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Housing will bottom out projection:
Old 01-16-2008, 11:57 AM   #1
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Housing will bottom out projection:

And what do you think of this projection of housing bottoming out in 2011?
This states this is the worst crisis in housing since the Great Depression? Yikes!
U.S. Real Estate Market Rebound
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Old 01-16-2008, 12:17 PM   #2
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Fascinating website! Thanks for the link, since I had never heard of this site.

I tend to take its gloomy views with a grain of salt, because I don't think their crystal ball is any more likely to be working than mine. But who knows? It's still an interesting site to browse.
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Old 01-16-2008, 01:24 PM   #3
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I agree on the grain of salt - my crystal ball is just as cloudy as anyone else's. I always felt that there are only two times the price of the house really matters - when I buy it and when I sell it.
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Old 01-16-2008, 01:32 PM   #4
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I agree on the grain of salt - my crystal ball is just as cloudy as anyone else's. I always felt that there are only two times the price of the house really matters - when I buy it and when I sell it.
I thought that quote was in regards to being happy as a boat owner.............
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Old 01-16-2008, 01:42 PM   #5
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I thought that quote was in regards to being happy as a boat owner.............
Same concept...
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Old 01-16-2008, 07:33 PM   #6
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Many people have a tendency to count home equity as a part of their net worth, even though it's only on paper. I disagree with Walt34 in his assertion that the only two times home value matters is when a person buys or sells a house. Try telling this to subprime borrowers who are now attempting to refinance their home, but the lender is turning down their loan application because there is negative equity in the home. Likewise, people who may be interested in refinancing their home may be in for a surprise when they find out the bank can no longer loan them money because there is simply no equity left in their home. An elderly person may be desperate and wish to obtain a reverse mortgage, only to be turned down for a new loan for the same reasons. I agree, however, that if someone is planning on staying in their home for ever and ever, then valuation may not be important.

During the past few years, there has been a tremendous amount of bragging that has gone on because of high home prices. I think that this has probably gone on to the extent that it has become an ego boost for some people. Someone might say for example, "My home is worth three times what I paid for it seven years ago." In most areas of the U.S., the bragging is slowing down. As the article states, there have been one million foreclosures since the housing bubble burst with probably two million more on the way through 2009. Folks, that's a lot of homes. Are some of these foreclosures happening in your neighborhood? If so what effect do you think this will have on comparables that will be used to support future appraisals?

Let's pretend that that "HousingPredictor" is wrong in their claim that housing prices will not bottom out until 2111. For arguments sake, let's define the bottom of the market as when most people can place their home on the market and expect to sell it in three months or less. Let's say that occurs in 2009 instead of two years later as predicted in this forecast. In the meantime, prices may have dropped 20 to 30 percent from their high, while most experts say that home prices peaked in about September 2005. Hypothetically, if someones home was worth $500,000 when the market peaked and lost 30% of its value their home would now be worth $350,000. Prices will now have to increase by more than 42% in order to once again reach that $500,000. How long do you think that will take? I believe that many people who are reading this post will not see it in their lifetimes.

Don't forget that real estate prices were artificially inflated because of subprime loans. Easy money is no longer available and probably never will be again. Also, we're now seeing record low interest rates. What happens if rates go up to more historical high levels? Not many buyers are going to be able to qualify for these large loans. In most cases, it is the lender that makes a successful escrow possible. Obviously, with no borrowed money, there will be no transaction. Money will be tight in coming years. Lenders have learned their lesson the hard way.

Yes, my crystal ball is better than no one else's. After all, even most economists (who have much more financial expertise than myself) cannot even accurately predict the start of a recession. I don't think most people are recognizing the magnitude of what has taken place with the bursting of the real estate bubble. Sure, I'm a homeowner and I wish my home was worth what it was two years ago and that prices would stop declining. By the way, I just took a walk in our neighborhood and saw many new homes with "For Sale" signs in the front yards. I also, saw a large housing development where construction
has stopped without having finished the houses, because the developer apparently has run out of money. This is now happening in neighborhoods across the United States.

I would like to be optimistic, but I think in terms of history this bubble is far worse than what people are willing to admit. "HousingPredictor" is more in touch with reality than many who view our current crisis through rose-colored glasses.
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Old 01-16-2008, 08:01 PM   #7
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Sure, I'm a homeowner and I wish my home was worth what it was two years ago and that prices would stop dropping.
What really concerns me more than the drop in price, is the drop in sales volumes.

Wherever I am, I have to live somewhere - - so if I sell my present house for less, I would buy the next house for less too. The difference would probably not be too different than before the housing meltdown.

But if the sales volumes remain small or shrink further, that could affect the plans and dreams of many homeowners.
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Old 01-16-2008, 08:13 PM   #8
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Sales volumes, inventory, and prices are all related. Just set your price right and you should be fine.

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Old 01-16-2008, 08:26 PM   #9
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Sales volumes, inventory, and prices are all related. Just set your price right and you should be fine.
Here in New Orleans, if sales volumes are low then I would assume that means that the number of those wanting to buy is low. Here, there is no shortage of dirt cheap homes these days. Want a home cheaper than your car? Move to New Orleans, and roll up your sleeves.

If the number of buyers is low, and the number of houses for sale is the same or higher, then we've got a problem.
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Old 01-16-2008, 08:29 PM   #10
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If the number of buyers is low, and the number of houses for sale is the same or higher, then we've got a problem.
W2R Thanks for perfectly explaining elasticity of demand to Twaddle.

Twaddle, Are you standing by you graph?
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Old 01-16-2008, 08:31 PM   #11
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Too few buyers. Too many homes. Either way, it means that the price is incorrect if you want to establish equilibrium.

I recently read a piece in Barrons in which the author suggested something I hadn't considered before: start demolishing the empty houses to fix the demand/supply imbalance.
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Old 01-16-2008, 08:46 PM   #12
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Quote:
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Too few buyers. Too many homes. Either way, it means that the price is incorrect if you want to establish equilibrium.

I recently read a piece in Barrons in which the author suggested something I hadn't considered before: start demolishing the empty houses to fix the demand/supply imbalance.
That seems to be happening in the Rust Belt, though it doesn't appear to be part of any plan.
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Old 01-16-2008, 08:46 PM   #13
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"This states this is the worst crisis in housing since the Great Depression?"

Yes.

2011 isn't too unreasonable, that would place it right in the average of all the post war slumps. Some differing points here though, demographics are running against housing (aging US population), that trend won't reverse until 2020 or after. Also this housing boom is much larger than any previous, the largest bubble in world history. So it's reasonable to expect the bust to be as great. Finally the overbuilding is greater than any other boom/bust, and is still continuing. Homebuilders keep building to amortize their costs, but it's just creating more overhang. Add to that commercial RE, which traditionally follows residential by 6 mo, and is now falling off the cliff on schedule. Commercial is way overbuilt and yet developers keep on going.

There are other factors, but ultimately this isn't comparable to a typical post war slump (none of which were national), if comparisons are made it should be compared to the depression, or to the Guilded Age boom/busts. And when you consider other factors, it seems as likely that it won't bottom until even later.
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Old 01-16-2008, 08:50 PM   #14
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They could try giving away the houses and land, I guess. Although others have tried that before with limited success.

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Old 01-16-2008, 08:52 PM   #15
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Too few buyers. Too many homes. Either way, it means that the price is incorrect if you want to establish equilibrium.

I recently read a piece in Barrons in which the author suggested something I hadn't considered before: start demolishing the empty houses to fix the demand/supply imbalance.
Better yet, crack the whip on the banks and get them in the rental business and rent the houses back to the foreclosed owners.

I'm sure the banks don't want to be in the rental business but that would be less of a problem than owning with no income at all.
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Old 01-16-2008, 09:56 PM   #16
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Here in New Orleans, if sales volumes are low then I would assume that means that the number of those wanting to buy is low. Here, there is no shortage of dirt cheap homes these days. Want a home cheaper than your car? Move to New Orleans, and roll up your sleeves.
Want2,

I hope you can get out with your *ss intact. I have spent a lot of time in Buffalo, NY, where things are very similar.

By the way, what is your take on your new governor? Inquiring minds want to know (as do all of the south Asians ["Indians" to y'all] in Canadistan). I figure, gotta be an improvement, but I've been away a long time.
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Old 01-17-2008, 07:24 AM   #17
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Want2,

I hope you can get out with your *ss intact. I have spent a lot of time in Buffalo, NY, where things are very similar.

By the way, what is your take on your new governor? Inquiring minds want to know (as do all of the south Asians ["Indians" to y'all] in Canadistan). I figure, gotta be an improvement, but I've been away a long time.
Thanks for the good thoughts. I hope we can get out for ER too, but if not then we will ER here until we can. Nothing is going to get in my way! I won't let it.

I think there is also some truth to what Twaddle is saying (and didn't mean to start a fuss on the board), though it is awfully generalized and we do have some severe local anomalies here. My house was a median value home before the storm, and was only moderately damaged, so maybe with a low enough price, some more attempts at repair, a good realtor (I have the best), and much patience I can get out. Or, maybe not. It's all in the luck of the draw.

I have GREAT hopes for Louisiana under our new Governor Jindal, who was sworn in earlier this week. He appears to be the best thing that has happened to Louisiana in a long, long time. He has a tough job ahead of him, but he appears to be "new blood" with his heart in the right place, instead of the corrupt, old time Louisiana politicians that keep filling up the ballots around here. So, we shall see.

If he lives up to my hopes and expectations, maybe some day he will be President Jindal.
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Old 01-17-2008, 08:50 AM   #18
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What!!!! Governor Jindal isn't corrupt? What a jerk for ruining that very long and upstanding tradition of graft, corruption, dishonesty and greed that Louisiana and, particularly, New Orleans officials and Police are known for, Want2retire! (Joking)
Want2retire: I am surprised to hear you say you have to lower your price as, from what I understood, so many houses in New Orleans were ruined that the remaining ones, I thought, jumped 20-30% in value. Hmmm...those newspapers and their misinformation.
Since I have done some study on the Biloxi, MS., and Gulf Shores, Ala., area lately, I thought Biloxi, too, jumped in housing price since they got blasted by Katrina also. Not, eh?

Good to know that more than one feels that we may be headed to a horrid real estate crash here. How...comforting?
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Old 01-17-2008, 09:43 AM   #19
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What!!!! Governor Jindal isn't corrupt? What a jerk for ruining that very long and upstanding tradition of graft, corruption, dishonesty and greed that Louisiana and, particularly, New Orleans officials and Police are known for, Want2retire! (Joking)
Want2retire: I am surprised to hear you say you have to lower your price as, from what I understood, so many houses in New Orleans were ruined that the remaining ones, I thought, jumped 20-30% in value. Hmmm...those newspapers and their misinformation.
Since I have done some study on the Biloxi, MS., and Gulf Shores, Ala., area lately, I thought Biloxi, too, jumped in housing price since they got blasted by Katrina also. Not, eh?

Good to know that more than one feels that we may be headed to a horrid real estate crash here. How...comforting?
I have absolutely no idea about most Gulf Coast communities but I would say that any investor should be sure to do more than the usual due diligence. I don't have my spreadsheet on this computer, but as I recall undamaged houses in my small (6x8 block) neighborhood went up maybe 5-10% in 2006 compared with pre-Katrina 2005. I would say they are presently down about 3-15% compared with pre-Katrina 2005. There's a lot of variability and damaged houses are going for a little less than that.

Only about half of the residents of New Orleans returned, and I think those who aren't back yet are growing roots in their new locations and can't or don't want to return. At any rate, the population seems to have stabilized, according to an article I read last week.
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Old 01-17-2008, 10:36 AM   #20
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"This states this is the worst crisis in housing since the Great Depression?"

Yes.

So it's reasonable to expect the bust to be as great. Add to that commercial RE, which traditionally follows residential by 6 mo, and is now falling off the cliff on schedule. Commercial is way overbuilt and yet developers keep on going.

January 10, 2008 - January 16, 2008Provided by Commercial Real Estate Direct
Philadelphia Market Strengthening in 2008
Philadelphia's office market fundamentals will strengthen though 2008, according to Grubb & Ellis. The brokerage firm expects a steady decline in the market's 9.6% vacancy rate and foresees rents for trophy properties increasing to as much as $35/sf from an average range of $25 to $28/sf last year. They also predicted that landlords will be able to reduce their expenditures for tenant improvements at Class A and B properties.
Apartment Rates, Occupancies Rise in Austin
Occupancy and rental rates in the Austin, Texas apartment market are on the rise, according to Capital Market Research. The Austin real estate consulting firm said that rents for one-bedroom units have increased to $714/unit, while rents on two-bedroom and two-bathroom units were up to $938/unit. Additionally, the 2007 occupancy rate rose to 96.6% from 94.4% two years earlier. Stricter standards for obtaining a mortgage and an improving job market in Austin have factored into the occupancy spike.
Office, Industrial Vacancies Rise in Buffalo
Office and industrial vacancy rates in the Buffalo, NY area will rise in 2008, according to CB Richard Ellis. The area's office vacancy rates at the end of 2007 were 9.9% downtown and 12.6% in the suburbs, while the overall industrial vacancy was 9.6%. On the industrial side, CB notes that sector was hurt last year by American Axle and Manufacturing's decision to vacate a 1.2 million sf manufacturing plant.



1. 25% increase in office rents in 2008 in Philly!!!!!

2. Occupancy and rental rates up in Austin.

3. Office and industrial vacancy rates will rise in Buffalo in 2008...Oops that's a bad thing..well it is Buffalo! Wait, let me put my ER glasses on. Yep, no good news here. Definite confirmation the sky is falling. It is better to be wrong with the group than right by yourself. Mass Hysteria, the Amerikan way!

Due to the huge demand Honobob's ER real Estate book offer has been extended thru the weekend. No need to call, we know you want it, just take off your tinfoil hat think your credit card number and we will ship in 3 days!
Customer service just like before the crash.
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