Boom Going Bust?

[REWahoo]

Real estate agents posting to blogs say housing sales are on the skids...

http://money.cnn.com/2006/04/18/real_estate/agents_bearish_in_blogs/index.htm

Real estate insiders go bearish in blogs
In mostly anonymous postings, agents are reporting big problems in the markets.


NEW YORK (CNNMoney.com) - If the secret worries of real estate professionals are any indication, home prices could be heading for a swoon.

When Brad Inman of Inman News, which tracks the real estate industry and is widely read by industry insiders, recently gave real estate agents the opportunity to blog about market conditions, they almost uniformly described them as bad – and getting worse.

"Normally, brokers and agents tend to sugarcoat the news; they don't want to affect consumer confidence," says Inman. "By letting them post anonymously, we gave them a way to really share their thoughts."

Most responded with tales of high inventories, slow sales and languishing prices.
Here's a sampling of their comments:

* "Portland, Oregon is mixed . . . more inventory, sitting longer. . . . Sellers no longer king." Posted by anonymous.
* "Minneapolis/St.Paul . . . 15 houses per buyer. If we had buyers. Huge inventory in every price range. More foreclosure properties coming on daily." Posted by anonymous.
* "East Central Florida Coastal area inventories up four times year to year and sales down 75%." Posted by Ramon Rivera (Not all bloggers craved anonymity).
* "Some Realtors, Mortgage Brokers & some clients have been more testy than in months previous. Something is in the air." Posted by S. Crowe.
* "Northern Ca. Let's not beat around the bush here. There is a slow down!! Home prices are not going up. Sales are down." Posted by anonymous.

Inman grants that there could be an element of self-selection, with agents suffering a slowdown more inclined to vent. But usually, comments from posters tend to be very diverse, with no clear consensus. "This round of blogging," he says, "has been conclusive; no one said the markets are great."

 

[yakers]

Interesting and maybe about time. But like politics, all real estate is local. Looks like Southern California is still holding up for now. I have lived through real estate cycles and if I were planning to sell, now would be the time.
There is another possibility, rather than a dive is a slow decline, your house could go up by 1%, your pay by 2% and inflation by 3%, do that for 10 years and you have a real adjustment. Anyone think that is just as likely as a real estate market dive?

 

[73ss454]

DW and I put our house in NY on the market today. We have been living in it for over 30 years. We have no idea how this will play out but were hoping for the best.

Hopefully we'll be able to have a better idea of the market in a few weeks.

 

[MJ]

I feel real fortunate that I was able to sell my house at the inflated end of the market. Now if my investment would grow safely at 7% to 9%, I would be tickled pink.

 

[dunc0029]

Yakers, I'd say it's quite possible. A large part depends on how high rates go, how panicky the flippers get, and how many foreclosures result from overstretched consumers. I'm a young would-be first-time homebuyer and have been watching real estate for years. Simply put, homes are not affordable for first-time buyers. I make good money and could afford about .7 median house in my comparably affordable area. There is a trickle-up effect when first-time buyers are priced out of the market. For a while, they were still jumping in seeing that everyone was getting "rich" with home equity as prices rocketed. Eventually, there are no greater fools and the sensible ones wait for reasonable prices.

 

[veritasophia]

I live in Irvine, SoCal, prices are very high in the area. With a median family income around $85,624 and the median home price at $582888, I don't know how any "median" family can contemplate buying a home here.

See also this forum on more interesting bust predictions California.

 

[wabmester]

I live in Irvine, SoCal, prices are very high in the area.

I just got back from a trip to Orange County, and I see there's still a massive amount of new construction going on. OC still has good job growth, so as long as new housing doesn't outpace job growth, your market should be in good shape. But I've heard that most of the job growth in OC is in the construction sector and other areas related to housing, so a housing bust could really deliver a double whammy to SoCal.

 

[Craig]

Veritasophia, interesting to note the dates on that forum thread. Booms tend to last longer than you expect, and busts often take longer to develop.

I still tend to agree the most likely scenario in most areas will be what yakers suggests. I would wager we will see some painful declines in CA, AZ, NV, FL, and perhaps some of the NE.

Still can't get DW to sell our condo in AZ ...

 

[Nords]

I see there's still a massive amount of new construction going on.

From what we've seen of the last 20 years in Hawaii RE, the boom ends just as the housing companies really ramp it up.

So I bet Orange County is just about over too.

 

[Martha]

Our condo conversions in the Phoenix area are still selling well. The locations are excellent. I assume condo sales in the less desirable locations will fall off first.

 

[veritasophia]

I remember reading from "the millionaire next door" that how affordable a home is depends on your income and should follow this formula:

(Home Price) = or < (3 * annual income)

Is this correct?

 

[Andre1969]

I've heard some people say that your home price shouldn't be greater than 4x your annual income, and others even say 5x. Staying at 3x your annual income would probably keep a lot of people out of hot water, though!

I think another rough guideline, for lending purposes at least, is that your monthly housing costs (principal, interest, taxes, insurance) shouldn't be more than 28% of your gross monthly income. But again, I'm sure that through "creative financing", a lot of people are well above that threshold.

 

[astromeria]

I must be getting old--I can remember when the advice was to spend no more than 2 to 2 1/2 times your annual income on your house. Maybe that was during the inflationary 70s/80s, when mortgage rates were high. I remember a friend bragging that she'd gotten an 8.5% mortgage--and my brother telling me that he got a 12% mortgage when the going rate was 2% higher