What if House Prices Fall by 30% Worldwide?

[camberiu]

I love when my favorite "piglet sodomizer" writes articles like this.

"Optimists think this housing market is going to reverse in 2009. I am not among them. This is an international phenomenon. The decline in on-paper wealth is going to shake the confidence of hundreds of millions of home owners. I suggest that you prepare for an international economic slowdown. The people who thought they were real estate rich are going to face a new reality: rising property taxes, rising expenses, rising utility bills, and declining equity. This is not the scenario for bull market investing."


LINK

[Art G]

I think at 30%, real estate moguls come in and start buying like mad. I read somewhere that something like 30% of the sub-prime problems are in just California and Florida, so elsewhere aren't feeling nearly the bust that they are. Of course, that may have something to do with their recent run being greater than all others.
So, like so often happens, those who bought homes at the end of the run, are the ones who get burnt, all others just bemoan the fact that they missed an opportunity. Of course, that opportunity would have only worked had they sold their house, moved into an apartment, and are now willing to wait out the bottom, or else move elsewhere.
Bottom line, dating back to the great tulip run, someone always gets screwed at the top, and the media always plays up the worst scenario.
Now, someone let me know when Aaron Spelling's house hits rock bottom, I might like to offer his family a hundred thou.

[brewer12345]

What if everyone had sold in 2005 and rented? Oink, oink...


You forget that there are lots of bottom fishers with capital to burn and a constant stream of new households being formed and immigrants coming in. They all need a place to live, whether owned or rented.

I suspect that within the next 18 months I will be the owner of a piece of real estate I do not live in. And I imagine that it will be very profitable over a several year period.

[cute fuzzy bunny]

Only thing that kept me from selling in 05 and renting (other than the fact that I just moved and my son had just been born) is the possibility that everything might just go sideways for 10 years, I'd have pumped out 10 years of rent, and homes would cost the same.

Might still do that.

[yakers]

Quote:

Originally Posted by brewer12345 What if everyone had sold in 2005 and rented? Oink, oink... I suspect that within the next 18 months I will be the owner of a piece of real estate I do not live in. And I imagine that it will be very profitable over a several year period.

Or is it time to buy REITs?

[73ss454]

I think it would be a good thing. My real estate taxes and home owners ins. should go down as well.

[tryan]

Interesting read. As I've said, the housing bottom will come with a deep recession Which caused which ? Who cares ? Time to BUY.

On a side note, the sales from REDC auction I attended in Nov are hitting the registry of deeds. Best I can see Countrywide allowed 100% financing on some of these gems (auction price + 5%) ... not all, but a few I looked up. Soooo how long will it be before these gems are sent as jingle mail? Point being, we're in the early innings of this ball game (and the feds will open the flood gates during an election year).

[Retire Soon]

Quote:

Originally Posted by camberiu I love when my favorite "piglet sodomizer" writes articles like this. "Optimists think this housing market is going to reverse in 2009. I am not among them. This is an international phenomenon. The decline in on-paper wealth is going to shake the confidence of hundreds of millions of home owners. I suggest that you prepare for an international economic slowdown. The people who thought they were real estate rich are going to face a new reality: rising property taxes, rising expenses, rising utility bills, and declining equity. This is not the scenario for bull market investing." LINK

A 30% decline in home prices is a reasonable projection. Home prices will continue appreciating from that point at 3% to 4% a year. Prices always revert to the mean. No, "Its not different this time."

[Helena]

A lot of virtual money is being taken off the table.
I've heard banks are reducing/freezing HELOCs.

[tryan]

Heck, prices were rising 15-20% per year for more than a decade ... give back 30% and rise again from there. OK (where do I sign?).

[Helena]

DFW missed most of the housing bubble...
prices here didn't skyrocket, nor have they
fallen very much... but there is a lot of
inventory.

[Retire Soon]

Quote:

Originally Posted by tryan Heck, prices were rising 15-20% per year for more than a decade ... give back 30% and rise again from there. OK (where do I sign?).

Don't forget that with a 30% loss, it will take a 43% increase to get back to the highest price. Historically, home prices on average have increased 3% to 4% a year. At that rate, it will take many years to get back to November 2005 prices.

[Buckeye]

I never thought I would be able to afford going back home to Seattle. Maybe I can.

[Notmuchlonger]

Quote:

Originally Posted by Buckeye I never thought I would be able to afford going back home to Seattle. Maybe I can.

Ya maybe if California home prices drop another 60 percent I would stay here

[ESRBob]

Quote:

Originally Posted by Helena DFW missed most of the housing bubble... prices here didn't skyrocket, nor have they fallen very much... but there is a lot of inventory.

That's a lot better than DFW during the 80s-- my brother bought a townhouse down there at the peak and it took him nearly 20 years to get the price back to where he bought it -- in nominal dollars! (in other words he'd still lost out big time in inflation-adjusted terms).

I have no idea where this real estate market is headed, but I do know that when real estate bubbles pop it can take a long time for prices to get back to where they were.

[haha]

Quote:

Originally Posted by Buckeye I never thought I would be able to afford going back home to Seattle. Maybe I can.

Don't hold your breath.

So far not much falling price around here.

Ha

[jazz4cash]

Quote:

Originally Posted by 73ss454 I think it would be a good thing. My real estate taxes and home owners ins. should go down as well.

The local government budgets will really get squeezed. Im concerned how they will adapt to losing the revenue machine of rapidly rising home values. They shoulda been banking some of the surplus gain, but nooo

[73ss454]

Jazz, don't worry about the local governments. My money is on them, they'll figure some way to rip us off.

What they'll do here in Fla. is just raise the millage rates to make up the diff., they do have a license to steal after all.

[jazz4cash]

well, I meant to say Im concerned about how it will affect ME!

[JustCurious]

Quote:

Originally Posted by Helena A lot of virtual money is being taken off the table. I've heard banks are reducing/freezing HELOCs.

I was just approved for a five figure HELOC by my credit union.