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May 2010 is forecast as price bottom for Chicago on Case Shiller Index futures (10 markets, including Miami and Chicago are covered).
So much depends upon where in the Chicagoland or any area, the price point and type of housing. I think 2010 is minimally optimistic for the overall generalized condo market.
What is miminally optimistic for the 2-4 unit market in Chicago? That is my next purchase, probably late 2009 or spring 2010. I would consider a condo in the Loop or West Loop if the price were right.
I looked at the site as well for Chicago. We should be able to go in and pull data on inventory and prices back 5-10 years, somewhere. Below a certain level, probably in 2005 or early 2006, inventory levels were low enough that prices increased. Prices tend to lag sales by 6 months, so once inventories get above a certain amount, prices will start to decline around 6 months later.
Check the following article titled "How Inventory Affects Housing Prices" by Dr. Anari.
'and the crystal ball of DOM, REOs, lates, and inventory didn't help anyone just before the crash, right?''
No because all this mess did not really exist before the crash.
But that crystal ball has sure helped us wanting for that 'dream home'. Here is an example. I could have totally stuck my hand in the sand and followed the advice you all preach and bought this home at the peak for 1.83 M .But instead I got smart, studied and followed MY DECLINING AREA and now I can get similar home for 800k. That a shiat load of savings I could put to good use on other areas for my family. Looking out for my family by being financially smart. Why is that concept so grasp for so many?
Not at all, you are quite right. The point is, people like to own their own home. The *majority* of people did not predict crash, because if they had, we would not have had one, because they wouldnt have bought homes! In the same way most people will fail to spot the bottom...which is partially why it is the bottom.
Some of it is luck. Not all, but some. You were smart because you followed once your prices started declining...that doesn't help those who bought on the way up. But if they had made a good down-payment and fixed their rate it's not half the problem people say it is.
Humanoid has said it will take years for people who bought at the peak to break even. Only part true. If you bought rentals as investments, yes, this will hurt for a while. But it is cyclical, it will actually end! If you bought your own home at the peak that sucks. If you sell your home for less than you paid you will lose, but since you buy your next home at a discount too, (since you're buying and selling in the same market) it doesn't make much difference overall.
It's only a killer if you end up in negative equity because you forgot the last crash and took an ARM or low/0 down-payment, or for some reason get out of house ownership at the bottom of the market. If you don't have to, don't!
Whats hard for people is the ones that bought their home at an inflated price even at a fixed rate, and are now making that huge payment, while the homes around them have declined in price drastically and they would like to buy a home around them at that price and have a lower payment but they can't sell theirs for more than they paid. I think that would be so frustrating. I sold my home in spring of 2007 before everything in that area started declining, didn't buy yet and like some others waiting for that "perfect time to buy" Next home though, I will buy in it and plan on staying there throughout my retirement.
Humanoid has said it will take years for people who bought at the peak to break even. Only part true. If you bought rentals as investments, yes, this will hurt for a while. But it is cyclical, it will actually end! If you bought your own home at the peak that sucks. If you sell your home for less than you paid you will lose, but since you buy your next home at a discount too, (since you're buying and selling in the same market) it doesn't make much difference overall.
What is going to actually end? The market downturn? Sure it will end, but its not going to head the other direction. This has been the largest bubble in real estate in the history of the US, it would take trillions to re-inflate the bubble. It took what 80 years for us to make the same mistakes of the roaring 20's again? The bubble isn't toing to re-inflate in our live time. Sooner or later the prices will bottom out and will start moving up at the rate of inflation. You are never going to see the real price you paid again, you'll perhaps see the nominal price in many many many years. In California I would guess around 20~30 years.
Also, it does make a difference overall. The person that purchased at the peak is going to be over paying every month until they sell. Then they won't be able to sell (unless they want to put cash on the table) until they have paid down enough of their loan. For people with little down that purchased in the peak that is going to take around 10~15 years in most areas. You'll see have no equity and have to come up with a down payment on your new home. It makes a huge "difference overall". Unfortunately, instead of learning it with pen/paper many are going to learn it the hard way.
Not at all, you are quite right. The point is, people like to own their own home. The *majority* of people did not predict crash, because if they had, we would not have had one, because they wouldnt have bought homes! In the same way most people will fail to spot the bottom...which is partially why it is the bottom.
I'll agree, market psychology is interesting. Most people will wait to save 50 cents on a grocery item and buy it when it's on sale, but at the same time will rush to buy other commodities when they are at their most expensive. I guess it's because they view houses as an investment rather than as a place to live, but still, it's a strange example of people following the herd instead of doing what's best for themselves as individuals
Quote:
If you sell your home for less than you paid you will lose, but since you buy your next home at a discount too, (since you're buying and selling in the same market) it doesn't make much difference overall.
This is only true if you pay cash for the house. If you take out a mortgage, the leverage multiplies your losses on the way down. It doesn't matter how much your next house drops if your equity is wiped out or you end up having to bring cash to the table to get out of your current one.
Well this is good but not a great advice because it doesn't say when one should buy. Of course, it's best to buy (from an investment perspective) when the home prices are at the bottom. But how does an average person know when it hit the bottom?
So let's share ideas on how to tell for an average person (not a realtor) it's at the bottom.
Are you in Miami OP?
For anyone who has already seen this info (I posted it on another thread) I apologize for the repeat, but I think it might be of interest if the OP is thinking about buying in Miami.
Top 10 risky RE markets, and the percent chance that home prices in each will be lower in two years than they are now, as taken from mortgage insurer PMI's just released quarterly rankings of the 50 big US housing markets.
1. Fort Lauderdale, FL 99.5% chance
2. Inland Empire, CA 99.5%
3. Orlando, FL 99.4%
4. Miami, FL 99.3%
5. Tampa, FL 99%
6. Las Vegas, NV 98.5%
7. Los Angeles, CA 98.5%
8. Orange County, CA 97.7%
9. Jacksonville, FL 97.5%
10. Phoenix, AZ 96.3%
Personally I'd be comfortable waiting things out in Miami.
Yes, I get the whole sentimental "buy a house to live in, paint the walls any color you want" bit.
But especially for those of us who happen to live in one of these declining markets (my location is on the list too) I have a hard time understanding how anyone is justifying buying RE right now.
At least in my location you can rent for far less than you can buy, and the whole "but you're throwing money away renting instead of building equity buying" arguement doesn't work since prices are declining.
I too find it funny that many people don't want to acknowledge the fact that leveraging works both ways. But then, we all know and accept the fact that RE values always increase, right?
Buyers market yes, but the banks are regulating the prices (and how many are for sale at any given time) turning it into a bidding war like an auction. Our agent says you have to offer around 20k more than the listing price if you really want the home, (You guessed it, going up against other buyers who will then move on to the next home for sale). I may wait til the winter months to start dragging him out in the most absurd weather conditions, that'll be better yet bottom prices for me.
i agree and it's one of the big reasons i was so opposed to a bailout. homes are still wildly overpriced and unaffordable.
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Middle Aged Mom
