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here is my question, dont you think realtors want the housing market to get more affordable or prices to go down so they can sell more houses? This makes sense to me!
here is my question, dont you think realtors want the housing market to get more affordable or prices to go down so they can sell more houses? This makes sense to me!
Yes of course they want to sell more houses But they want to sell them now not later. So if real estate is inflated now then let it be. If they agree that the prices could go lower then they agree that a seller should wait. Thus this feeling of urgency.
Think of it this way. BailoutBank does not care what the price of the house or the credit of the buyer is as long as it can unload the mortgage to the fed minus fees. Their business is based on sales.
Last edited by halfoffpeak; 01-19-2009 at 04:52 PM..
In some parts of the country there was a bubble, in other part including New Jersey, there really was not. If you care to provide your evidence that there was a bubble in the New Jersey, that was even a third the proportions of what went on in parts of Florida, Arizona, California, and Nevada I sure would love to see it.
You want evidence of a housing bubble in New Jersey? Look no further than this graph:
The thick green light represents inflation; the housing markets hovering around that line are the ones where house values have more or less kept pace with inflation. The big roller coaster markets include "Edison" and "Newark", the two metropolitan areas that cover most of the counties of Northern NJ (all of Ocean, Monmouth, Middlesex, Somerset, Essex, Union, Morris, Hunterdon, and Sussex counties).
Are you going to tell me with a straight face that there was no bubble in New Jersey? No wonder all of those counties are expected to see prices fall 25% in 2009.
James, prices weren't real estate prices weren't supposed to go up. Housing doesn't go up in a recession, but it did, it went up more than it ever has before, and now it's correcting itself. Any area that saw prices go up was a bubble.
Yes of course they want to sell more houses But they want to sell them now not later. So if real estate is inflated now then let it be. If they agree that the prices could go lower then they agree that a seller should wait. Thus this feeling of urgency.
Think of it this way. BailoutBank does not care what the price of the house or the credit of the buyer is as long as it can unload the mortgage to the fed minus fees. Their business is based on sales.
Is real estate inflated now? or does the market continue to be week because people are just scared. I have head reports that say in general US real estate is currently about 3% under valued. How they figured that out I do not know.
I still cannot figure out how you people continue to say and think New Jersey was or is in a bubble. Most places here are still within 20% of 2006 values, the commonly thought of peak in the market. In comparisons there are markets in Florida, Nevada, Arizona, and California that are down 50% and 60% and some even more.
There are very few towns in New Jersey where bank owned properties make up more then 2% of the homes sold in any given month. Compare that to many other states where most of the towns have 20% to in some cases 50% of the homes sold each month being bank owned.
So when you say we have a bubble in New Jersey, get some perspective.
The thick green light represents inflation; the housing markets hovering around that line are the ones where house values have more or less kept pace with inflation. The big roller coaster markets include "Edison" and "Newark", the two metropolitan areas that cover most of the counties of Northern NJ (all of Ocean, Monmouth, Middlesex, Somerset, Essex, Union, Morris, Hunterdon, and Sussex counties).
Are you going to tell me with a straight face that there was no bubble in New Jersey? No wonder all of those counties are expected to see prices fall 25% in 2009.
I don't think I would use that as evidence. You can tell it is not very sophisticated. Homes don't go up and down in value only because of inflation. Some of the towns shown in the graph are losing population because the young move away and the old are passing away. There is no new good employment to draw or keep the young there. I know that type of town, I grew up in one, my parents still live there. My parents sold their home in 2006 for 140K. I remember the people down the street selling theirs, (essentially the same house) back in 2000 for about 125K. In talking with my Mom the other day she said the people who purchased her home could not get 100K now. Is that because there was a bubble there? Or is it just a lack of demand.
Is real estate inflated now? or does the market continue to be week because people are just scared. I have head reports that say in general US real estate is currently about 3% under valued. How they figured that out I do not know.
First, all corrections are based on fear just as bubbles are based on exhuberance.
Second, this is what a decent real estate expert should do in order to argue for a purchase: provide a couple of non-NAR associated indices according to which NJ real estate prices are on par with historical averages. All the indices I have seen show the opposite, including the one a few entries above. If the index above is not enough scientific for you, how come the hearsay 3% is?
I don't think I would use that as evidence. You can tell it is not very sophisticated. Homes don't go up and down in value only because of inflation. Some of the towns shown in the graph are losing population because the young move away and the old are passing away. There is no new good employment to draw or keep the young there. I know that type of town, I grew up in one, my parents still live there. My parents sold their home in 2006 for 140K. I remember the people down the street selling theirs, (essentially the same house) back in 2000 for about 125K. In talking with my Mom the other day she said the people who purchased her home could not get 100K now. Is that because there was a bubble there? Or is it just a lack of demand.
I am just not buying the science your selling.
Listen, there is no doubt that local towns can undergo a Renaissance because of it's local economy. Silicon Valley saw this happen during the birth of the Internet. But, the fact of the matter is, no towns in New Jersey really did. Sure, some retail outlets spruced up in a lot of places, but retail is one of the weakest markets now, and it was more based on the idea that people had the money to spend at them. Most jobs have been exiting New Jersey because of it's business unfriendly nature. Regardless, most of the discrepancies between local markets was priced into those markets well before the year 2000. For example, a cape style home in Princeton with the same exact counters, bathroom, and whatever else would sell for twice as much for the same exact home in Trenton, NJ. In the housing bubble, both Princeton and Trenton saw price increases, but the discrepancy of the local market was still priced into both houses. They both went up and they both will go down.
Is it because of a bubble or because of a lack of demand? You shouldn't be asking this. What you should acknowledge is that there is a lack of demand because there was a bubble. There is a lack of demand because people could never realistically afford houses at those prices. Now, usually, real estate agents make the mistake of referencing a house that still sold near a bubble price as evidence that there is still demand out there and prices will hold. In doing so, they completely ignore the market at the expense of looking at an individual transaction. A lot of buyers who do have money make the mistake of establishing a price ceiling, then they jump into the market and take whatever they can get at that ceiling. A lot of these people who did so in 2007 could have got a lot more for their money in 2008. This trend will continue until people have the income or the money to pay these prices. I'm sure Donald Trump can afford to spend 400k on a cape house. The market can't.
James, you do have a decent understanding of some of the macro trends that are going on in the entire US financial market as a whole, I just think your timing is off. Surely, someone buying a house will be able to hedge against inflation, provided they don't overpay.
I've been hedging against the printing press for 3 years now. I bought gold at $600, I bought gold at $700, I bought gold at $800, I bought gold at $900, and I made the mistake of buying it at $1000. The same goes for Silver. I bought it at $4, I bought it at $8, I bought it at $12, and I made the mistake of buying it at $20. I bought oil at $30, I bought it at $50, and fortunately, I sold it at $120. Through my hedging, I learned that the hedges against inflation can get ahead of themselves. Anyone who decided to hedge inflation by buying oil at $150 made a huge mistake, despite the market clearing at that price and the printing presses in full swing.
If you look at home prices from a historical perspective, they've never returned more than the rate of inflation over the long term. Robert Shiller traced back US real estate prices back to 1890. A similar study in Spain showed that property along the coast line returned the rate of inflation dating all the way back to the 1600s. The fact of the matter is, housing got way ahead of inflation, and we shouldn't expect it to gain in price due to inflation until it falls back in line. In fact, the negative sentiment towards housing may create a situation in where real estate actually becomes severely undervalued because market crashes tend to overshoot.
James, I've been out and about looking at real estate the entire year. Open houses have very few visits and I see more and more signs each month. Foreclosures keep increasing while people keep losing their jobs. Every market is seeing price declines and decreasing sales. Until unemployment decreases, wages go up, foreclosures slow, or sales go up, there is no risk of real estate in NJ turning around. Each of those things have gotten worse and show no sign of slowing and they all have negative effects of the demand for real estate.
Personally, if anyone is looking to hedge against inflation today, I would suggest they look into buying Silver, Platinum, Oil, Coal, or agriculture. Real estate may be in the works towards the end of this year. There may be steals out there, but I'm talking about the market in general. If someone offered a house at 30% of peak price today, then sure, that would be a great way to hedge against inflation, provided you borrow the money from the bank to buy it at a fixed rate.
Until unemployment decreases, wages go up, foreclosures slow, or sales go up, there is no risk of real estate in NJ turning around. Each of those things have gotten worse and show no sign of slowing and they all have negative effects of the demand for real estate.
Historically, real estate turns around before unemployment and wages.
Historically, real estate turns around before unemployment and wages.
but historically, before it's turned around, it was at bottom and flat in price for 8-10 years.
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But they want to sell them now not later. So if real estate is inflated now then let it be. If they agree that the prices could go lower then they agree that a seller should wait. Thus this feeling of urgency.
