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I used to think that way as well - until the current economic climate hit. If things get any worse, selling any home (to a home buyer not an investor) in 90 to 120 days will be a miracle. When prices nationwide start apporoaching or falling below what it would take to rebuild that same house (like in MI) we are ALL in trouble.
Why is selling for below replacement cost a problem for anyone besides builders and used house salespeople working on commission? All that it will do in the long run is drive down the price of land and building materials to put things back in balance again.
Sure, it'll be a bit painful in the short term. Bubbles always cause inefficient allocation of resources to non-productive enterprises that could have been better spent elsewhere - real estate, in this case. But that's already done. Don't confuse the cure (dropping prices) with the illness (rampant speculation and irresponsible lending driving up house prices to unaffordable levels).
We are being realistic and will be listing our home based on recent comps (5 k above assessement). It's a buyers market so we expect to take a "loss" on our home, but gain in our new home purchase where we will be coming in somewhere around $30,000 under the original listed price.
Kudos to HappyTexan for posting the USA Today article. Sellers would be wise to read it and get rid of their properties AT A FAIR PRICE (i.e., 2000 pricing) before they tank further and have to go into short sale territory.
Quote from the story:
... prices would need to fall as least 17% more to reach their traditional relationship to household income, according to a USA TODAY analysis of home prices since 1950. In that scenario, a $300,000 house in 2006 could be worth about $200,000 when real estate prices hit bottom.
This is what I have been seeing, feeling, watching in South Tampa: that prices are still about 100k inflated. This is not about buyers (me) wanting a "steal." This is about buyers (me) NOT WANTING TO BE THE SHORT SALERS OF 2011!!!!
If you overpaid pre-peak, during the peak, or post-peak, THAT IS NOT MY PROBLEM. My only concern is avoiding being underwater in 2011, 2015, and so on. And every expert, thinker, economist says that prices will continue to decline into 2010. They also say that a "fair price" in today's market is to go back to 1998-2002 pricing and add about 2% appreciation. (Historically U.S. homes have appreciated 2-5% a year.)
Unfortunately renting is not something I want to do because I have pets and do not want to deal with landlord/pet issues. So I will wait. There's still about 16 months of inventory in Tampa.
It is not the seller's responsibility to protect you from FUTURE depreciation. Why should the seller absorb the depreciation in what will be YOUR asset after closing that will most likely occur over the next 2-3 years? In a rising market, should the seller expect you to pay what the home will be worth 2 years out? NO. Real estate doesn't work that way. You're being selfish, honestly. If I went into a car lot and told the dealer that I wanted to pay no more than what the car would be worth in 2 years, I'd be laughed off the lot. If you are unwilling to absorb that potential loss yourself, then right now is not the time to buy for you.
BTW, I just sold my home for about 5% less than I paid for it 2 years ago. Obviously a loss, but that's definitely not what it sold for in 2000.
It is not the seller's responsibility to protect me from further price declines, but it is my responsibility to protect myself from making a bad investment (i.e., overpaying for a house). Perhaps if more people had been as careful as I am, we would be in less of an economic mess.
I don't see anyone saying that prices will be going UP in 2009 and beyond. Only down. I don't see anyone saying that prices are now back in line with historical appreciation levels. It cannot be that all of these people are wrong.
How far will housing prices fall? To the historical mean, which is another 20-40% down, depending on where you live. This graph is shocking for two reasons. One, how it disproves the basic belief that a house is a good investment, it's not. And second, how we should have seen a correction in 2002, but post 9/11, all we saw was a bubble. Currently prices are down 20% from the top that was shown in this graph, but clearly, they still have a long way to go. Will housing prices return to historical averages? Yes. But what's going to happen first? Here's the view of Whitney Tilson who was on 60 Minutes on Sunday and one of the few who predicted the mortgage disaster.
"We had the greatest asset bubble in history and now that bubble is bursting. The single biggest piece of the bubble is the U.S. mortgage market and we're probably about halfway through the unwinding and bursting of the bubble," Tilson explains. "It may seem like all the carnage out there, we must be almost finished. But there's still a lot of pain to come in terms of write-downs and losses that have yet to be recognized."
The housing bubble will deflate slowly, unfortunately for our recovery because now people are just pulling their houses instead of selling at a loss. "I'll wait till the market comes back" you here but it's not coming back, any more than lightbulbs.com stock is going to be worth $100 a share anytime again ever.
It is not the seller's responsibility to protect me from further price declines, but it is my responsibility to protect myself from making a bad investment (i.e., overpaying for a house).
I agree with everything you said, however, that's not how it sounded in your original post. I don't think anyone is doubting that prices are coming down. But still, trying to pay what something will *most likely* be worth in a couple of years just isn't going to work 9 times out of 10. I don't know that there is much we can do to "hurry this along." And I'm right there with you. Now that my house is sold, I have the choice to either buy now or rent and wait for a while, and I'm definitely waiting. I too, don't want a depreciating asset, but I know that it's completely futile to expect any seller to absorb that loss before it's happened yet. So, to avoid the frustration and headaches you appear to be feeling, I'm not even going to bother looking for quite a while. I'll pay attention to what's going on, but I won't be in the market. There's no use. Maybe that's what you should do too?
Yeah, I think you are right, Boo. I'll wait it out, unless someone prices something really well.
But my OP still stands: Most of what I am seeing is overpriced. Whether it's because prices are still falling (and in my head I know the house will be worth less in a year), or whether it's b/c the properties are overvalued (assessed or listed at a 2005 price instead of a 2002 price, for example), or whether the sellers overpaid and can't sell for less, or whether it's just sellers who are expecting to profit from the house (when we now know that property does not always appreciate)--regardless of the reason for the inflated price--we still have a lot more bubble to burst. And the media AND REALTORS AND BUILDERS who keep saying that prices have "plummeted" are wrong. They've decreased, but not "plummeted."
The housing bubble will deflate slowly, unfortunately for our recovery because now people are just pulling their houses instead of selling at a loss. "I'll wait till the market comes back" you here but it's not coming back, any more than lightbulbs.com stock is going to be worth $100 a share anytime again ever.
But in your analogy they still have a house...you have nothing! Be careful if you wait too long you may miss out.
Location: Halfway between Number 4 Privet Drive and Forks, WA
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Quote:
The housing bubble will deflate slowly, unfortunately for our recovery because now people are just pulling their houses instead of selling at a loss. "I'll wait till the market comes back" you here but it's not coming back, any more than lightbulbs.com stock is going to be worth $100 a share anytime again ever.
I will disagree with you on this point. Real estate is cyclical. It will come back around. Always has. Aside from the "easy money" spree that led up to this downturn, what makes you think this cycle will be any different?
Once prices reach a bottom, they won't stay there forever. That's why it's called a bottom.
Prices didn't shoot up overnight, therefore they won't go down overnight.
Location: Halfway between Number 4 Privet Drive and Forks, WA
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A house is a house is a house.
It is not an investment, nor a way to make money.
Comparing a house to stock is retarded.
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Not everyone is delusional
Will housing prices return to historical averages? Yes. But what's going to happen first? Here's the view of Whitney Tilson who was on 60 Minutes on Sunday and one of the few who predicted the mortgage disaster.
