Time Magazine: New York Metro Home Prices to Fall Another 40% (real estate market, buying a home)
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Care to enlighten us? Stamping your foot and saying, "no!" doesn't change the fundamentals.
A further 40% decline in the NY Metro Commuter area brings us back, roughly, to 2000 levels of house prices. While I know everyone was busy fighting off sabertooth tigers and starving to death back in the harsh ancient long long ago of the distant year 2000, try to remember that life really wasn't so bad, and that even though Ug killed your wife, you at least got to stick him with a mastadon tooth spear after the next hunt.
All that has to happen for a further decline in prices is for the fundamentals of the market to basically stay as they are. Lending standards returning to sanity would, all on its own, bring the market all the way back down to pre-bubble levels. The bubble had no other fundamental component - real income stagnated, the savings rate declined, supply of houses went up, the entire US population didn't magically have more money. Literally the only fundamental that enabled the market to do what it did was the degradation of lending standards that allowed people to get more loan than was sane or safe. And here we are.
40% down? Depending on how long people can hold their breath underwater, it could take years to get there. But when the nation wakes up from the fever dream it's had for the past decade, it will be right back where it started.
40% further decline out here would bring us to somewhere around the mid 90's (93-98 since prices were basically flat all those years).....
- The area/neighborhood is a big factor, in the boom people will buy anything, In the bust, certain areas for example in newark etc...there's always 1 buyer for 1 house is not true. Noone wants to buy there.
- Another major obstacle is the difficulty to get mortgage, especially for condo. There are so many restrictions, have to x percent sold, have x percent owner occupancy, etc.. Many well qualified buyers cant get the mortgage simply due to the fact the banks cannot sell the mortgage to fannie. So they all ended up trying to get it from a few local lenders, a lot of headache.
In NY/NJ at least there a few good local lenders, when i tried to buy a unit in philly that doesnt qualify for fannie, you can just forget about it. Either all cash or no deal.
My point was more to the concept of where the market is, vis a vis market conditions as a whole. If you look at the demographics, in let's say an efficient marketplace, there are plenty of people who DON'T WANT but either NEED, MUST, or ARE WILLING, etc. to live in -- using your example -- Newark. There will never be equilibrium, but -- my point was and still is -- IF THE PRICE IS RIGHT IT WILL SELL. Boom or bust. There are people who due to their situations and circumstances will live where they will live. I bought a two family in Newark, bad area. Fixed it up, put it on the market, and it sold in one week. Maybe the exception, maybe the norm.
It's very simple -- everyone knows exactly what a house is worth . . . and the answer is . . . it's worth what someone is willing to pay for it.
have you looked at the rows and rows of half finished houses in newark. the construction cost is more than the market price, that means noone is willing to buy in those areas.
medium income families no longer willing to be the pioneer and live in those areas like during the boom, the very low income residents who are willing to live there cannot afford to buy the house anyway. This is the problem with "developing" areas. If you do it right you make a killing like in hoboken/downtown jc, you time it wrong it's gone.
Care to enlighten us? Stamping your foot and saying, "no!" doesn't change the fundamentals.
A further 40% decline in the NY Metro Commuter area brings us back, roughly, to 2000 levels of house prices.
That would be 2000 levels of nominal prices. A Case Shiller index of about 120 or so would be in line with salary increases in that period (which would make for a 30% decline)
Obviously you don't understand the fundamentals. I won't attempt to teach economics on the internet, and more importantly, the reasons are far beyond economics. However, let's just look at some fallacies here. Comparing housing prices to 200 levels is amateurish and yields totally distorted numbers, statistics, results, etc. -- and mindset.
One cannot look at the numbers at certain levels. You have to look at global economies and economies of mass. There are economic reasons, legislative reasons, political, and demographic, as well as more.
Lastly, I didn't stamp my foot. Maybe I should have. LOL.
I for one wouldn't mind a 40% decline. I'd welcome it, with open arms and offers on properties far and wide. I am a buyer, 365 days a year, so a 40% decline to me could be like a kid in a candy store. Unfortunately, the candy store is in Fantasy Land. If housing prices decline 40% -- the last thing you will need to worry about is the value of your home.
Quote:
Originally Posted by pfwnj
Care to enlighten us? Stamping your foot and saying, "no!" doesn't change the fundamentals.
A further 40% decline in the NY Metro Commuter area brings us back, roughly, to 2000 levels of house prices. While I know everyone was busy fighting off sabertooth tigers and starving to death back in the harsh ancient long long ago of the distant year 2000, try to remember that life really wasn't so bad, and that even though Ug killed your wife, you at least got to stick him with a mastadon tooth spear after the next hunt.
All that has to happen for a further decline in prices is for the fundamentals of the market to basically stay as they are. Lending standards returning to sanity would, all on its own, bring the market all the way back down to pre-bubble levels. The bubble had no other fundamental component - real income stagnated, the savings rate declined, supply of houses went up, the entire US population didn't magically have more money. Literally the only fundamental that enabled the market to do what it did was the degradation of lending standards that allowed people to get more loan than was sane or safe. And here we are.
40% down? Depending on how long people can hold their breath underwater, it could take years to get there. But when the nation wakes up from the fever dream it's had for the past decade, it will be right back where it started.
That would be 2000 levels of nominal prices. A Case Shiller index of about 120 or so would be in line with salary increases in that period (which would make for a 30% decline)
Although I don't agree with the comparitive analysis -- one question -- wouldn't you have to effect the # for the "REAL" rate of inflation; not CPI based as I know that is already counted, but the true rate of inflation based upon actual numbers? I would do so. I think the results would have more integrity.
Since Americans are clearly insane when it comes to buying a house, a 15K tax credit means they can put an extra 15k towards their down payment. Since they are insane we'll assume they don't have 15k in their living expenses savings and so actually have to borrow that from someone - so call it 12k because they got ripped off.
If they do a 20% down mortgage that extra 12k means they can afford a house $60k more than they could otherwise. If they use a FHA 3.5% down it's too scary to contemplate, but FHA limits come in luckily. Housing insanity means payments don't matter and given current interest rates actually won't.
So when the $15k goes away prices need to fall $60k in order for the next round of buyers to be able to buy in.
Obviously you don't understand the fundamentals. I won't attempt to teach economics on the internet, and more importantly, the reasons are far beyond economics. However, let's just look at some fallacies here. Comparing housing prices to 200 levels is amateurish and yields totally distorted numbers, statistics, results, etc. -- and mindset.
One cannot look at the numbers at certain levels. You have to look at global economies and economies of mass. There are economic reasons, legislative reasons, political, and demographic, as well as more.
Lastly, I didn't stamp my foot. Maybe I should have. LOL.
I for one wouldn't mind a 40% decline. I'd welcome it, with open arms and offers on properties far and wide. I am a buyer, 365 days a year, so a 40% decline to me could be like a kid in a candy store. Unfortunately, the candy store is in Fantasy Land. If housing prices decline 40% -- the last thing you will need to worry about is the value of your home.
I've never seen so many words with no point whatsoever. Did you read your own post?
you can get a good look at a butchers @ss by stickin your head up there...wait..you can get a good look at a T-bone by stickin your head up a butchers @ss..wait its gotta be your bull
Although I don't agree with the comparitive analysis -- one question -- wouldn't you have to effect the # for the "REAL" rate of inflation; not CPI based as I know that is already counted, but the true rate of inflation based upon actual numbers? I would do so. I think the results would have more integrity.
Not really, because there are a lot of houses already built for which inflation in building materials prices and so on is mostly irrelevant (there's some push and pull - existing building prices effect new building prices and vice versa).
So income inflation is what really matters. If people earn 20% more then house prices will be 20% higher, assuming spend percentages stay reasonably constants - which they tend to do in housing (richer people buy more expensive houses all the way up to buying multiple mansions). Of course spend percentages got out of whack during the bubble - that is after all why it was a bubble, I'm not referring to time changes but income changes.
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