Economist: U.S. housing slump may exceed Depression (calculate, accounting, debt)
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^^ we are definitely in a transition period. It is going to be interesting to see how all this plays out.
Well, I believe the entire fiasco is really going to disrupt the economies of certain regions for a long time to come.
I live in the South now, however, and deal with a lot of regional banks. Pretty much, they've written the bad paper off their books and are beginning to pick back up again, chiefly because the house prices never went that insane. Typical drops in home values so far has been in the low single digits, with the notable exception of Atlanta. In Charlotte, house prices have actually gained ground--all because houses were not that overpriced to begin with and the region is experiencing pretty strong economic growth.
Meanwhile in California, literally billions and billions of dollar in equity represented by home values has just vanished into thin air. That has to hurt borrowing power, which in turn hurts any number of other sectors in the local and regional economy.
As I leave my 1 br apartment in the Orange County, CA burbs and walk around town, I see condos still listed for 500K and most homes above 750K. These are not elegant estate homes, these are plain stucco tract homes with tile roofs on 50' x 90' lots. I see people living in them that probably earn under 100K who must be leveraged to the hilt if they bought from 2003 to 2006. If it wasn't for my good paying job I'd be gone from here tomorrow. Sure I pay almost $1500 rent but I'd hate to be holding one of these stucco palaces right now. Homes don't seem to be selling, so I am guessing prices will have to take a decent fall before anybody has enough courage to put up an offer. Since few people are really making any more $ than they did 7 or 8 years ago, I would not be surprised to see home prices return to levels of 1999-2000 era.
Well, I believe the entire fiasco is really going to disrupt the economies of certain regions for a long time to come.
I live in the South now, however, and deal with a lot of regional banks. Pretty much, they've written the bad paper off their books and are beginning to pick back up again, chiefly because the house prices never went that insane. Typical drops in home values so far has been in the low single digits, with the notable exception of Atlanta. In Charlotte, house prices have actually gained ground--all because houses were not that overpriced to begin with and the region is experiencing pretty strong economic growth.
Meanwhile in California, literally billions and billions of dollar in equity represented by home values has just vanished into thin air. That has to hurt borrowing power, which in turn hurts any number of other sectors in the local and regional economy.
In other parts of the country, notably the South, real estate is still relatively undervalue, and the lending environment was much more conservative. So the damage from the bust is limited there. It will be interesting how all this will affect the various region's long term economic prospects. California will probably suffer long-term effects that will last for years.
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Really? I heard Atlanta was Foreclosure City. That does count as the South doesn't it?
Location: Jonquil City (aka Smyrna) Georgia- by Atlanta
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Quote:
Originally Posted by ViewFromThePeak
Houses were only considered an appreciating asset because of increasingly socialist programs to incentivize homeownership, such as mortgage interest deducations, Fannie/Freddie, FHA, etc.
Houses will eventually be regarded as a depreciating asset after this is done (just like a car or a boat) as we've run out of direct ways to incentivize homeownership and artificially prop up prices. Of course, I'm sure there are ways to indirectly promote homeownership vis-a-vis the State, but then do we wish to replace the stars and bars with a hammer and sickle?
People should buy houses to live in. Not as speculation or to flip. If you want to speculate, buy gold or stocks.
A house produces no revenue for the owner, except the cost of living which is easily offset by maintenance and taxes. Owning commercial real estate such as a factory can produce dividends on investment. That's why I do not regard residential real estate in the form of single family homes as investments, regardless of what others suggest.
If you look at historical trends in real estate, you'll notice that the appreciation was very flat or below rates of inflation during periods when there were no government incentives of homeownership. Of course these incentives have a huge impact. if houses had to be owned by cash or through the local bank without securitization, I think you'd see a different ball game.
"They ain't making more land" is poor argument IMHO. There is a ton of undeveloped and habitable land in the US of A.
The words of reason. I have been saying this for years, but nobody would agree with me. I believe that falling real estate values are the best thing for the US economy. Without development to generate phony wealth, people will have to farm, and produce goods instead. Rather than demolishing factories and bulldozing farms and forests for homes, condos and shopping- the opposite will be happening. I look forward to it!
Really? I heard Atlanta was Foreclosure City. That does count as the South doesn't it?
In my followup post, I noted Atlanta as the exception. However, Memphis (A basketcase city IMHO), and Jacksonville FL are also southern cities with problems.
On the other hand, Mobile, New Orleans, Birmingham, Jackson, Baton Rouge, Lexington, Richmond, and Norfolk are listed as the stablest markets for foreclosures in the country. In those cities, you see stable growth economies that avoid boom-and-bust cycles, and rather cautious lending practices. As a result, those cities have been pretty much insulated from these issues.
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