[rpachigo]

ReviewJournal.com - Breaking News - Economists say housing market to remain unstable

Olecapt, care to comment?

[olecapt]

Originally Posted by rpachigo

ReviewJournal.com - Breaking News - Economists say housing market to remain unstable

Olecapt, care to comment?

See my blog at


http://www.city-data.com/blogs/blog3...nel-train.html

If thing go as at present homes will lose 45% or so by year end and be close to valueless at the end of 2010. All avaiable housing will be rentals.

I therefore expect we will see things change sometime soon.

Note that Vegas is likely to do relatively better than much of the country. So imagine what a mess it will be if things continue running along.

[rpachigo]

Interesting read and interesting times. My guess is prices drop some more and we are at plateau for 5 years, maybe more or less. Who wants to buy a house now at a higher price than the person you're buying it from. Maybe 10% or less. No market for that. Everyone wants to pay less than the guy they're buying the house from bought at. Also any serious loan mods would have serious unintended consequences - people intentionally missing payments, etc to work out a better deal. Then more bank losses and the cycle continues in a different way. I've already told my FIL who bought in Palm Beach, FL a $500,000 condo in 2005 to stop making payments if anything like that occurs.

[olecapt]

Originally Posted by rpachigo

Interesting read and interesting times. My guess is prices drop some more and we are at plateau for 5 years, maybe more or less. Who wants to buy a house now at a higher price than the person you're buying it from. Maybe 10% or less. No market for that. Everyone wants to pay less than the guy they're buying the house from bought at. Also any serious loan mods would have serious unintended consequences - people intentionally missing payments, etc to work out a better deal. Then more bank losses and the cycle continues in a different way. I've already told my FIL who bought in Palm Beach, FL a $500,000 condo in 2005 to stop making payments if anything like that occurs.

I see no possiblity of a plateau. That is what I find most troubling.

Anything that stops the REPO mechanism will lead to a very fast price increase...really just changing from selling REPOs to sellling everything else. And the volume goes away. And we have 18 months of inventory.

What I would like to see is some gentle mechanism that levels things for a year or so...but I don't see any way.

This thing is so far out of control that if you touch it some other bad thing will happen.

[ClarkGrisowld]

Originally Posted by olecapt

Anything that stops the REPO mechanism will lead to a very fast price increase...really just changing from selling REPOs to sellling everything else. And the volume goes away. And we have 18 months of inventory.

I'm not sure about that. From a purely mathematical perspective, you are correct that repo's clearing will result in a higher price, but based only on a weighting change of types of sales and removing firesales at the bottom tier. The "real" price level on non-stressed properties I don't see changing much because repos clearing doesn't really do anything for their supply/demand fundamentals.

The mid and top tier are arguably 9-10% overpriced. I don't think repos clearing are going to cause a rush of people to bid up those prices. It will stem the free fall, but it's still very tough and very uncertain economic times. I can't imagine why, in this price range, you're initial offer wouldn't be 10-15% below asking, if not more.

Ehh, I guess that's your point about volume disappearing.

As I've said before, bubbles bursting characteristically overshoot on the correction. We are arguably not to fair value on non-stressed properties. And a 10% overshoot would imply about 20% more downside. Of course, dealing with a real asset that has obvious stickiness means that rule probably doesn't apply in the same way. People need somewhere to live and they can't just "dump" a house like they can a stock in a market free fall.

I think this comes down to when the finance/credit market distress ends. When that happens, it would not be surprising to see the "real" prices get bid up 5% in a year or so. The trouble is no one has a handle on when this ends, with some feeling we are at or past the bottom and others predicting more gloom yet to come. My personal pulse is that we are pretty close to a peak in layoffs (economy-wide, not LV), probably coming mid-year with hiring not picking up until Q1 of next year. And I think only after layoffs and wage deflation peek do we see a bottom in housing.

[tony soprano]

There seems to be a gathering consensus that our economy does not begin its turnaround until housing stabilizes. Good or bad, I suspect we'll see some legislation out of the new administration that seeks to get potential home buyers off the sidelines. Something along the lines of a tax credit or subsidized interest rates. That's my speculation anyway.

[Huckleberry3911948]

housing prices are too high.

[airics]

i still think the govt is going to have to do something about the devaluation of homes... i have a home that i paid 270 for in 06, i currently owe 200, and its probably worth 170..... If it wasn't rented and paying the mortgage, at this point i would consider walking.... multiply this times a whole bunch of people thinking the same thing and you have one hell of a problem.... and did you see what american express did last week... all of their customers got reevaluated....if you have below a 750 score on experian, you got screwed.. they lowered the lines drastically... i had a 50k line, which is now 15k... and if you had 10k on the card, instead of a 20% debt ratio, now you have a 66% debt ratio which is going to crush your score... incidentally, my score was a 735...

[jaunespinoza]

Refinancing is up sharply, due to historically low interest rates. That may get the ball rolling. I think if you go in low, right now, you will be ok. We are back to the cheaper to buy than rent, and that makes a difference, too. During the bubble, people were willing to spend double to buy--we all saw what happened there. Paying 8-12 times annual rent is reasonable. Paying 20-30 times annual rent is foolish.

[KonaKat]

People are still going to be in trouble re: refi's because you cannot get a mortgage for more than what the property appraises for. So, if it appraises out at $170K and you owe more than that, no help there either.