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Now go back to Jan 2001 with the price of $157,000 and compute an annual growth of 5.66% for 8 years. That same steady 5.66 growth for 8 years shows the current median price would be $249,000.
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The problem is incomes didn't go up nearly as much, credit is tight, larger down payments are required and unemployment is rising. There is no way to rationalize where prices should be in this economic environment. Stocks on average gain 10% a year. They are now at 1998 levels and falling. That's 0% in a decade.
A 5.6% yearly housing appreciation will eventually outpace 0-3% wage growth and there will be no qualified buyers. Prices still need to be flat for a number of years or decline quickly and then rise at a much more sustainable rate than 5.6%.
Accepting 2001-2003 as a precedent-setting price period is a theory, not a fact. The housing bubble pre-dates 2003. No, I am not saying that the wild days of 40% price hikes were taking place that early in Arizona. But the market distorting lowering of the federal funds rate 11 times (from 6.5% to 1.75%) did take place in 2001. The value of financed assets was already distorted at that point. The distortion simply continued to grow. Gilbert, Arizona is not "oversold."
Show us where the housing bubble started. From Jan 2001 through Dec 2003, a 36 month period, the price increase was at a steady 5.66% rate; hardly a bubble in my mind. If you look at this on a graph, the huge price increase very clearly started right in January 2004.
This subscription only goes back 8 years to Jan 2001, so if you have other data, I would be interested in seeing it.
No matter what happened with the funds rate or anything else in the economy, all we are looking at here is the Median Price movement of homes in Gilbert, both up and down.
As I've said several times before, it's up to each individual to use this data any way they choose, and to make their own conclusions and projections.
To me the market clearly shows oversold. That does not mean that it will not go lower, but there are many indications that have been trending all this year that seem to indicate that we are getting close. Of course, I also know all of the uncertainties that are still around.
"Show us where the housing bubble started. From Jan 2001 through Dec 2003, a 36 month period, the price increase was at a steady 5.66% rate; hardly a bubble in my mind. If you look at this on a graph, the huge price increase very clearly started right in January 2004."
5.66% growth coupled with stagnant wages does not signify a bubble to you? It does to me. 40% growth is simply a bubble at a higher rate.
What fundamental forces led to 5.66% price growth in 2001, 2002, and 2003? Wage growth? Nope. Limited land availability in Arizona? Nope. Peace? Nope. Cheap money? We have a winner!
Quote:
"No matter what happened with the funds rate or anything else in the economy, all we are looking at here is the Median Price movement of homes in Gilbert, both up and down."
Funds, shmunds. There was no national bubble in lending created by artificially low interest rates. Prices went up because everybody wants to live in Gilbert, AZ. And Henderson, NV. And Cape Coral, FL. Etc. And I guess that everyone changed their collective mind around the end of 2005.
Quote:
"To me the market clearly shows oversold. That does not mean that it will not go lower, but there are many indications that have been trending all this year that seem to indicate that we are getting close. Of course, I also know all of the uncertainties that are still around."
Prices will continue to decline because tight credit, rampant foreclosures, and increasing unemployment require it.
Quote:
"This subscription only goes back 8 years to Jan 2001, so if you have other data, I would be interested in seeing it."
I'm familiar with the index. How do you equate that chart with it's nation wide "standard" house price to the "median" prices of market in the Phoenix metropolitan area, or the Scottsdale area, or the Gilbert area's "median" price?
One cannot take a nationwide "standard" housing price using an 1890 baseline, or even a 1950's baseline and apply that to a local market that has different factors determining the housing prices in that local market.
We're in agreement that in general the prices are likely to continue to decline. Neither of us know for how long, or how much because we don't know how the world or local economies are going to react, or how the sellers and buyers are going to react.
We're not in agreement on the oversold condition of the Gilbert and other local markets.
The foreclosures are likely to continue until 2012. And that is a prediction of several title company reps that deal with REO's and talk to the banks.
However, many of the foreclosures are being sold to investors, and investors are also buying up REO's in bulk packages from 1 to 10 million dollars. Some are being rented and held until the prices increase, and some are being fixed up and sold to the public. I know a lot of investors
Many retail sellers are keeping their homes off the market until the climate changes. Many are taking them off.
Building permits are way down.
Those are some of the factors that are keeping the sales increasing and the inventory decreasing. The market is making adjustments to what is happening within the marketplace.
Those are some of the factors that are keeping the sales increasing and the inventory decreasing. The market is making adjustments to what is happening within the marketplace.
Yeah. It's adjusting down. Any individual with any basic understanding of economic fundamentals and the vaguest grasp of the dire current economic circumstances this entire world is facing can tell you why, and why these downward trends will continue into the foreseeable future. It's called a financial and stock market collapse due to bad loans, deregulation, bad judgement. This in conjunction with false inflation of the economy over the last decade, fueled by the mirage of falsely inflated home values and increased access to credit which led to people spending more and more money that was never really there. Meanwhile, we in this country have an economy that's grown increasingly dependent on consumption, and therefore leverage, for vitality, paralleling less and less productivity as a percentage of the economy. We consume more than we produce, we import more than we export, and we've consumed ourselves into bankruptcy. The consequences of all of this are hitting from all sides now and conspiring to create the perfect storm. I'm not getting into this again here, it's obviously a waste of time.
You know, we've been having debates on this forum in threads going back years now, between Captain Bill the realtor promoting his sunny optimistic outlook on the Phoenix real estate market (no doubt driven by his own personal agenda and bottom line), and those of us who have no personal dependence on the market but who DO have a solid knowledge of economics and personal finance, posting rebuttals to his ridiculous self-serving baseless posts. And for years, we've been right and he's looked foolish, and still does with every post he writes. The housing market is in a state of complete and utter free fall, and the reasons that they are, and that they'll continue to be, are obvious to anyone with a triple digit I.Q. Bill, give it up, buddy. It's far past time.
Funds, shmunds. There was no national bubble in lending created by artificially low interest rates. Prices went up because everybody wants to live in Gilbert, AZ. And Henderson, NV. And Cape Coral, FL. Etc. And I guess that everyone changed their collective mind around the end of 2005.
.
Cape Coral is a flat and ugly area. I looked at property there in '99. $4000 for a 120x90 lot. At the the bubble peak people were splitting the parcels into 3 30x120 lots and aking $90,00 each.. There was no desire for me or most other people to live there when a large lot was 4 grand. No money trees or gold paved streets sprung up that I know of that made it suddenly a desirable place to live 5 years later paying 20 times as much for a third less land. . Basically there was a reason that some areas were priced the way they were and that has not changed. Prices will return to historical averages and then increase at historical rates.
Last edited by markas214; 10-23-2008 at 08:52 PM..
"I'm familiar with the index. How do you equate that chart with it's nation wide "standard" house price to the "median" prices of market in the Phoenix metropolitan area, or the Scottsdale area, or the Gilbert area's "median" price?"
Unfortunately Professor Shiller of Yale can not provide an analysis with that kind of depth especially for Gilbert, or even for Arizona as a whole. But Arizona is subject to the same historical trends. If anything, Arizona's abundant land means that long term appreciation would be more likely than other states to be limited to the rate of inflation.
Steve is right, house prices here are in a free fall. The financial mess is a long-term problem that will deflate prices nationwide. Nationwide includes Gilbert, AZ.
Quote:
"One cannot take a nationwide "standard" housing price using an 1890 baseline, or even a 1950's baseline and apply that to a local market that has different factors determining the housing prices in that local market."
The fact that so many embraced this recent bubble/mania in Arizona indicates to me that the bust will be far worse than average here. Arizona ranks high in the percentage of exotic loans, and borrowers are defaulting on those loans in record numbers.
Quote:
"Neither of us know for how long, or how much because we don't know how the world or local economies are going to react, or how the sellers and buyers are going to react"
I don't know that the next Pauly Shore movie will be lousy. I don't know that the airport will be hectic on Thanksgiving Eve. But using my intelligence, past experience, and abundant evidence, I am more than comfortable in predicting that the economy will be extremely weak for several years, and that the bubble assets at the heart of this crisis will grow cheaper and cheaper.
Even those with non-exotic mortgages that they can generally afford will realize that being sgnificantly underwater is not worth the trouble. With meager savings, most Arizonans are one job transfer, loss, etc. from being forced to confront the fact that they owe more than they own. Please do not inform me that many people have paid-for houses or owe very little. I am aware of this, and I am not predicting a 100% foreclosure rate. I am predicting a higher rate of foreclosure than 2008's record numbers.
I'm familiar with the index. How do you equate that chart with it's nation wide "standard" house price to the "median" prices of market in the Phoenix metropolitan area, or the Scottsdale area, or the Gilbert area's "median" price?
One cannot take a nationwide "standard" housing price using an 1890 baseline, or even a 1950's baseline and apply that to a local market that has different factors determining the housing prices in that local market.
We're in agreement that in general the prices are likely to continue to decline. Neither of us know for how long, or how much because we don't know how the world or local economies are going to react, or how the sellers and buyers are going to react.
We're not in agreement on the oversold condition of the Gilbert and other local markets.
The foreclosures are likely to continue until 2012. And that is a prediction of several title company reps that deal with REO's and talk to the banks.
However, many of the foreclosures are being sold to investors, and investors are also buying up REO's in bulk packages from 1 to 10 million dollars. Some are being rented and held until the prices increase, and some are being fixed up and sold to the public. I know a lot of investors
Many retail sellers are keeping their homes off the market until the climate changes. Many are taking them off.
Building permits are way down.
Those are some of the factors that are keeping the sales increasing and the inventory decreasing. The market is making adjustments to what is happening within the marketplace.
Bill,
Are you still at this?? I thought you gave up your arguments months ago...
Have you embraced "historical" pricing or do you still not believe it matters??
I told you months and months ago that Phoenix had to get back to historicals but you didn't want to hear it or believe in historicals...
How about price to income ratio? Why don't you tell all the posters about your crackpot ideas that it doesn't matter? And how instead of home prices coming back to sane levels, that people should "work harder" so they could make more money to afford these overpriced POS homes. I can't believe you actually made those statements...
Are you still sticking by your prediction (like the NAR) that things will start to rebound in 1Q '08? (Oh yeah, we're two quarters beyond that and things are getting worse)
Do you still stand by those positions, or have you and your NAR buddies changed their tune?
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