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From the early 2000's to about 2007, house prices increased at a faster rate than the historical norm. The primary reason for this was the huge increase in buyers that was made possible by extremely loose lending standards/products that were initiated during that time. This created ademand in many areas that outpaced the supply. The problem with this increase in house prices is that it was artificially created by allowing certain people to purchase a house that could not afford it in the long run. The correlation of wages to house prices became out of whack. With a large percentage of the buyer pool now gone because of changes in lending standards/products and the resetting of mortgage rates for many people, thedemand for house purchases is now far less than the supply in many areas.
The current housing debacle will not be resolved unless and until demand and supply are roughly equal or until there is slightly more demand than supply. It will take time to get there. Wages and house prices must come into line for this to happen. Unemployment levels will have to come down to pre 2007 levels. The reality exists that house prices will come down much faster than wages will increase.
For those people who think "normal" house prices were what they were back in 2007 they are wrong as these were artificial prices. In the end, the last time we had true normal prices was in the early 2000's or late 1990's. This is reality. Any attempt by the government to short circuit a required correction will only have temporary political benefits that will delay a complete and true correction.
Well said and I certainly agree with you! I don't think prices are going down.... I think prices are simply correcting themselves. As they should. It is tough now, but in the long run, the economy will stable itself out in a more realistic manner.
I don't blame the government, it was the people who were willing to pay ridiculous amounts of money for houses not worth that amount who caused the problem. To make it worse, they couldn't afford what they purchased. Eventually these things catch up with society....and this is our catching up period.
The bubble probably prevented what might have been a deep and serious recession following the collapse of the dotcom bubble, followed by 9/11. Sooner or later, all bubbles burst and most folk forget this, in the middle of the euphoria.
The real estate bubble fueled the entire economy, for a brief period in time.The entire culture got caught up in it and rationalized it's rewards.
The whole deal about the relationship between income and so-called affordable housing is sometimes misunderstood. That a median income household should be able to afford a median priced home anywhere, is unrealistic.
It seems to me that government is protracting the time line to attempt to keep as many banks, balls and businesses afloat as possible, given everything depends on it.
On the other hand....certain areas in the U.S. have been prone to localized bubbles thoughout history. Some busts took almost a decade to wind down. People were prone to saying they would never see home value appreciation as they had....again in their lifetime.
Within 5 years they did and it blew through all previous records.
On my blog I did a "what if" scenario to help readers understand this exact phenomenon. I did an average appreciation for our area and did this graph of home prices in the bubble vs. normal appreciation without the bubble.
With our current correction out here, home prices are where they would be if the bubble had never occurred, just assuming regular appreciation.
On my blog I did a "what if" scenario to help readers understand this exact phenomenon. I did an average appreciation for our area and did this graph of home prices in the bubble vs. normal appreciation without the bubble.
With our current correction out here, home prices are where they would be if the bubble had never occurred, just assuming regular appreciation.
You blog well. You present the facts of your local market. You make themrelevent. You give your readership the dignity and respect to make up their own mind to act now, or not.
With our current correction out here, home prices are where they would be if the bubble had never occurred, just assuming regular appreciation.[/quote]
Sadly this isn't the case in NJ...might only sit at a stalemate. Waiting for the peoples salaries to catch up....
Sucks knowing someone bought a house 10 years ago for a quarter of what you would have to pay now for the same house when it should be more like half.
With our current correction out here, home prices are where they would be if the bubble had never occurred, just assuming regular appreciation.
In your area, home prices are where they would be if a bubble had never occurred.
The question is, what would home prices be if a bubble had never occurred and there was a major economic crisis with high unemployment, restricted lending and a skittish American public that had just witnessed (and was still witnessing) financial carnage amongst home "owners."
In your area, home prices are where they would be if a bubble had never occurred.
The question is, what would home prices be if a bubble had never occurred and there was a major economic crisis with high unemployment, restricted lending and a skittish American public that had just witnessed (and was still witnessing) financial carnage amongst home "owners."
These aren't quite baseline conditions.
Well if there wasn't a bubble there probably wouldn't have been a economic crisis, just whatever normal economic cycles. I don' think this hypothetical is particularly relevant. Just imo of course.
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