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Remember that even in this total disaster in real estate, 90% of people are still making on-time payments on their mortgages. Its a whole nuther discussion that our economy runs on those fringe few percent that can sway things so wildly.
So very very true - and sady, soooooo forgotten in this current environment.
Whats not to agree with? This same or similar thought process should ALWAYS have been followed at any time when making such a large purchase. The details of the current economic/political climate may be dfferent now than at other times, but there are always some of those variables to consider in the investment aspect of purchasing a home. Noone should EVER have had the view that a real estate asset will forever go up in value. Im not saying some were not told that, just that they should have been smart enough to know better.
My personal opinion? Mostly just the fringes ever did think this...just like the fringes are the ones who are now saying real estate will never (or at least it will take a very long time) appreciate again.
I still believe that MOST people in this country buy a home to live in, think about their needs and some desires (I will grant that SOME (but not most) people's desires are beyond their affordability), and then purchase a home they believe they can afford based on current circumstance. They buy instead of rent because of all the intanngibles that have been discussed here and elsewhere. Yes, things can change, and the current market conditions do not allow many to be as flexible as would be optimal (job status change/relocation etc). But there have always been those risks in the past...just exaggerated a bit right now.
Remember that even in this total disaster in real estate, 90% of people are still making on-time payments on their mortgages. Its a whole nuther discussion that our economy runs on those fringe few percent that can sway things so wildly.
At least the discussion is being civil now. Which is appreciated.
You missed my main point: times are different today in comparison to any other era in our history. We just experienced a run-up and burst that was unprecedented. Now I predict we are about to embark on even bigger changes that seem to be headed our way. Things like probable mega taxes, European style energy taxes which will curtail how we live and drive, etc. I know, our Prez said he is going to reduce your taxes but the reality, it is impossible and we will be paying the piper in the form of much higher taxes; the only question is when.
These probable paradigm shifts will affect the housing landscape as we know it which could make the home you buy today turn into an anchor (a.k.a deep depreciation). If you own a bigger more expensive home for example, you might want to get off the ride versus riding it out.
I think it is a sane viewpoint to predict that home prices would increase to keep up with inflation. The double digit growths got us into trouble. In the future, it's also sane to assume that inflation (or deflation) will affect labor and material costs to the same percentage after we reach equilibrium in the housing market. So long as everything else increases at 4% a year, then housing should increase at about 4% a year (on average). What I think was most over valued in all of this run-up was the dirt / land. But that conversation is for another time.
Major shifts in taxation will eventually have to occur because of new multi-trillion dollar government spending sprees that include free healthcare, free college tuition, etc. Pressure on interest rates will occur making the more expensive homes out of reach for a lot more buyers. The US government will cut state aid in an attempt to balance their budgets. State grants will be cut pushing the burden to the local level and property taxes will probably go up.
I've always paid attention to the details when I buy a home. If my crystal ball is correct, the shift for the foreseeable future means it's going to be all about "affordable" homes. Lower consumption of energy, lower cost of maintenance, lower cost in property taxes, etc.
The thread is called. "Home values still going down. Why??" In short. Most of this has to do with the deflating of the bubble. But it also has to do with people subconsciously not wanting to over extend. It's now all about "good enough" and not chasing the best.
There are other reasons that are affecting values and that is real wages that of course go hand and hand with unemployment. Wages as an aggregate are going down. In 1985 when I got out of college as an engineer a "good working blue collar wage" about $8.50 an hour. In 1995 it was $12.50. In 2005 is was $14.50. Now it is $12 an hour. We are truly in a "global economy". If a guy in Mexico is willing to work hard for only $12 a day, the blue collar guy is in trouble. If you are an airline mechanic making $40 an hour and a plane can land in China, you are in trouble. Xrays can be emailed if you are a radiologist and call centers can be set-up overseas. In summary, there are not enough jobs to support home ownership if things continue.
So why was the economy so incredible from 2000-2007 while all of this global competition was in high gear??? We had a housing bubble in the works. ATM 2nd mortgages were were peoples raises. Mega money was being made by brokers, agents, luxury goods, etc and this trickled down to everyone else. Now. Reality is in place. We are in a global competitive setting and we have to compete with the guy who is willing to work for a buck a day. A lot of people are going to be left behind (or are going to drag us down).
So sh9730, do you think we are in typical times??? People default back to big picture thinking and we will automatically bounce back because we have never known such an era as I have described. All I ask is to give me the details on how it is going to happen.
I'm in the process of realigning my portfolio top to bottom and executing my plans.
I am not trying to suggest there are not challenges, WHEN THE MAIN POINT OF HOME PURCHASE IS INVESTMENT! I maintain that for most people, that is not the PRIMARY factor in driving the purchase.
But, even though there are challenges regarding Future Asset Value (FAV), I can hardly remember a time when there were not SOME sort of socio/economic/political factors that should influence that part of the decision making process. What bout 15%+ inflation in the 70s and interest rates in the hight teens? How sbout skyrocketing engergy prices in the 70s? (Even higher than our recent runup when adjusted for inflation). How about the stock market crash of 87? All of these at the time, were just as headline making.
But, somehow, in the long run, homes are still built, and sold, MOSTLY to people who want to LIVE in them (am I making this point enough times?). My belief is that most home buyers know there is some risk that their home value may decrease, but if AT THE TIME OF DECISION, the buy vs rent costs are close, when possible most Americans will BUY. Does it make the most FINANCIAL sense? Maybe not. But it makes the most AMERICAN CULTURE sense, so they do it.
Although there are clearly differences, I still hear people talk about the housing crash of the early 80s, and how at the time, they never believed things would recover. But they did and more, even after this crash.
Now, I do agree with you that there are some ways to buy homes that are USUALLY the best bets from a resale standpoint because they are the types of homes that people will always need/want to LIVE in. This was a major factor in my purchase of my current home. I live alone, yet still bought a 1900 SF single story 3bdrm w/den home. Big enough to support a typical family, yet not too big that even a newlywed couple would be interested. It was well within my price range, and is in a newer neighborhood with nearby schools and infrastructure.
But again, I have no intention of moving for a very long time. SO, it is also a house that I enjoy living in, which (have I said this already?) MOST people use as their primary decision making factor.
Not sure how else I can make my point? Of course, these are just my beliefs...MN could be just as right as I am.
Watch those delinquencies skyrocket when people finally throw in the towel and admit they won't recover their losses, accepting just how overpriced the AZ market was ... and will continue to be.
Many simply don't have the good fortune to wait it out nor the willingness to continue throwing good money into a declining or flatlining asset.
Watch those delinquencies skyrocket when people finally throw in the towel and admit they won't recover their losses, accepting just how overpriced the AZ market was ... and will continue to be.
Many simply don't have the good fortune to wait it out nor the willingness to continue throwing good money into a declining or flatlining asset.
As post right above yours points out so correctly, MOST people are not paying for an "asset". It is their family home, the neighborhood and schools, the parks, the things of "life" that they are paying for. And help is on the way. Prices are going to recover amazingly in the next five years - median sales price in PHX up 60-150% or even more from bottom depending on location. There is going to be a new "bubble" - not as big as the last but more persistent. You guys will all be kicking yourself.
I am not trying to suggest there are not challenges, WHEN THE MAIN POINT OF HOME PURCHASE IS INVESTMENT! I maintain that for most people, that is not the PRIMARY factor in driving the purchase.
But, even though there are challenges regarding Future Asset Value (FAV), I can hardly remember a time when there were not SOME sort of socio/economic/political factors that should influence that part of the decision making process. What bout 15%+ inflation in the 70s and interest rates in the hight teens? How sbout skyrocketing engergy prices in the 70s? (Even higher than our recent runup when adjusted for inflation). How about the stock market crash of 87? All of these at the time, were just as headline making.
But, somehow, in the long run, homes are still built, and sold, MOSTLY to people who want to LIVE in them (am I making this point enough times?). My belief is that most home buyers know there is some risk that their home value may decrease, but if AT THE TIME OF DECISION, the buy vs rent costs are close, when possible most Americans will BUY. Does it make the most FINANCIAL sense? Maybe not. But it makes the most AMERICAN CULTURE sense, so they do it.
Although there are clearly differences, I still hear people talk about the housing crash of the early 80s, and how at the time, they never believed things would recover. But they did and more, even after this crash.
Now, I do agree with you that there are some ways to buy homes that are USUALLY the best bets from a resale standpoint because they are the types of homes that people will always need/want to LIVE in. This was a major factor in my purchase of my current home. I live alone, yet still bought a 1900 SF single story 3bdrm w/den home. Big enough to support a typical family, yet not too big that even a newlywed couple would be interested. It was well within my price range, and is in a newer neighborhood with nearby schools and infrastructure.
But again, I have no intention of moving for a very long time. SO, it is also a house that I enjoy living in, which (have I said this already?) MOST people use as their primary decision making factor.
Not sure how else I can make my point? Of course, these are just my beliefs...MN could be just as right as I am.
Thanks for the post. I get what you are saying. If it wasn't for the fact that people normally buy homes to live in (not a traditional "investment") things would be worse.
Your right, there has always has been a crisis. But those happened when the USA was clearly the king of the hill. We didn't have the MASSIVE (soon to be super MASSIVE) debt, we had jobs for the guy who wasn't as skilled because we were not a global economy, etc. I was not one of those people who thought we were in a doom-and-gloom era. When you understand why only 4% of the worlds population (USA) controlled 25% of the wealth, then you will understand why bouncing back will be a struggle. That's for a different forum.
I do think this is a different time for the reasons that I stated. As a country, we are living off of credit. At best case, it's naive to think that we will have the same standard of living (as an aggregate). If I let my mind wander a little I can see things unraveling unlike anything we have seen before.
I do think we are on the same page buying homes that are "affordable". THis will be some interesting times in the years to come.
So why was the economy so incredible from 2000-2007 while all of this global competition was in high gear??? We had a housing bubble in the works. ATM 2nd mortgages were were peoples raises. Mega money was being made by brokers, agents, luxury goods, etc and this trickled down to everyone else. Now. Reality is in place. We are in a global competitive setting and we have to compete with the guy who is willing to work for a buck a day. A lot of people are going to be left behind (or are going to drag us down).
Brilliant Post! Would rep you again if I could. Very accurate analysis.
As post right above yours points out so correctly, MOST people are not paying for an "asset". It is their family home, the neighborhood and schools, the parks, the things of "life" that they are paying for. And help is on the way. Prices are going to recover amazingly in the next five years - median sales price in PHX up 60-150% or even more from bottom depending on location. There is going to be a new "bubble" - not as big as the last but more persistent. You guys will all be kicking yourself.
Not a chance. The only people kicking themselves are the ones who didn't bail earlier.
As post right above yours points out so correctly, MOST people are not paying for an "asset". It is their family home, the neighborhood and schools, the parks, the things of "life" that they are paying for. And help is on the way. Prices are going to recover amazingly in the next five years - median sales price in PHX up 60-150% or even more from bottom depending on location. There is going to be a new "bubble" - not as big as the last but more persistent. You guys will all be kicking yourself.
I won't be kicking myself. I'm going to buy something in AZ when I close on a property that I just sold. I'm buying it to live in with an eye on renting it when I am not there (see VRBO® is Vacation Rentals By Owner . I don't have the sense of urgency that others seem to feel because I know what is happening in the market.
I also realize that if I need to sell, I may have an anchor. Even with all of the feel good reasons own, selling a property in AZ has been tough and may continue to be tough for several more years. We just don't know the exact outcome. I would not be buying if I could not afford to lose. 20% from the bottom is close enough for me.
You said "help is on the way". What help are you talking about? Normally "help" is what makes the economy worse because politics are involved.
Maybe someone can explain the "real estate market" to me because I just don't get it. Why is it that people expect houses to appreciate? Where did this expectation originate? What else do you know of that you can buy besides a very few select items that will actually GAIN value while being used? But yet houses should always go up? Why? A car is the 2nd biggest investment in most peoples life but yet a car is always considered a declining asset i.e it will always depreciate. It also doesn't make sense that a house will just appreciate all by itself with no improvments done but they sure did here. Thats why even at the >200k price range (hardly the "bottom") it's hard to find anything that had substantial improvements done because people bought them knowing they would just appriciate to the moon so why lift a finger right? Why put any money or effort into it? And now with this market good luck finding anyone who is willing to put money into a house. So now we're left with a bunch of underwater owners trying to unload their un-updated, unmaintained overpriced houses. The real estate market is in a world of it's own if you ask me. It defies all logic, as in we have rising unemployment and more foreclosures but yet prices go up? How does that make sense? We have more demand? Where are these buyers coming from and where are they working?
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We had a housing bubble in the works. ATM 2nd mortgages were were peoples raises. Mega money was being made by brokers, agents, luxury goods, etc and this trickled down to everyone else. Now. Reality is in place. We are in a global competitive setting and we have to compete with the guy who is willing to work for a buck a day. A lot of people are going to be left behind (or are going to drag us down). 
People default back to big picture thinking and we will automatically bounce back because we have never known such an era as I have described. All I ask is to give me the details on how it is going to happen.
I'm going to buy something in AZ when I close on a property that I just sold. I'm buying it to live in with an eye on renting it when I am not there (see 
Housing Market?
