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OP, when your home is overpriced the market does inevitably seem slow. Your house can still sell but it's going to cost you a major price reduction based on the info from your other thread.
A neighbor down the road reduced his price 10k about 5% and still hasn't had 1 looker for the month of July.
This is the chill I've been talking about up and down for at least a year. Sellers can't sell, buyers can't buy. Right now the reason why buyers aren't buying is the sellers (can't afford to sell for what price is necessary to move the property). Maybe some are getting turned off to homeownership as well, but I think that's still more of a minority.
Soon inflation will be here, and the market will still be in a freeze, but not because sellers are underwater. It will be the buyers hit by higher interest rates and more stringent underwriting guidelines as the public sector shifts the burden of lending back on to the private sector.
Still don't see prices going down much further from here, I think this is it - we're seeing the bottom form this summer (in nominal dollars, not inflation adjusted dollars).
That is not necessarily true. See US: mid-late 1970s.
You can have an inflationary recession, or a stagflationary recession. If the dollar loses value and/or the costs of goods and services increase, wages can rise but at a lower rate than the CPI or whatever your favorite inflation measurement may be.
Ben Bernanke, as long as he's running the Fed, will not allow deflation to take root. He's been clear about his intent in that regard and he's been consistent with his actions since taking office.
Another spiral down in prices would mean we are in a deflationary depression, and would trigger a financial crisis which would very likely bring down several western governments, destroy our private finance sector, and create one heck of a mess.
Things will get bad, maybe even that bad, but not by virtue of deflationary pressures.
That is not necessarily true. See US: mid-late 1970s.
You can have an inflationary recession, or a stagflationary recession. If the dollar loses value and/or the costs of goods and services increase, wages can rise but at a lower rate than the CPI or whatever your favorite inflation measurement may be.
Ben Bernanke, as long as he's running the Fed, will not allow deflation to take root. He's been clear about his intent in that regard and he's been consistent with his actions since taking office.
Another spiral down in prices would mean we are in a deflationary depression, and would trigger a financial crisis which would very likely bring down several western governments, destroy our private finance sector, and create one heck of a mess.
Things will get bad, maybe even that bad, but not by virtue of deflationary pressures.
Interest rates will remain rock bottom and the money presses will keep rolling... all in the hopes to trigger inflation. It's the crux of the entire plan. Even as a big doom and gloomer I would think your "financial crisis which would very likely bring down several western governments..." is a stretch. Sure it could happen. We could all be gone on 12/21/12, also.
I'm not a huge fan of homes following "simple supply and demand" - I think it's much more complex then that... But the dot com boom preceding the credit bubble and the run up it caused in housing completely threw the stock out of whack. There are countless McMansionvilles slapped up by every builder/developer with a heartbeat over the past 10 years - there was no regard to the median incomes of the areas and certainly no regard to whether folks could meet their obligations. Significant portions of the subdivisions they started were never finished... shadow inventory sits all over the place.
I don't know what you specifically define as "another spiral in prices"... But, further reductions may not be coming just from deflationary pressure. They could simply be coming from zero appetite to buy $500k+ tract built or 30yr old homes in areas where the median family income is ~100k annually... or folks wanting $1m+ 8k sqft replica Scottish castles in the suburbs. Not just talking resale here. There's still plenty of room to build in either scenario if you want to go "pick your colors". We've spent the last 10 years catering to a demand that has all but dried up... If there's not "another spiral in prices" who is going to buy all this shiny new McMansion house stock sitting available? Plenty of which just sits vacant and not even on the market. What happens when folks sitting in them today want to sell?
The builders are already trying to make the switch to "new models available" as they try to trick the current owners in the area that they didn't get ripped off paying waaayyy more for essentially what their neighbor will get brand new... There's not much else they can do as the demand is now at the much lower prices. It's still completely out of whack as folks now want to buy with FHA, under the FHA limits, and continue to be conservative overall. I don't see how you can generate enough inflation (aka hyperinflation) to stop the higher price homes from continuing to see significant reductions.
Interest rates will remain rock bottom and the money presses will keep rolling... all in the hopes to trigger inflation. It's the crux of the entire plan. Even as a big doom and gloomer I would think your "financial crisis which would very likely bring down several western governments..." is a stretch. Sure it could happen. We could all be gone on 12/21/12, also.
I'm not a huge fan of homes following "simple supply and demand" - I think it's much more complex then that... But the dot com boom preceding the credit bubble and the run up it caused in housing completely threw the stock out of whack. There are countless McMansionvilles slapped up by every builder/developer with a heartbeat over the past 10 years - there was no regard to the median incomes of the areas and certainly no regard to whether folks could meet their obligations. Significant portions of the subdivisions they started were never finished... shadow inventory sits all over the place.
I don't know what you specifically define as "another spiral in prices"... But, further reductions may not be coming just from deflationary pressure. They could simply be coming from zero appetite to buy $500k+ tract built or 30yr old homes in areas where the median family income is ~100k annually... or folks wanting $1m+ 8k sqft replica Scottish castles in the suburbs. Not just talking resale here. There's still plenty of room to build in either scenario if you want to go "pick your colors". We've spent the last 10 years catering to a demand that has all but dried up... If there's not "another spiral in prices" who is going to buy all this shiny new McMansion house stock sitting available? Plenty of which just sits vacant and not even on the market. What happens when folks sitting in them today want to sell?
The builders are already trying to make the switch to "new models available" as they try to trick the current owners in the area that they didn't get ripped off paying waaayyy more for essentially what their neighbor will get brand new... There's not much else they can do as the demand is now at the much lower prices. It's still completely out of whack as folks now want to buy with FHA, under the FHA limits, and continue to be conservative overall. I don't see how you can generate enough inflation (aka hyperinflation) to stop the higher price homes from continuing to see significant reductions.
At some point, RE investors will start to salivate at the prospect of scooping up those 8k sq ft homes and subdividing them into 3,4,5,6 unit homes. Might change the dynamic of that neighborhood where the original buyer was a faux affluent middle class person, but that's where I see it going.
So I don't see what can bring homes down further. FASB will not suspend rules like 166 and 167 forever to allow banks to keep losses off the books and keep properties in default on the books for 100% value as if the years from 2007-2010 never happened. It will take an act of god to drop average home prices nationally more than another 4-6% (locally that may be more or less) without causing banks to become insolvent despite changes in accounting to make them look healthier on paper.
But, I think we're splitting hairs. I'm not saying RE is healthy or healing or going to improve anytime soon - I'm only saying inflation will make things appear as if they aren't deteriorating from here on out.
There are no signs of inflation now, or anytime soon. Nor have there been any signs of inflation for years & years. If the printing press is set to run 24/7 we might see some inflation in several years, but as of now it does no exist.
Then your neighbor is still overpriced in my opinion. Well priced homes that are in good condition still sell.
Is it possible that it's not over-priced but people are not buying? I have a relative who lives in a $550k home, nice area of CT. He dropped the price to under market and yes people are looking at HIS home. In fact a lot of people. But no one's made an offer. So what's he do? Keep lowering until someone buys?
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