Subprime - How Long Before the Real Estate Market Normailizes

[chinaco]

We are intending to down-size in the next 4 to 5 years. We might consider doing it sooner.

How many years do you believe it will take for the housing market to stabilize and become a bit more normal. It is obviously a buyers market today. When will the excess inventory be sold and buyers return (real home owners... not spec investor).

Also, I am talking on a national basis. I know that different locations of the country were affected differently.

When taking the poll, please give your opinion on a national basis.

Make comments about your local situation are in the thread.

 

[W2R]

In two years, I will be newly retired and wishing my house had sold, so I could move to Missouri for ER. We think the real estate cycle in New Orleans is a little bit ahead of the rest of the country. I voted for "3 years" for the rest of the country.

I am not so much concerned about prices, as numbers of homes sold. If I sell for less here, then buying for less in Missouri could ease that problem or make it a non-problem. But if I can't sell at all, then I am stuck.

Seems there are two points of view on this. Some think that if houses aren't selling then it's going to be hard to sell at any price, because buyers won't be able to find financing and can't sell their prior house anyway. Others seem to think that if houses aren't selling, I could sell at a lowered price.

Right now, 3 houses out of 20 on my block are for sale, and have been for sale for quite a while. Prices have come down to some extent, but none have sold yet.

 

[Moemg]

I voted for two years .If Florida passes a reasonable property tax reform especially portability it should spur some sales plus with all the baby boomers retiring that should help things in Florida . I also would like to sell my house but I'm not going to give it away. My neighborhood is changing and a lot of houses are being torn down to build McMansions since it's waterfront property .My sister in Long Island ,NY has had her house on the market for three years . In the meantime she built a house in Florida and is now stuck with two houses and horror of horror had to go back to work.

 

[2B]

I voted for 5 years but the key was your comment of "national." Southern California, parts of Arizona, Nevada and Florida are leading the disruption but they also had giant gains over the last few years. Parts of the NE have had a hit but some parts are still booming. The Pacific NW is still selling hot and things are still "growing to the sky." Even Houston is solid with sales decent and prices rising.

I think before it's over we will all share some of the pain but the rest of us will have to wait for the next inevitable recession. I don't think the current "credit crunch" will trigger it because the economy is too strong and foreign money is too readily available to get good prices on big equity hunks of US companies. I'm betting on 2009 or 2010. That's when I'll lose my cushy j*b and enter ER. I doubt my personal situation will be solved by then but I'll just have to make do.

 

[tightasadrum]

I voted 3 years, but it really depends on what "recovers" means. I'm looking at a reversion to the mean trend over the last 20 years. The spike up of values was artificially induced by easy credit IMHI, and I don't see values in really hot areas attaining those values again for some time. I'm hoping that more sanity comes back into the housing market now.

 

[73ss454]

I voted for two years .If Florida passes a reasonable property tax reform especially portability it should spur some sales plus with all the baby boomers retiring that should help things in Florida . I also would like to sell my house but I'm not going to give it away. My neighborhood is changing and a lot of houses are being torn down to build McMansions since it's waterfront property .My sister in Long Island ,NY has had her house on the market for three years . In the meantime she built a house in Florida and is now stuck with two houses and horror of horror had to go back to work.

I moved from LINY to Florida at the end of last year. The taxes here in Florida are a mess and I don't see it getting any better. In June of this year they had it worked out where they were going to give a super exemption option in lieu of Save Our Homes. This would have evened the playing field but it was knocked out by a Florida judge. So what they came up with is to up the homestead exemption from 25K to 50. This will save the average homeowner less than $300 a year.

Here's the problem: Let's say I'm paying 8K in taxes and my neighbor is paying 4K with the same house. Under SOH (save our homes) taxes can only be raised 3% a year which is fine. Now 3% of 8K is more than 3% of 4K so the taxes will not make any sense to anyone moving to Florida. You have to really want to move here under this tax structure.

They also want to make the SOH portable which is OK for a long time resident of Florida but does nothing for the new comer.

As far as your sister in NY selling her home. Just lower the price it will sell. I started at $725K and ended up at $570 on LINY, it took 6 months but it sold. Your sister must like working because price sells houses in any market.

 

[mathjak107]

i tend to think when we see credit card defaults sky rocket we may be near the bottom. very few will actually default on a mortgage and pay a credit card bill especially with universal default rules. there may be reasons why one might try but historically it just dosnt happen

 

[Safe Harbour]

I wonder if it will recover before global warming melts enough of Greenland and Antartica to flood coastal properties! (Smile - it's just a joke, on a beautiful Saturday morning, high on a hill in a famous coastal city)

 

[youbet]

But if I can't sell at all, then I am stuck.

.

Generally, you'll always be able to sell if you price to the market.

IMO, the recent housing boom has led to, in many areas, staggering house appreciation. Owners are very hesitant to give any of their perceived paper gains back and, relative to the gains of the past 3 - 5 years, price drops have been modest.

Whether the markets in southern Missiouri and Louisiana behave relative to one another in your favor or against you during the time period you want to move, only time will tell. But I sure wouldn't let a few thousand bux one way of the other hender me from moving on and doing what I wanted to do!

 

[youbet]

I wonder if it will recover before global warming melts enough of Greenland and Antartica to flood coastal properties! (Smile - it's just a joke, on a beautiful Saturday morning, high on a hill in a famous coastal city)

I wonder, is it too soon to start a thread on whether tax payers should bail out coastal residents whose properties are under water due to global warming?

 

[Retire Soon]

How long will it take buyers to return to the market in force? Perhaps more than 5 years. How long will it take home prices to return to the prices reached in the peak of the housing bubble which some believe to be August, 2005? Perhaps not in the lifetime of many of the readers on this forum.

 

[2B]

How long will it take buyers to return to the market in force? Perhaps more than 5 years. How long will it take home prices to return to the prices reached in the peak of the housing bubble which some believe to be August, 2005? Perhaps not in the lifetime of many of the readers on this forum.

Back in the mid-80's Houston had a major real estate crash. Many subdivisions lost 30 to 50% of their value. Some neighborhoods were literally bulldozed! People were mailing their keys back to the lenders. It took about 10 years for the typical neighborhood to regain their pre-crash valuation.

Of course, then we all made bad decisions and overpaid for our houses. It was only right that we take the consequenses of our mistakes -- so we heard from the national news commentators. I keep wondering why the current people at risk in subprime are now "victims" of predatory lenders?

 

[old woman]

Right now you hear/read about people who think renting is cheaper than buying and house prices will keep falling. When they think like that they won't buy a house at any price. They think wait and live in apartments and they are being smart and the landlord will fix the plumbing. Over time things will happen to make them want houses. An apartment is fine for a young person or couple but when they have kids or get a boat or want a garden or hate living below someone they will start wanting a house. When the rent goes up and they start to see friends in houses paying less than they do for rent they will want to buy even if it is more than rent. These first time home buyers will improve prices for the move up buyers and once the snowball starts it will escalate. I think move first time buyers are motivated to jump in when prices are going up fast so every year they wait cost them thousands.
The Californian moving to lower cost areas might be just the trigger to start price raises in lower cost areas. City people moving to small towns buying retirement homes or second homes will start to drive up prices too. I am 59 and will buy my retirement house when I am a few months from retirement in the country near fishing lakes where prices are currently low. Once prices start going up I might retire earlier or buy and hold until I am ready.

 

[youbet]

I am 59 and will buy my retirement house when I am a few months from retirement in the country near fishing lakes where prices are currently low. Once prices start going up I might retire earlier or buy and hold until I am ready.

Actually, in many areas with recreational opportunities, you're already too late. Prices are dramatically up from just 3 - 4 years ago. And, so far, pull backs have been modest.

The areas where I've specifically followed along with prices and availability are northern Wisconsin, northern Minnesota and northern Arkansas. In all three areas, I watched prices for desirable lakefront property approximately double in just a few years, moving them out of my ability to purchase.

Would you mind sharing the areas you're watching "where prices are currently low?" I'd like to go check some real estate web sites and see if there are any possibilities.......

Thanks.....

 

[barbarus]

People who pay ridiculous prices for houses are not victims, they are perpetrators.

They drive up prices on many things for everyone else.

Does anyone here actually trust a politician? A bureaucrat? The Media?

 

[BigMoneyJim]

These first time home buyers will improve prices for the move up buyers and once the snowball starts it will escalate. I think move first time buyers are motivated to jump in when prices are going up fast so every year they wait cost them thousands.

I doubt I'm typical, but the combination of low rates and falling prices has me considering trying to buy in the next year or two.

I always compare a one bedroom apartment rent to a three bedroom home mortgage, though. Not because they're comparable but because I only need a one bedroom apartment but would want to buy a 3-bed single family house to make selling easier. Even so, I think the time for me to buy may be rapidly approaching.

 

[barbarus]

Just be careful not to to catch a falling knife BigMoneyJim.

 

[brewer12345]

Prices will slide for another year, probably be flat in '09 and then will flop around not doing much for 2-3 years. Local markets will differ, obviously.

 

[barbarus]

Three years is a figure that's being bandied about quite a bit.

We'll all have a much better perspective next year at this time.

 

[Spanky]

I am still waiting for the housing crash in the Bay Area.

 

[old woman]

Would you mind sharing the areas you're watching "where prices are currently low?" I'd like to go check some real estate web sites and see if there are any possibilities.......

I am only looking in WA state near enough to go to Federal Way as a day trip. Mossyrock, Morton, Randle. I can get a 5 acre piece for about 200K with a old mobile and a shed or garage or barn but not on waterfront. That to me is cheap, I don't want an old mobile but vacant land cost too much to get the well, septic system, pour cement and build the shed or garage or barn. I could get a decent house on 5 acres for 250-300K or a fabulous home for 595K but it is too big and too many stairs for me but really pretty. I can sell my old house for about 400-450K pay off the 180K mortgage and pay cash for a 30 year old mobile home or get a decent house with a small mortgage or spend some from savings. Every year I work puts me up about 70K in what I can afford.

 

[W2R]

Generally, you'll always be able to sell if you price to the market.

IMO, the recent housing boom has led to, in many areas, staggering house appreciation. Owners are very hesitant to give any of their perceived paper gains back and, relative to the gains of the past 3 - 5 years, price drops have been modest.

Whether the markets in southern Missiouri and Louisiana behave relative to one another in your favor or against you during the time period you want to move, only time will tell. But I sure wouldn't let a few thousand bux one way of the other hender me from moving on and doing what I wanted to do!

Exactly! It won't. I wouldn't mind pricing at, say, 80-90% of what is supposedly the market value here, if I could sell it in a couple of months that way. I bought my house in 2002 for less than that, and enjoyed living in it meanwhile. The selection is great where I am going.. nothing is selling there either, and most of the houses have been on the market a long, long time. I am sure I could pick up a home that would be great for me at a bargain price.

Another advantage of selling and buying in a down market is that my property taxes might end up being a little lower than if I paid top dollar.

 

[Wags]

I would hope 3 years (poll is closed).

In West Texas (WT)the prices seem to be holding on homes and real estate. Parts of WT are experiencing an oil boom and thus people are buying vehicles, homes, RV's, etc...., etc.....

My wife and I own our home and our vehicles, thus we do not have a mortgage or a car note. However once the kids leave the house we are thinking about keeping our current residence as a 2nd home, and using my GI Bill to purchase a small house (with about 1 to 2 acres) closer to big city which would have access to medical facilities, doctors, etc..., etc.... Of course, we may change our minds in between now and the time the kids leave the nest.

GOD BLESS

 

[tryan]

"normal market" .... never or NOW. What's normal?

The last "bottom" in the Boston market was achieved about 4-5 years after the peak. Peak prices would not be reachieved for 12 years. But this was driven by a NASTY recession. You'll know the bottom because investors will be able to rent for a PROFIT ... something we have not seen in nearly a decade ... but it's coming back.

 

[brewer12345]

You'll know the bottom because investors will be able to rent for a PROFIT ... something we have not seen in nearly a decade ... but it's coming back.

I am still waiting for that. I looked at a few properties over the last few weekends. A typical example is a nice 3 bed 1.5 bath with an inlaw suite in an OK, but not great 'hood. Listed 295k, should flow cash pretty decently around 225-240k. So I go look and discover that the owners have done zero maintenance aside from the roof in the last 10+ years. Would require at least $30k to shape it up (and probably more than that from what I couldn't readily see). Told the realtor that I culdn't see going more than 175k or a bit more. Never mind, she sauid, because another couple bought it to live in, and close to list price.

Another oddity of the current market: There are two smallish 3 BR houses a street over from me. They have been on the market for a looooong time and have been vacant for a while. I asked my realtor to see if we could go look at these places, since I assume the sellers must be very motivated. Realtor says that both these houses are "dead listings." The asking price is what the sellers owe on the property, and sinec they have obviously chosen to skip town, they have no incentive to price the properties realistically or bargain. I imagine these will sit until they get foreclosed and then come back on the market as REOs. But in NJ, this might take a year.