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Yes, the term "self-fulfilling prophecy" springs inevitably to mind, having watched this kind of thing happen over the years to things real estate-related and not. You spout gloom and doom long enough to get enough people scared, you can actually make it happen and then pat yourself on the back for "predicting" it.
Still peddling your "self-fulfilling prophecy" theory, are you? It's clear that you have the wrong metaphor. We ARE in a "Vicious Cycle," wherein the lower prices fall, the more foreclosures, which in turn produce lower prices, etc. But it's NOT a case of self-fulfilling prophecy. You have only to look at the Case/Shiller graph of long-term prices to see that.
The runup in house prices in 2000-2006 was out of all proportion to historical averages. What's happening now is simply a return to historical norms. We're about half-way finished with that process, and it will continue absent some massive government intervention. (Even that may not have much effect.) Yes, it's painful, and i'm sure it's frustrating for home owners and real estate agents, but unless they loosen the lending standards again, it's inevitable for most markets. (Yes, i agree that parts of Texas may not follow the national pattern.)
I said, once all things are said and done. You keep on repeating things that show that prices are going to fall. Np, that's fine, but I'm talking about what assumption is there that once things clear out, why wouldn't there be a bump when what's left are strong owner's and low inventory?
I said, once all things are said and done. ....what assumption is there that once things clear out, why wouldn't there be a bump when what's left are strong owner's and low inventory?
-chuck22b
Since that day is far down the road (several years), it's a little hard for me to predict exactly what might happen. But i'll take a guess.
First,
Factors influencing FOR a "bump" up:
-- Immigration in to the U.S. (more potential buyers)
-- Economic trends (For example, higher energy prices will influence people to buy smaller houses, closer to cities and public transportation, etc. Those smaller, close-in houses will enjoy stronger demand and higher prices.)
-- Legal issues (municipalities may impose more onerous zoning and building requirements for new houses, thus raising prices on both new and existing houses.)
Factors influencing AGAINST a "bump" up:
-- Retirement and death of the baby-boomer cohort (a significant and discrete segment of the total demand population)
-- Permanently tighter lending standards: a return to standards last seen in the '70s and '80s. Thus, fewer qualified buyers at each price point.
-- Willingness/eagerness of home builders to start over-building again as soon as they see inventories fall, thus setting the stage for another over-supply situation.
-- Economic trends (Higher energy prices will influence people to buy smaller houses; large, rural houses will experience a drop in demand)
-- International economic trends. As wealth gets transferred from the U.S. to the oil-producing countries, the standard of living in the U.S. will decline, people will have less money to spend on houses, demand will fall.
Add it all up, and i don't think we'll see a strong bump in prices, even after inventories return to normal. The Case/Shiller graph is pretty compelling: long term prices will likely follow the historical trend line, unless we screw around with lending standards (like we did over the past 8 years). Unless household incomes go up dramatically, house prices are going to be stagnant.
I said, once all things are said and done. You keep on repeating things that show that prices are going to fall. Np, that's fine, but I'm talking about what assumption is there that once things clear out, why wouldn't there be a bump when what's left are strong owner's and low inventory?
-chuck22b
Well yes once things are said and done prices should go up,people talk about "better buy now,great time to buy,that house will go up in value".....yes it will in what 5 ,10 years after it drops or stays the same for the next 3 years?
Might as well hold my money in a CD and have it make money now.In Miami I was a little bit lower than the area in price which brought interest to my house(still yook a year to sell),I'm sure the agents were telling their buyers "this is a deal,better get it now,it is lower than the area" yet one year latter it has plummeted way way way lower in value since I sold it.
About the only thing that would make me consider buying right now is if CD rates dropped to zero where then it would save me money to buy and not pay rent.So I might as well wait and who knows,if prices drop more I might be able to buy and still have enough left in a CD for the interest to pay taxes and insurance every year too other than emptying it to buy a house.
You can say that again!
But I will change it up a bit...and substitute HOME for house
A shame the term home was helping to keep the RE Ponzi scheme going just a little while longer.
It's vintage schadenfreude to watch overindebted people lose sleep at night worrying about their bills because they used the mantra "life is too short (to save)".
AMEN. Don't put yourself in debt for 15-30 years. Cash is king (until Bernanke starts raining it from the sky) and debt is slavery. Owe no man a single cent. Free yourself from this world of consuming and start living prudently.
And if rent and morgage are even or close to same amount, and you live in the home for 5 or 10 years, which way do you come out ahead long run?
A shame the term home was helping to keep the RE Ponzi scheme going just a little while longer.
It's vintage schadenfreude to watch overindebted people lose sleep at night worrying about their bills because they used the mantra "life is too short (to save)".
You still mistakenly refer to real estate as a Ponzi Scheme. Why?
From wikipedia:
"A bubble. A bubble relies on suspension of belief and an expectation of large profits, but it is not the same as a Ponzi scheme. A bubble involves ever-rising (and unsustainable) prices in an open market (be that shares of a stock, housing prices, the price of tulip bulbs, or anything else). As long as buyers are willing to pay ever-increasing prices, sellers can get out with a profit. And there doesn't need to be a schemer behind a bubble. (In fact, a bubble can arise without any fraud at all - for example, housing prices in a local market that rise sharply but eventually drop sharply because of overbuilding.) Bubbles are often said to be based on "greater fool" theory. "
Will you provide some mathematical calculations to back up your claim as proof? Let's take 2 examples, 1 in a bubble market, 1 in a solid market.
Bubble market home: 400k home that will decline and additional 10% and be worth $360k in 2 years. What is the 2 year mark, the 10 year mark (lets say it's worth $400k again here) and the 20 year mark (let's say $525 here).
Solid market: 200k home, appreciating at 2% per year, 2 years=208, 10 years=$240, 20 years=325k.
Don't forget the escrows and amortization in your calculations. Okay, I'm ready for you to prove your point that you'll save by renting. Let's see some math backing it up!
Texian, I notice you didn't respond to my post so I thought I'd bring it back to the top for you. I'm willing to consider your points, give me some proof.
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