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How do you see it? I'm worried that prices may drop even thousands of dollars more and then it will take forever to even get to the point that we are at now. From what I understand, a house appreciates $3-$4k/yr in a normal market. If that is so, then say you house value drops $30K more, then it will take 6-10 years to get back where it was today. What's your take on it? I know nobody can predict the market, but I'd just like some honest feedback.
Who the heck told you "house appreciates XXXX dollars / yr"? That is not how things work. In some areas you might see big year over year gains for a few years, in others there are stable values, in others big declines in a NORMAL market...
Without knowing what the conditions ON THE GROUND in your area are it is impossible to say what will happen in 6-10 months, let alone YEARS.
Similarly without knowing what sort of percentage $30K represents as a fraction of your home's total value it not possible to say how likely it is to "gain this back".
So many factors, some within your control (condition /style), some totally NOT (finances, economy. neighbors).
You really can't do anything to turn around the general trends so there is no sense worrying about that. You can make sure that your home is better maintained than average and THAT is something that you need to do...
Last edited by chet everett; 06-19-2009 at 01:47 PM..
In a normal market, a home generally tends to gain in value in parallel with inflation. Typically, this is around 3%. The market we saw this past decade (10%+ increases each year) was far from the norm. As a result, home prices have dropped dramatically.
So how long would it take you to recoup your losses if you purchased at the peak of the market? Let's say you bought your house in Florida for $100,000 in the summer of 2005. At the end of the bust, let's pretend your home lost 40% of it's value (which, sadly, is not that far off). How long would it take for your now $60,000 home to appreciate back to your purchase price, assuming 3% a year appreciation? 17 years.
Don't forget 6% for real estate transaction fees. That puts you more in line with 20 years.
Now, this assumes that most housing markets will go right back to appreciating in value right after they bottom. This is highly unlikely. What we will most likely see after we hit bottom is that home prices will remain at a certain level for a number of years, weighed down by a high inventories and continuing foreclosures. So, in the end, it's anyone's guess. But the smart money would measure using decades, not years.
I think you probably meant to say 3 to 4% per year and the 3K to 4K/year would work for 100K house. In any case, most economy guru are saying we might be at or close to bottom, give or take a year or two, LOL. But all agree that there may be some time that is going to be flat or inching upward after the correction is done. But again, those are just estimates and they may or may not be correct all over the country.
If you ask me the tampa bay area and specifically my county, I do follow the realtors association housing data every month and median price looks pretty flat now at about 140 to 145K for the last few months but still way down year over year percentage wise. Sell volumes are inching up too as well as inventories inching down. Whether this is a trend or not difficult to tell until you have several months of data. Any statistician will tell you if you fit a line (trend) on too few data there is huge uncertainty about the nature of that trend. Because uncertainty is derived from the data size. When you have more months of data you will be able to tell better what's going on.
I decided to start to look to buy house knowing that it may be on the down side still but there is great inventory at great price. So that's the risk/benefit one has to put into consideration.
The MARKET does not dictate the movement of individual properties!
I personally have made very nice gains from owning properties that moved upward even when the town I was in was moving down.
At the other end I know idiots that have bought absolute MANSIONS in terrible areas and they have seen their equity DROP like a rock EVEN when the overall market was on an upward tear!
Who has not seen individual homes, with the right remodeling, go from a pit to a palace? At the other extreme I bet everybody drives past some faded relic that went from hosting the elite to being a dive...
I sincerely doubt that there are many homes that track EXACTLY with the "market average". In even the WORST melt down area the MAJORITY of the depreciation is due to lenders unloading distressed properties to investors and I can guarantee that the SMART ONES will not want 17 years to recoup their investment...
I think you probably meant to say 3 to 4% per year and the 3K to 4K/year would work for 100K house. In any case, most economy guru are saying we might be at or close to bottom, give or take a year or two, LOL. But all agree that there may be some time that is going to be flat or inching upward after the correction is done. But again, those are just estimates and they may or may not be correct all over the country.
If you ask me the tampa bay area and specifically my county, I do follow the realtors association housing data every month and median price looks pretty flat now at about 140 to 145K for the last few months but still way down year over year percentage wise. Sell volumes are inching up too as well as inventories inching down. Whether this is a trend or not difficult to tell until you have several months of data. Any statistician will tell you if you fit a line (trend) on too few data there is huge uncertainty about the nature of that trend. Because uncertainty is derived from the data size. When you have more months of data you will be able to tell better what's going on.
I decided to start to look to buy house knowing that it may be on the down side still but there is great inventory at great price. So that's the risk/benefit one has to put into consideration.
I've spoken to a few realtors about the situation and I am getting mixed reviews. One says it's the bottom from all the magazines she's read, the other says we got a while to go. I don't know whose advice to take. It's frustrating.
I've spoken to a few realtors about the situation and I am getting mixed reviews. One says it's the bottom from all the magazines she's read, the other says we got a while to go. I don't know whose advice to take. It's frustrating.
Unless one of them has a magical crystal ball that can tell the future, no one knows. That magazine would be worth a LOT of money - investors would jump on it - if it predicted exactly what would happen.
I did see that article . We have a year to go according to that.
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What's your take on it? I know nobody can predict the market, but I'd just like some honest feedback.
