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False analogy. House prices rose in the bubble at a rate far above that of all other inflation.
You can say that again. Case in point, Edison, NJ.
2000 Median Home Price: $182,100
2007 Median Home Price: $397,400 (+ 118% vs 2000 Median Home Price)
Median Home Price Feb-Apr 2009 (from Trulia): $302,100 (+66% vs. 2000 Median Home Price)
Projected price of homes for April 2009 based on CPI data: $226,714
(This is the price that homes would have been today if they tracked the CPI, which historically homes have done in the past. CPI for April 2009 is 24.5% higher than it was in 4/2000)
Now if you compare today's prices at $302,100 vs the CPI-projected prices of $226,714, you see that prices still currently 33% inflated when compared with what they would have been if price trends followed the CPI. So based on these calculations, it becomes apparent that prices could easily fall this amount without overshooting historical norms.
Now I realize that the figures above are really ballbarks and discount many other factors (household income, taxes, savings rates, etc. etc.) and the use of median prices has its flaws as well. So no, this is not a calculation proving that prices will fall an additional 33%. It's just to prove a point that prices are still highly inflated.
I just want people to realize that the so called "bears" on here are still 100% right on. Home sales may increase but prices CONTINUE to fall. "Bears" have been saying all along that prices for homes need to correct. So for each new sale becomes a new ceiling for the next sale. House A sells this month for $100k, House B (same type house) sells next month for $100k - 1%. Repeat....
So we can get into a GOOD NEWS VS BAD NEWS debate but really the "Bears" platform is PRICES NEED TO CORRECT and that is happening. (At least that has been my only point really from day 1 on here)
Some people like me rent and if the rate of depreciation for a home is less or equal to renting then buying is a smart choice considering the tax breaks we get.
Some people like me rent and if the rate of depreciation for a home is less or equal to renting then buying is a smart choice considering the tax breaks we get.
The exact same thing two doors down to what I'm renting now sold in 12/08 (most recent sale of the same I could find). The monthly interest on 80% of what it sold for at 5%, plus the HOA, and taxes comes to 91% of my rent. If I can earn 3% on the 20% down and subtract that from the rent it's 100% - renting the home costs the same as renting the money to buy the home.
Of course that interest is tax deductable and rent isn't - then again I didn't itemize last year anyway. And there's insurance and maintenance costs on the owning side.
If I thought prices were going to rise buying would make sense, if I thought they were going down it wouldn't. Don't forget the costs of selling, the price increase needs to cover that before it counts as an increase - over whatever my expected ownership timeframe is.
Note that I'm not counting repayment of principle on the owning side at all - so "building equity" is irrelevant, since that equity is simply those payments and on the renting side I can just invest them in some other vehicle.
You guys are talking about 2 different sets of numbers. What's really important are not m-o-m sales, which we all know are seasonal, but y-o-y sales. Again, the NAR data show that nationally, pending sales are up y-o-y, which would indicate the beginning of a bottom forming...nationally. As it stands now, sale prices, especially in NY metro, continue to decrease on a y-o-y basis. For NY metro, the y-o-y price decrease for March was almost 3%.
y-o-y, m-o-m, yadda yadda yadda...
"pending sales" are a leading indicator, not a measure of actual sales. don't beat up the author of the article over something that is clearly disclosed.
irrational optimism was a problem during the peak, it's logical to assume there will be irrational pessimism as we tread up out of the valley.
the concept of pent-up demand seams pretty reasonible -- just because the economy is in the toilet doesn't mean all the irraltional girlfriends/wives out there don't want their white picket fences.
if I wasn't in the middle of all my primary residence projects, I would look into buying a foreclosure to rehab, I just don't need the headaches of another house right now.
... it's logical to assume there will be irrational pessimism as we tread up out of the valley.
Where are we treading up to?
Every bull seems taken with the idea of "recovery" to somewhere. Where? How? Irrational girlfriends aren't going to magically reinflate the credit bubble.
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