Falling home prices

[cute fuzzy bunny]

Based on my extensive, nearly professorial experience in the matter, its my finding that you've made a bunch of money on your homes.

My old neighborhood was always in the top 5 nationally for overpriced real estate and percentage shifts for no valid reasons.

Homes there sold for $150-175k for most of the 90's through 2001
2002: 250
2003: 325
2004: 375
2005: 350
2006: 350
2007: 300
Current: about 260-270.

A lot of folks up there pissed about what they missed, but unless they bought since 2002, they're all still up about 100k.

 

[TBPu]

CFB, uh yeah, I missed the overshoot part. Thought it was "a house will never fall below it's construction cost."

And yeah 20 years of studying the housing market is a lot. Almost too much. Any hobbies or anything? All day, everyday? 20 years that is a lot.

honobob, the real issue might be that there are indeed very few re-sales to report. In Michigan there are (using anecdotal comments) many people who cannot sell their home at any price and decided to take the ugly signs down. If they can sit tight for several years then maybe it was a good investment. But I'm going to be surprised if a home sells in Frankfort in 2008, at any reasonable offer. Many have been for sell since late 2006, and I mean MANY.

And based on my experience (professorial for real), you ain't made a dime till you've sold it. For years my ex bragged to her sisters (renters) about how much money she was gonna get from her share of this home when it sells, well she's a lot quieter these day.

 

[honobob]

Here's another actual resale in San Francisco.
Sold 8/05 for $760,000
Sold 10/07 for $$970,000

1880 Steiner Street #104, a nice 1300sf 2bed/2bath.
Now that is EVIDENCE of the market in San Francisco.

 

[TBPu]

Nice cherry picking, probably SF and NYC are limited land or something like that. Bet ya can't find a good Cleveland example!

 

[honobob]

honobob, the real issue might be that there are indeed very few re-sales to report. In Michigan there are (using anecdotal comments) many people who cannot sell their home at any price and decided to take the ugly signs down. If they can sit tight for several years then maybe it was a good investment. But I'm going to be surprised if a home sells in Frankfort in 2008, at any reasonable offer. Many have been for sell since late 2006,

I only asked for one, but any way, maybe the value hasn't gone down but the marketing period has lengthened.

 

[honobob]

Nice cherry picking, probably SF and NYC are limited land or something like that. Bet ya can't find a good Cleveland example!

Actually it was the first one I looked at. Honobob is all about full disclosure. If you research my previous posts you'll see plenty more like that. Wasn't trying to convince you of what my local market was. Just wanted to show you what real evidence looked like.

 

[honobob]

Number 2 sale in a different neighborhood.
1965 Clay Street. A nice 964sf 1bed/1bath.

sold 8/06 $700,000
Resold 8/07 $825,000

Sale one up over 12% for each year.
Sale Two up almost 18% in one year!!

 

[FinallyRetired]

OK, folks, I finally found a recent resale in Manassas Virginia -- the same town that had the highest dropped price on the blog list, something like 76% down. I didn't cherry pick, either, this is the first recent resale I found, the others had sales 10+ years apart. Here it is, right off the Prince William County tax site:

9808 Greenview Lane
8/1979 $76,450
9/1984 $101,000
11/2004 $400,000
6/2006 $464,900
4/2007 $525,000

This doesn't look like a great depression scenario to me. But what do I know, I can't even play the piano. As my daddy used to say, though, don't go by the price of a repossessed house full of mold when estimating average house values.

 

[honobob]

9808 Greenview Lane
8/1979 $76,450
9/1984 $101,000
11/2004 $400,000
6/2006 $464,900
4/2007 $525,000

I thought we were trying to find lower resales to support the end of the world. So looks like slightly over 7% annual appreciation. Is this where we Northerners had the Battle of Bull Run? Is there limited land or something like that?

 

[Notmuchlonger]

Location location location

 

[TBPu]

honobob, I do like evidence but it would be hard to find any evidence in Michigan other than listings. No sales equate to no sales evidence. But I assure you, there are lots of empty houses compared to 3-4 years ago.

So I've never been one to claim expertise but my eye for For Sale signs tells me we got housing problems in River City. Yep, right here in River City folks.

 

[Texas Proud]

All this talk about years of research and "evidence" , yet in three pages of posts not one confirmed resale at a lower value. I'm sure values are down somewhere but all my confirmed resales in my area have been at 10%+ increase over "bubble years" prior sales.

Just curious why no one posts an actual resale at a lower value when they make their claims.

Are we talking now or anytime?

I bought my house at 55% of the previous sale back in the 80s... confirmed with broker and the extra cash they had to put up at closing...

As for today... who knows.. it would have to be someone who recently purchased and is selling now... but I can tell you that there are a number of foreclosures in some good neighborhoods... one I looked at has a tax appraisal at $348K but is listed at $227K... most of the rest are close to the tax appraisal....

 

[FinallyRetired]

I thought we were trying to find lower resales to support the end of the world. So looks like slightly over 7% annual appreciation. Is this where we Northerners had the Battle of Bull Run? Is there limited land or something like that?

Yeah this is one of the battlefields of the War of Northern Aggression. Land is pretty plentiful, but it's only an hour or so from DC, a pretty stable and growing federal [-]featherbedding[/-] job market.

Bit of trivia: Back in the mid 90s the Disney Company tried to secretly buy up all the farm land and turn it into an amusement park with a historic theme. When the locals found out about it they rezoned and voted down the idea.

 

[honobob]

Damn! Not a trace of evidence left.

 

[eridanus]

Robert K? Is that you?


Shiller data from Oct 2007 sales:

Denver has returned a 36% return since 1990.
Atlanta has returned 34%.
Chicago has ruturned 63%.
Boston - 69%
etc.

Not to say that they've all been that low. LA has returned the best since 1990 - 150% - and a number of others have over 100% gain.

 

[jazz4cash]

Yeah this is one of the battlefields of the War of Northern Aggression. Land is pretty plentiful, but it's only an hour or so from DC, a pretty stable and growing federal [-]featherbedding[/-] job market.

Bit of trivia: Back in the mid 90s the Disney Company tried to secretly buy up all the farm land and turn it into an amusement park with a historic theme. When the locals found out about it they rezoned and voted down the idea.

Dont underestimate Disney........this price decline could be "Plan B".

 

[Retire Soon]

San Diego would be a good market to look at when considering price declines. It was one of the first regional markets to go up and likewise it was one of the first markets to decline. The link below will take you to DataQuick, which keeps track of sales in this region. The chart compares November 2007 sales in cities in San Diego County with the same month a year ago.
Keep in mind when viewing the chart that statistics can be misleading. As others have pointed out, many people have taken their homes off the markets. Also, buyers are generally seeking less expensive homes in any given neighborhood since money is becoming tight. The chart only shows actual sales in each city, so if there were only a few, the percentage decline in sales price could be skewed. As everyone knows, November is not the best month to sell a home, but I think you can get a general idea of where home prices are headed by studying the chart.

DQNews - San Diego Union Tribune Zip Code Chart

 

[cho oyu]

Robert K? Is that you?


Shiller data from Oct 2007 sales:

Denver has returned a 36% return since 1990.
Atlanta has returned 34%.
Chicago has ruturned 63%.
Boston - 69%
etc.

Not to say that they've all been that low. LA has returned the best since 1990 - 150% - and a number of others have over 100% gain.

Hmmm. Imagine that. Even in one of the hottest markets in the US, the average return has been just over 5% per year over the last 18 years.

Interestingly, this follows quite well even if you extend dates back another 50+ years. Most of the US appreciates at around 3%/year (very close to reported inflation), while some coastal areas tend to appreciate at around 5%/year (slightly above reported national inflation rates).

Of course there are some very localized statistical deviations (coastal community becomes a spot for the rich and famous, small mountain town turns into hot ski resort), but for the most part, housing is merely a roof-over-the-head-keep-out-of-the-rain inflation hedge as compared to rent.

 

[TargaDave]

If you figure that tax breaks are offset by maintenance and depreciation you wonder why so many people are owners instead of renters given the modest long term appreciation. The obvious answer is that for many people (or course not all) a home is much more than a "roof-over-the-head-keep-out-of-the-rain inflation hedge", or some big money making scheme. You might say it's an activity or lifestyle (an outgrowth of the nesting gene?). That fact that it keeps up with inflation at all is a plus

 

[cube_rat]

I'm stepping back into real estate after cashing out late 2006. I live in the bay area and although San Francisco appears to be still strong to some degree, the peninsula area has a large amount of short sales and bank owned properties on inventory in great areas. This info is stored in the private comments section in the multiple listing. Sometimes the REO or short sale info is advertised, sometimes not. I can't tell you how many empty houses I've walked through here on the peninsula. Where did these people go? I just saw a house yesterday that's an utter disaster where flipper wannbes came in, bastardized the house and ran out of money. Now it sits as bank owned in a very nice part of San Bruno.

EDIT: Overall, I believe that certain parts of the bay area will recover from the current bad pockets due to a strong work force in the Silicon Valley and biotech firms (i.e. Genetech). Additionally, there are still high income earners sitting in rentals salivating right now wondering when to jump into the market, thus I see a wave coming in should rates drop and prices flatten or go downward.

 

[Martha]

Hey Cube, haven't seen much of you lately!

Honobob, here is a cherry pick from my neighborhood:

1609 east superior st
1986 sold for 169000
2002 sold for 289000
2005 listed for sale at high 300,000s then dropped to mid 300,000s
2006 mortgage foreclosed, balance at time of foreclosure sale was 305,000
2006 and 2007 property listed for sale for 299,000, then 279,000, then 239,000
2007 property sold for 200,000

 

[honobob]

Hmmm. Imagine that. Even in one of the hottest markets in the US, the average return has been just over 5% per year over the last 18 years.

Well, let's take a look at what that really means. 1990 $200,000 purchase of home with 20% down ($40,000). We won't even look at those smart guys like Alex with their no down VA loans. That home will be worh $458,404 in 2007 if it is an AVERAGE home. Now if I put $40,000 in stocks in 1990 and make 10% every year (everybody I know who has bought stock has lost money in the stock market) I'll have $202,179.

Real Estate $458,404
Stock Market $202,179

And the real estate figures are an average!! People I know are doing a hell of alot better than average, but then they know how to do the math.

 

[honobob]

Robert K? Is that you?


Shiller data from Oct 2007 sales:

You might want to post the parameters of Schiller data. For most metropolitan areas the information is useless.

 

[TBPu]

I'm not actually saying we have this situation onboard but just sharing the possibility that it may exist.

Cognitive Dissonance
An ego flaw wherein the filtering of information that conflicts with what one already believes, in an effort to ignore that information and reinforce one's beliefs, exists.

Or something of that type might allow certain types to believe that the widely reported housing price drop does not exist and contrarily, a housing price rise is in fact the norm.

And of course it is possible, I guess, for the vast majority of people to be equally obsessed with reporting false information about housing drops.

All is possible.

 

[cute fuzzy bunny]

Its also possible that a lot of people are focused on the drop and not the big picture and long term growth.

Which psychological dysfunction would that be?

I remember a lot of folks running around in 2002-2003 showing the big drop in the equities markets as the reason why not to invest in equities.

Seems to me that their lip flapping has subsided somewhat over the last four years.