for the same payment between the two rates. That will tell you how far prices would have to drop.

Okay, out of curiosity, I ran the numbers. For the same mortgage payment, a payment that would support a $250,000 house only supports a $185,000 house (going from a 4.25% to 7% mortgage). That's a 26% drop.

This same, tired, FALSE argument has been made here by our resident one-post wonder and the historical data does not support that correlation. This has already been debunked. Look at previous graphs posted in this very thread. I keep repeating myself and am just too tired to go back and search for it again. You simply cannot "run the numbers" and say that's how much a house price will drop. It's not that simple.

Interest rate rises in the mortgage market do not necessarily mean lower house prices! If interest rates rise, it will likely be due to inflation. Particularly wage increases and the increase in the velocity of money. What do you think happens to house prices in the face of inflation? Don't take my word for it. Look it up. What other hard assset (besides maybe gold/silver) do you want to be holding when inflation hits?

New home sales hit all-time highs back in 1978-79! Think of all the people today (some on this board) who tell you stories of paying 15% mortgage rates for their home back then. My own father still likes to tell that story when he hears people complain today. Did the interest rates prevent these people from affording a home? Were they stupid? No. They could afford it and could also take advantage of future refinancing. Also, there will be pent up housing demand when growns "kids" land better-paying jobs and get sick of living in their parents' basement at the age of 40. A club our one-post-wonder here is surely a member of.

[logline]

Originally Posted by ND_Irish

This is an excellent point and one which I rarely hear people discussing. If you look at a chart of 30-year fixed rate mortgage rates, it is troubling to say the least. Here is one from the St. Louis Fed: http://research.stlouisfed.org/fred2...raph.png?g=Jzj. If you believe in reversion to the mean, mortgage rates at some point will likely rise significantly. Using data from Freddie Mac going back to 1972 for 30-year fixed rate mortgages (Primary Mortgage Market Survey Archives - 30 Year Fixed Rate Mortgages - Freddie Mac), I calculated the average rate from 1972 through 2013 using their annual averages. The average 30-year fixed rate for that period was just over 8.5%, and we have had average rates that high as recently as 2000. Using your numbers and a 30-year fixed mortgage rate of 8.5%, the price of the house would need to be approximately $160,000, or approximately 36% lower, to have the same monthly payment.

No. It's not. See above.

[ND_Irish]

Originally Posted by logline

No. It's not. See above.

We'll see who is right. I think you are underestimating what is going to happen this time around. In prior years we have never had the level of central bank intervention like we have currently in all markets so I do not believe the past is as useful in terms of guidance. In my opinion, this has created multiple bubbles including real estate, equity markets, technology, and sovereign debt, which I believe is the most significant.

If you look at markets in terms of cycles, I think the Las Vegas real estate market is starting to feel like 2006. That is, inventory and prices are up, and sales are beginning to slow down. I think homes in this area were appropriately priced in 2010-2012. I purchased here during that time. While I do not think pricing is nearly as bad as it was during the last real estate boom, I think pricing once again is starting to drift away from the long-term trend line due to interest rates which are still artificially low.

[BBMW]

They MUST mean lower housing prices, because the higher interest rates collapse the buying power of the mortgage payment.

Think what you want. When it hits we'll see the results. But ask yourself this, why has the Fed been suppressing interest rates if this is not the case?

Originally Posted by logline

This same, tired, FALSE argument has been made here by our resident one-post wonder and the historical data does not support that correlation. This has already been debunked. Look at previous graphs posted in this very thread. I keep repeating myself and am just too tired to go back and search for it again. You simply cannot "run the numbers" and say that's how much a house price will drop. It's not that simple.

Interest rate rises in the mortgage market do not necessarily mean lower house prices! If interest rates rise, it will likely be due to inflation. Particularly wage increases and the increase in the velocity of money. What do you think happens to house prices in the face of inflation? Don't take my word for it. Look it up. What other hard assset (besides maybe gold/silver) do you want to be holding when inflation hits?

New home sales hit all-time highs back in 1978-79! Think of all the people today (some on this board) who tell you stories of paying 15% mortgage rates for their home back then. My own father still likes to tell that story when he hears people complain today. Did the interest rates prevent these people from affording a home? Were they stupid? No. They could afford it and could also take advantage of future refinancing. Also, there will be pent up housing demand when growns "kids" land better-paying jobs and get sick of living in their parents' basement at the age of 40. A club our one-post-wonder here is surely a member of.

[ddrhazy]

Put your money where your mouth is Irish. Sell your house and start renting if you believe the burst is looming.

[logline]

Originally Posted by ND_Irish

I think pricing once again is starting to drift away from the long-term trend line

All historical data to the contrary:


Draw a line on that graph and extrapolate the long term trendline. Where does that line intersect with 2014?

Again... this has all been discussed here before.