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We ALL saw small decreases since 2006, but are DONE and things are turning around, just like Raleigh.
If you want to argue against Doom & Gloomers regarding long term prospects, that's one thing, but to claim that the decreases are "DONE" in the face of record setting declines in home sales, prices, starts-- not to mention increases in mortgage rates, foreclosures, bank failures, Freddie/Fannie/FHA problems, etc.-- that's kind of a lot to claim without some hard data that shows sequential months of improvement. Got any data that shows a trend? If not, your belief that the price declines are over is baseless.
I'm not in California, Arizona, Florida or Nevada. I'm looking out my window at rows and rows of stale "for sale" signs and "price reduced" signs.
We're going into fall now. What do you think is about to happen?
If you want to argue against Doom & Gloomers regarding long term prospects, that's one thing, but to claim that the decreases are "DONE" in the face of record setting declines in home sales, prices, starts-- not to mention increases in mortgage rates, foreclosures, bank failures, Freddie/Fannie/FHA problems, etc.-- that's kind of a lot to claim without some hard data that shows sequential months of improvement. Got any data that shows a trend? If not, your belief that the price declines are over is baseless.
I'm not in California, Arizona, Florida or Nevada. I'm looking out my window at rows and rows of stale "for sale" signs and "price reduced" signs.
We're going into fall now. What do you think is about to happen?
Any economist can see that the inventory numbers reflect a glut of supply. If price stability was in our future, the inventory would already be greatly eaten up. All this means is that people are under the delusion that their homes are worth more than they are, and aren't budging out of stubbornness, being upside down, whatever. The prices will eventually come to an equilibrium, either from sellers getting over themselves and it coming down slowly, or by a HUGE wave of foreclosures and having them come crashing down.
KC,
I see your point... that the blip in appreciation in the peak months may be just a bump due to seasonality... but that the overall longterm trend may be down. Like I said, I'm not assuming a long term trend from this data, but that the fact that there was appreciation shows that there is some sense of normality in markets outside of the "red" States.
When I say normal, I mean historical trends with nominal appreciation at or near the rate of inflation and markets that move along with seasonality. California is not working normally as the rate of depreciation was higher in the Spring than it was in the Winter. Obviously, market pricing works on supply/demand.
There were also more foreclosures, tighter lending standards, and so on in the spring compared to winter. So I don't think you can say that seasonality was the only variable in that comparison. I think supply and demand still works there, it's just a bit more complex due to how far out of equilibrium things got. But in any case, you'll never hear me saying that they are "normal" in the "historically stable" kind of way.
I don't think we disagree that much - I'm certainly not expecting everywhere to look like CA or FL over the next few years. I do think that this is and will continue to be more widespread than a lot of people expected, though - even recently we'd never seen prices go down nationwide before. After enough "never happened before" things have happened to housing in a relatively short period, you start to wonder just how uncharted the waters are.
Past downturns typically had a large component of the extra appreciation wiped out by nominally flat prices over a few years being eroded by inflation. I still think this will be the case for the healthiest of the dropping areas around the country, but I do see many more than last time will have smallish nominal drops (5-20% total over the course of several years). So I need to be clear that "worse than past down turns", or "a serious nationwide problem" is not the same as "everywhere is going to see 50%+ price declines and look like CA or FL, just with colder weather".
Even 20% nominal drops spread out over 4-5 years is going to be missed by anyone not studying the market closely - it's only 4-5% a year on average. But it adds up over the years, especially when prices "should" go up 4% and instead go down 5% or whatever. Hence my interest in how much of the US is affected by the smaller 5-10% drops as much as my (morbid) curiosity about the obvious bubble areas.
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You are also guessing that the long term trend for all markets is going to be down. It may be the case in the short-term... but historically speaking, the long-term trend is up (at roughly the rate of inflation or a little higher).
Nah, I never said that. The long term trend for a lot of the states is negative, as the 12 month graph shows, but certainly not all of them (TX and other energy states are still doing well, for instance). There's a bit of an (assumed) seasonal blip in the 3 month numbers. But just as the 3 month numbers from winter made the trend look worse than it was, I think the 3 month numbers from the peak of the selling season may be giving us a bit of false hope.
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There's a simple reason for this... there's an underlying value for shelter.... usually as reflected by rental rates. As inflation increases, the underlying value of shelter still stays the same... therefore nominal prices have to increase. With the increase in inflation this year... the nominal prices of homes should also increase. On the other hand, if we have deflation... then nominal prices should also decrease.
Rental prices aren't fixed, though. They can change as supply of rentals or ability to pay vary. There's roughly a million empty houses out there on the market - if many of these come on line as rentals that'll drive prices for shelter down noticeably.
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Technically speaking, the value of homes in California have dropped a whole lot more than the ~30% nominal price drop that we have seen. In real terms, the value has dropped close to 35% for the year.
-chuck22b
Yeah, no argument that it's a pretty impressive drop. It's a bad sign for the economy when historically high inflation is lost in the noise of nominal price drops.
Actually, just flew through Raleigh, 2 weeks ago, on our way to Pinehurst for a Jr. Golf tourn. our son played in. All looked "pretty good to me"! Parents used to live in Greesboro, so know the area somewhat. I think the the Raleigh area has been OK and was NEVER as inflated as states like CA, which is why they too, have not taken the hit like others. We ALL saw small decreases since 2006, but are DONE and things are turning around, just like Raleigh.
What the heck are you talking about? Raleigh didn't see price decreases in 2006. 1q2007 data from OFHEO showed prices a bit over 7% higher than in 1q2006. The market there was actually going reasonably well until Sept 2007 or so, when the second wave of the credit crisis hit jumbo loans.
In case you didn't know, real estate is local - not all areas are exactly the same as your neighborhood in Chicago. You're doing exactly the same thing you accuse everyone else of, which is assume that what happened in your particular neighborhood is what's happening across the country. Come on, the data's out there and readily available - it sure beats pretending you know everything about an area because you've bee in their airport once before.
What the heck are you talking about? Raleigh didn't see price decreases in 2006. 1q2007 data from OFHEO showed prices a bit over 7% higher than in 1q2006. The market there was actually going reasonably well until Sept 2007 or so, when the second wave of the credit crisis hit jumbo loans.
In case you didn't know, real estate is local - not all areas are exactly the same as your neighborhood in Chicago. You're doing exactly the same thing you accuse everyone else of, which is assume that what happened in your particular neighborhood is what's happening across the country. Come on, the data's out there and readily available - it sure beats pretending you know everything about an area because you've bee in their airport once before.
I think you misread, I said since 2006, not in 2006. And you are correct to accuse me of not knowing much about NC. I'm not sure what you area accusing me of, since I'm not sure what you think I think happened in our neighborhood. I speak as a whole, even since 9/07 or 4Q, that markets are not down in large percentages, were lower in 1Q of 08 than the unposted 3Q of 09, peak season or not. I also strongly disagree that prices are going to continue to fall 3-4% annually, form this point, IN ANY state in the US. You'd have to be pretty clueless and our economy would have to be in a deep, deep depression for that long and longer for this to be true. Just because I don't quote data and give links to 50 different websites, doesn't mean I am pretending to know everything. What data there is, is always disputed in some way, shape or form, no matter where it comes from or who it comes from. What I do know and wholeheartedly agree with is that real estate is local and is what I've been saying all along!!!
we need people like you and I who balance out the over doom and gloom and over generalization of all States.
Predicting that real estate is going to return to historic norms is only "doom and gloom" to over extended loofers who HELOCed themselves into oblivion, based their retirement on inflated real estate etc etc. Also, I don't see anybody making over generalizations. I've told fairmarketvalue many times that I don't know about her area nor do I care. I think many in the "doom and gloom" club will claim that real estate is going to weaken in most areas due to a variety of macroeconomic conditions, but not that every market is going to behave the same way.
This reminds me of a year ago when only a few markets were having problems. Everyone thought their "local market" was safe and that was that. Of course a year later a lot of these previously safe markets are now seeing major price declines.
Predicting that real estate is going to return to historic norms is only "doom and gloom" to over extended loofers who HELOCed themselves into oblivion, based their retirement on inflated real estate etc etc. Also, I don't see anybody making over generalizations. I've told fairmarketvalue many times that I don't know about her area nor do I care. I think many in the "doom and gloom" club will claim that real estate is going to weaken in most areas due to a variety of macroeconomic conditions, but not that every market is going to behave the same way.
This reminds me of a year ago when only a few markets were having problems. Everyone thought their "local market" was safe and that was that. Of course a year later a lot of these previously safe markets are now seeing major price declines.
Hi Humanoid,
You tend to assume that I believe that home prices are going to appreciate like it did in the "liar-loan", boom years. I'm far from that. Nor am I delusional about my home value and I've already accepted that currently I've already lost my down payment and maybe some ... But, it shouldn't really matter since I'm not selling anytime soon.
I don't think markets going back to historic norms is "doom" and "gloom". I think that is a very reasonable assessment. In fact, the sooner we get back to historic norms the better it is for the general economy. In some places, IMO, we're actually getting back to historical affordability levels.... and that is where most of the disagreements come from. What is historical norm?... and when will we reach this point?
Those who HELOC'ed themselves into oblivion deserves what's coming to them. They have to learn responsibility somehow. I think the drop in prices will actually be good for society. With less debt burden, the cost of shelter would eat up less of society's wages and allow for more flexibility. Maybe, California would regain more competitiveness and retain/draw in more talent as the cost of living becomes relatively more affordable.
What I think is doom and gloom is if someone looks at the severely depressed markets, and then generalizes that all markets are going to face the same fate (actually it doesn't look like you or KC are saying that). I also think those who totally discounts/dismisses any signs of improvement because it disagrees with his/her previous premonition on markets are more "doom" and "gloom".
Yes, some markets are worse than others... but even in the worst markets there are signs that things are better than they were a year ago. Some areas in California has already had 3+ months of Y/Y sales growth. New Home Inventory AND existing home inventory has dropped bellow the 8 month mark. The IE is no longer number One in the foreclosure rankings. Home affordability has improved drastically in a very short time. And the rate in which median prices have been falling has slowed. All of this pretty much happened in less than a year. Barring major economic slowdown, I really doubt we will see as steep drops in values as we saw earlier this year.
People tend to forget the other side of the picture. As more people move into "affordable" housing units their ability to spend will improve. One possible reason HELOC spending was used was because the cost of housing in California was high. If housing is cheap, people wouldn't have to use HELOCs to spend, but instead use their regular incomes. Also, if home sales are increasing... then so will home furnishing, etc. (according to dataquick, the majority of buyers today are first time home buyers)??
Sorry, if seeing a light at the end of the tunnel is being a dolt. I guess that is why I'm more of an optimist. But, I don't think I'm a totally blind optimist.
Don't be sorry Chuck. Look at me, deep down inside I have some positivity. I need to. I own 2 homes and have a family to support. But I live in the Inland Empire and historically, it has not fared well during downturns :-(. Buck up as they say? good luck to us all.
But, it shouldn't really matter since I'm not selling anytime soon.
It does matter, you lost a lot of money there is no way to deny it. The fact that some day the nominal price on your home will return to what you bought it for does not change matters. Frankly I'm really sick of hearing this sort of thing. Financially the difference between you and someone who rented for a few years and then bought is dramatically different. The renter will end up with hundreds of thousands that you won't, all because they understood the market better. Anyhow, you lost a lot of money you should be thinking how you made such a mistake instead of denying the mistake.
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I also think those who totally discounts/dismisses any signs of improvement because it disagrees with his/her previous premonition on markets are more "doom" and "gloom".
The problem is that many of the things that sound positive, when you dig into them aren't so positive. There really aren't many good indicators in the California market yet.
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Some areas in California has already had 3+ months of Y/Y sales growth.
Historically sales "bottom" about 4-5 years before prices bottom, see here for a brief look at this:
Are we there yet? When will housing prices hit bottom? | L.A. Land | Los Angeles Times (http://latimesblogs.latimes.com/laland/2008/08/are-we-there-ye.html - broken link)
So although this is a "good sign" in some sense it doesn't signal a bottom in prices in any sense.
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New Home Inventory AND existing home inventory has dropped bellow the 8 month mark. The IE is no longer number One in the foreclosure rankings.
Where did you get the 8 month figure? But regardless it has been going down, but a more important question is why? It is not because more sales are happening, they are about the same as last year. Instead it dropped because the number of homes on the market dropped. So on the face of it its a good sign, but when you look at the actual numbers its not a good sign at all. Around 35% of the sales in California were distressed so the non-distressed sellers are vanishing for some reason. What is the reason and what is going to come of them? Did all of these people lose interest in selling their house and instead are going to live in it for another 10 years? Unlikely, the inventory numbers are indicating that there is a large amount of "shadow inventory". IE is no longer number one in foreclosures? Who cares?
I think you misread, I said since 2006, not in 2006.
Prices now are still higher than in 2006 in the Raleigh MSA. They were up in in 2006, up slightly less in 2007, and flat so far this year. Where's the data for the price drop and recovery you claimed for the area?
As for your predictions, I guess we'll see what happens in the future. I don't know why 3-5% drops for a few more years is so hard to believe, considering it's happening now and the RE and credit markets are getting worse overall. If you had some sort of data to back up what you're saying it might be worth investigating, but it just sounds like you're hoping for the best regardless of what's really happening. That's not a bad trait in moderation, but accusing others of being clueless because not everyone shares your irrational optimism is pretty weak.
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