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No one knows what is coming in the next year or so.
Very true. I always find it amusing that experts would assert how things will turn out, e.g. "the economy (or the real estate market) will/will not recover in 2009." No one can consistently predict the future.
Okay folks - With some new hindsight, let's take another look at rosy predictions travelmate38 made in 2007 in this thread.
No - Things have not firmed up at all. In fact, the Case-Shiller index is on-track for one of the worst years in residential real estate price decreases EVER! Sure, the number of sales in Sept bounced up a bit. I'm guessing this is due to foreclosures / short sales, not true demand and confidence in the housing "market".
Someone above said it: Banks can't lend like they were. And I think the banking problem has hit the main stream now - which it hadn't even in August of this year.
Look that the facts folks:
1) Rents and house prices are still seriously out of line. Historically, this relationship has held up remarkably well. Right now the average renting cost is about 3% of the house value, even with the recent drops. With the cost of ownership around 8% (give or take - 6% mortgage, 1% tax, 1% maintenance) - the P/E ratio for houses is still WAY out of wack.
2) Incomes continue to drop. Real incomes dropped from 2000 to 2006, while home prices went WAY up. This is another relationship that has been constant over 100 years.
3) We have too many homes. The inventories are still too high and the builders made too many during the boom. Happens every time.
4) The free money train has stopped. You can no longer get a $400,000 loan with a job at McDonalds. There are plenty of documented cases where this type of thing was happening over the last 7 years.
5) The closest analogy to this crash we have is Japan. And after their housing crash, housing prices are still down 15 years later...
Hang onto your hats - This is going to be a REALLY long decline. Don't believe anyone who has any connection to housing for income (banks, realtors, even the government now).
Cheers.
p.s. I have no affiliation with the housing industry. I am a computer programmer...
Quote:
Originally Posted by sls76
Can you please support your claim that renting only costs 3% (I'm assuming that's an annual figure) of the house value? Do you have data or an article that you can link to? Homes in my old neighborhood in Cary are renting for around 6-7% of the house value if I'm understanding you correctly.
BTW, I agree with some of what you said and am currently renting, so I'm not trying to be antagonistic. I just don't know much about the cost of renting v. the cost of owning as a percentage of the house value.
I'll see if I can dig it up. It *was* a national figure. So your point is well-taken. Real estate is notoriously regional (the old location, location, location thang), so you are certainly right that in certain areas price / rent ratios are better than others. But over-all, on average, this is a macro indicator that shows us we are still a long way from the bottom.
Another really good macro indicator is the price / median income measure like I pointed out above. This measure has been relatively consistent for, like, 100 years. Then it magically changed over the last 7 years. With real wages having fallen for the last 20 years, it's hard for me to understand all this. Although, watching the credit bubble finally burst of the last 60 days has brought a ton of insight to the problem. People have been borrowing just to keep a consistent standard of living. How messed up is that?
Pile that on top of a speculative bubble in real estate, what a mess folks.
I'll see if I can dig it up. It *was* a national figure. So your point is well-taken. Real estate is notoriously regional (the old location, location, location thang), so you are certainly right that in certain areas price / rent ratios are better than others. But over-all, on average, this is a macro indicator that shows us we are still a long way from the bottom.
Another really good macro indicator is the price / median income measure like I pointed out above. This measure has been relatively consistent for, like, 100 years. Then it magically changed over the last 7 years. With real wages having fallen for the last 20 years, it's hard for me to understand all this. Although, watching the credit bubble finally burst of the last 60 days has brought a ton of insight to the problem. People have been borrowing just to keep a consistent standard of living. How messed up is that?
Pile that on top of a speculative bubble in real estate, what a mess folks.
Happy Thanksgiving!
According to Moody's Economy the average house P/E is 16 which implies a 5.2% rent to value ratio. I'd love to rent a $500k house for $1250/month but that's not going to happen.
NorthJersey.com: Price/rent ratio shows where home market is headed (http://www.northjersey.com/business/realestate/33709779.html - broken link)
Regardless of this, I agree there's a major affordability issue and even non-bubble markets will see decent decreases IMO.
Rental rates have been decent here since we arrived in 1989.
The bad thing was the arrival of high paid yuppies coming from traditionally high rent areas. Newer complexes are aimed at these folks leaving the middle class working people with fewer choices.
Bad thing for the new landlords is that the transplants don't usually want to remain renters and leave after 6 months to a year.
We love renting here and hope the good rentals continue to be available.
Our current 1 BR unit is $715 for 870 SF and has a pool, 24 hour gym, and business center. Also, all maintenance is provided and the Drucker & Falk crew comes at a gallop if you have a problem.
Rental rates have been decent here since we arrived in 1989.
The bad thing was the arrival of high paid yuppies coming from traditionally high rent areas. Newer complexes are aimed at these folks leaving the middle class working people with fewer choices.
Bad thing for the new landlords is that the transplants don't usually want to remain renters and leave after 6 months to a year.
We love renting here and hope the good rentals continue to be available.
Our current 1 BR unit is $715 for 870 SF and has a pool, 24 hour gym, and business center. Also, all maintenance is provided and the Drucker & Falk crew comes at a gallop if you have a problem.
Yes, but if you're actually reading the posts instead of just randomly adding your input you'd see that your rent would imply that your 1 BR unit off of Capital Blvd. is worth nearly $300k with a 3% rent to value ratio. What you pay to rent a 1 BR unit in N. Raleigh seems pretty irrelevant to me to the discussion of 2-3 year housing projections for Cary.
Yes, but if you're actually reading the posts instead of just randomly adding your input you'd see that your rent would imply that your 1 BR unit off of Capital Blvd. is worth nearly $300k with a 3% rent to value ratio. What you pay to rent a 1 BR unit in N. Raleigh seems pretty irrelevant to me to the discussion of 2-3 year housing projections for Cary.
I was just re-reading this post from 2 years ago with all it's predictions for 2009 and on. I'd love to hear others thoughts about what has actually happened. We're planning on buying a house next year so I've been keeping an eye on what houses are listed in our area and watching the prices. From my perspective they seem to still be dropping. It used to be that we could never afford a house in Cary on our income. Now there are many many homes we could afford and would be thrilled to buy. And they don't seem to be moving even at the new lower prices in desireable areas. And it seems to me that so many of them are empty.
Interesting to read this old thread from 3 years ago. From my observations I would say that prices in the $250k $400k have dropped 5%, and from $400k to $700k they have dropped 8% to 10%. Obviously there will be exceptions with some homes where the price may have gone up because of upgrades, specific location etc. Equally there will be examples where prices on certain homes have fallen more than these percentages with short sales, foreclosures etc.
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