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View Poll Results: Opinion: When will the Real Estate market reach bottom
Late- 2006 0 0%
Early-2007 6 9.23%
Late-2007 13 20.00%
Early-2008 10 15.38%
Late-2008 11 16.92%
2009 or later 19 29.23%
never 6 9.23%
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Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 01:59 PM   #1
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Opinion: When will the Real Estate market reach bottom

In other words when will it be best time to buy?
Some links with expert opinions might be good.
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 02:59 PM   #2
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Re: Opinion: When will the Real Estate market reach bottom

Impossible to predict the date, but here are some thoughts.

* The last bubble took about 6 years to unwind.* *This one is *much* larger.

* Take a look at historical housing prices/growth in your area to get an idea of what the trend was, and then watch for the time in the future when prices have reverted to the mean.* *Prices often overcorrect after a bubble, so mean reversion won't necessarily mark the bottom.

* In general housing prices have historically risen at close to the rate of inflation.* *So, even a period of flat growth over a number of years could bring prices back in line with the historical trend.

* Housing tends to take off starting at the bottom of economic cycles.* *So, if we enter a recession, then expect housing to recover once the economy recovers.

* There's a new housing price futures market.* *The current prediction is a nation-wide median price drop of 5% for next year.* *Futures markets often represent the best preditions since people are betting real money on the outcomes.
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 03:23 PM   #3
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Re: Opinion: When will the Real Estate market reach bottom

people in the field are saying a decade
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 03:46 PM   #4
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Re: Opinion: When will the Real Estate market reach bottom

When eveyone says they can't go up.
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 04:33 PM   #5
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Re: Opinion: When will the Real Estate market reach bottom

Quote:
Originally Posted by tio z
When eveyone says they can't go up.*
Maybe the day after that's said, around noon I think, if you want a more accurate estimate.
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 04:56 PM   #6
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Re: Opinion: When will the Real Estate market reach bottom

I'm still of the mind that the market overall doesn't matter to me and much as what is happening to my local market. There are still buyers for homes in my market. Prices never went up over 5% per year during the last few years so I don't expect prices to collapse here. Now San Diego, SF, Boston and FL might be a different story. BTW there has been at least one survey that shows several towns in the US with home prices that were undervalued. IIRC there were several places in TX that were undervalued.
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 05:02 PM   #7
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Re: Opinion: When will the Real Estate market reach bottom

Rents (inflation) will also affect price declines. If rents continue to rise for a few years, price declines won't be as severe. If a recession hits and the Fed lowers rates then I think that will support prices on the way down. For really steep declines I think we need to see mortgage rates go a few points higher, at which point even most dual income professionals will be locked out of the market.
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 05:37 PM   #8
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Re: Opinion: When will the Real Estate market reach bottom

All of the above . . . depending on where you ask the question.
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 05:57 PM   #9
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Re: Opinion: When will the Real Estate market reach bottom

Wab -- GREAT POST.

Do you have any links (or more insight/intuition) for the following:

Quote:
* The last bubble took about 6 years to unwind. This one is *much* larger.
Quote:
* There's a new housing price futures market. The current prediction is a nation-wide median price drop of 5% for next year. Futures markets often represent the best preditions since people are betting real money on the outcomes.
Thanks,
Kramer
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 06:11 PM   #10
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Re: Opinion: When will the Real Estate market reach bottom

Quote:
Originally Posted by Arif
I'm still of the mind that the market overall doesn't matter to me and much as what is happening to my local market. There are still buyers for homes in my market. Prices never went up over 5% per year during the last* few years so I don't expect prices to collapse here. Now San Diego, SF, Boston and FL might be a different story. BTW there has been at least one survey that shows several towns in the US with home prices that were undervalued. IIRC there were several places in TX that were undervalued.
All real estate is local. In the early 80's the whole Gulf Coast plunged during the oil bust. Home prices in the NE and California boomed. The company I worked for at the time had to cover peoples home losses to get them to take transfers. It was in the mid-90's before most home prices had fully recovered.

Texas hasn't participated very much in the boom of the last 5 years but now the oil and energy business is taking off again.
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 06:24 PM   #11
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Re: Opinion: When will the Real Estate market reach bottom

Homebuilders are in trouble.



Earnings Preview: Pulte Homes


Quote:

"Our June survey of real estate agents indicated that housing trends worsened from already-weak levels," Bank of America analyst Daniel Oppenheim wrote in a June 28 client note. "We now expect a 48 percent decline in earnings in 2007 and a 72 percent decline in 2008 based on the weak trends and our expectations for the future."
http://news.moneycentral.msn.com/tic...724&ID=5890301


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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 06:34 PM   #12
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Re: Opinion: When will the Real Estate market reach bottom

Kramer, there are several economic blogs with good coverage of the housing bubble. * One of the better ones:

Calculated Risk

The Office of Federal Housing Enterprise Oversight collects lots of good price data. * You can see it in graphical form here going back to 1975:

inflation-adjusted housing prices

Take a look at LA, for example, and you'll clearly see their previous bubble peak in 1989 and recover around 1996. * Similar story but different timeframe for Boston and others.

The Federal Reserve flow-of-funds data shows the growth of housing relative to GDP. * The separation from the historical trend has been pretty amazing starting in about 2000:

Housing vs GDP

Note that those graphs overstate things a bit since they use a linear scale, but you get the idea....

The CME housing futures market only goes out one year, but it does predict a drop in prices for the US composite of 10 markets. * *Google "CME housing futures" for various articles.

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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 06:36 PM   #13
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Re: Opinion: When will the Real Estate market reach bottom

lots of anecdotal evidence of a bubble and links to other sites here -

http://www.thehousingbubbleblog.com/
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 06:57 PM   #14
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Re: Opinion: When will the Real Estate market reach bottom

Quote:
Originally Posted by Arif
I'm still of the mind that the market overall doesn't matter to me and much as what is happening to my local market. There are still buyers for homes in my market. Prices never went up over 5% per year during the last* few years so I don't expect prices to collapse here. Now San Diego, SF, Boston and FL might be a different story. BTW there has been at least one survey that shows several towns in the US with home prices that were undervalued. IIRC there were several places in TX that were undervalued.
from what i read texas and colorado are pretty overbuilt and for some reason have a huge number of foreclosures and ARM/IO loans. if there is a surge of foreclosures there in the next few years as the loans reset to higher rates you will probably see prices drop as builders keep on building
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 07:20 PM   #15
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Re: Opinion: When will the Real Estate market reach bottom

Quote:
from what i read texas and colorado are pretty overbuilt and for some reason have a huge number of foreclosures and ARM/IO loans. if there is a surge of foreclosures there in the next few years as the loans reset to higher rates you will probably see prices drop as builders keep on building
I don't know anything about CO but in TX I think what you are seeing there is people getting mortgages that weren't suppose to. For instance, folks that don't make enough money buying a house with little or no down and the low int. rate with the ARM. That scenario would happen whether there was a bubble or not. It is more a function of these exotic/risky mortgages.

Maybe some parts of central TX like Austin is over built but places like Houston and outskirts of Dallas are pretty darn cheap on a price per sq ft basis compare to the other markets I mentioned earlier.
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 07:37 PM   #16
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Re: Opinion: When will the Real Estate market reach bottom

Quote:
Originally Posted by Arif

Maybe some parts of central TX like Austin is over built...


"Nationally, existing home sales are down four percent, but in Austin sales are up 11 percent."

"Single-family home sales in the Austin, Texas, area posted a seventh consecutive month of double-digit growth in July and set a record for the month..."

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Re: Opinion: When will the Real Estate market reach bottom
Old 08-27-2006, 11:41 PM   #17
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Re: Opinion: When will the Real Estate market reach bottom

Thanks, Wab. Wow, the total housing stock value vs. GDP I find to be quite a convincing statistic.

Kramer
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-28-2006, 07:18 AM   #18
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Re: Opinion: When will the Real Estate market reach bottom

Quote:
Originally Posted by Arif
I don't know anything about CO but in TX I think what you are seeing there is people getting mortgages that weren't suppose to. For instance, folks that don't make enough money buying a house with little or no down and the low int. rate with the ARM. That scenario would happen whether there was a bubble or not. It is more a function of these exotic/risky mortgages.
I think the bubble was largely riven by loose financing, so that is how the bubble will come crashing down. Subprime lenders are starting to feel pain from the securitization markets and they are pulling back from some of their riskier loans to crappier borrowers. Next, the very popular option ARM products that allow lots of negative amortization will either be yanked off the market or will be altered to require much higher minimum monthly payments. Finally, we might see tightening up of underwriting standards, especially on no-doc programs. With each tightening of the credit flow, more buyers get knocked out of the market. Not good for prices.

But all of these things take time. I agree with Wab: we will not see the end of the correction in the bubble markets for at least 3 or 4 years, possibly longer in some locales.
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-28-2006, 08:34 AM   #19
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Re: Opinion: When will the Real Estate market reach bottom

Quote:
you'll clearly see their previous bubble peak in 1989 and recover around 1996. Similar story but different timeframe for Boston and others.
Yup, the "bottom" in the Boston area was 1992-1993. What fun that was! Banks foreclosing and NOT taking title because they didn't want to manage the property (too much liability). Used to shop though a 1/4 inch stack of REO listings ... oh, those were the days! Bought many propertied for a dime on the dollar (compared to the forclosed note). Can't wait to do it again!

Always said the next bottom will be achieved in about 1/2 the time the top was achieved. 6 years out seems about right (assuming we've topped). A nice deep recession will speed things up a little.
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Re: Opinion: When will the Real Estate market reach bottom
Old 08-28-2006, 08:41 AM   #20
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Re: Opinion: When will the Real Estate market reach bottom

Wab - excellent link on GDP vs housing stock.

One question: does anyone have any info/data on the % growth of second vacation homes? As boomers retire (and people spend more of their disposable income on things like vacation homes), the number of homes will go up relative to the population/GDP, and might account for a small part (but obviously the housing bubble accounts for most of the froth vs GDP in recent years).

Also, another (small) factor: as more illegal aliens enter the country and the value of their services is off-record, that would (slightly) reduce GNP output, while the housing stock would still increase due to their housing needs...

Again, both of these are slight changes compared to the 40s/50s/60s/70s, but these and other factors may account for a little bit of the disparity and (possible) paradigm shift/adjustment.
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