More predictions for our never ending housing recession
Well it’s just raining housing market forecasts right now.
And if there is any pattern to this flood of prognostication, it may be simply that each forecast is progressively gloomier than the last one.
Recent days have given us a series of price predictions, the last one, from Barclays, touting a 40 percent peak to trough drop in home prices across the U.S.
Rising unemployment and an epidemic of foreclosures that just won’t call it quits means 30 of the 50 biggest metro areas have 75 percent chance or greater of seeing prices slide right into 2011, the report finds.
The decline in housing prices that have battered metro markets in Arizona, California and Nevada will spread out to cities across the country, PMI predicts.
Fifteen metro areas, including Providence and Detroit, are in a select group that has a 99 percent chance seeing prices stumble right into 2011. (I guess 100 percent, even for Detroit, would sound a bit arrogant.)
Other winners include Phoenix, Miami, Los Angeles and Las Vegas.
Not to be spared, Boston has an 80 percent chance that prices will continue to fall into 2011, New York an 88 percent chance.
By contrast Cambridge market – meaning Cambridge out through Metro West and beyond - has a 41 percent chance, according to the PMI report.
Tired of falling prices? Then consider moving to Pittsburgh, Columbus or Houston, where the chances that homes will keep losing value into 2011 is just 6 percent, or so says PMI.
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and of course, the best way for anyone to figure these things out is to look at where prices should be, and compare them to where they are.
Much the same as the stunningly overvalued stock market, which is also due for another fall.
clearly the trend is firmly in place. Anyone who thinks we'll see a floor on pricing in the next year is high. I still see a reversion to 1997 pricing. Housing has permanantly lost its allure as being a great investmnet vehicle. Sure there will be a number of rounds of "knife catchers" (look at people who bought last year), and numerous false bottom callers (the NAR has made several), this will be a long, long, slow grind down, similar to Japan, where houses actually overshoot fair value and hit levels we will look back on from even today with amazement...
Wait, where is Joe Real Estates' comment from NAR saying there has never been a better time to buy!?!? It's refreshing reading a story reporting on statistics and forecasts rather than Realtor spin. It reflects what any educated individual who pays attention to real estate has been saying for several years: Real Estate in and around the Boston area is still overvalued and has a ways to go before bottoming out.
Agree, agree, agree. The root problem is debt. It is massive debt levels accumulated over the last 20 odd years that is weighing on the economy, stock market, real estate market, etc. Until the system is cleansed of all the bad debt and the good debt is payed down, there will be no recovery. Of course, the US government will never repay it's debt. It will only continue to accumulate debt. That is why politicians, Treasury and FED have decided to attempt to inflate away the debt. And that is how you kill a currency and a country. The American Empire is on it's last legs. It was a good run. Did you have fun?
I recall Rona telling me that in November of 2007. I am glad I listened to her and other circuimstances made us stay on the sidelines.
David (#4): it's not going to be that bad. In a few years, everyone will forget about this mess and there will be a new bubble. Everyone forgot the last housing bubble, didn't they? And about the last few stock market bubbles.
Buy Everygreen Solar (ESLR)!
Charles (#1): only buying at the "correct" price is the key to any non-bubble investment, but how do you determine where prices should be? Historical price/rent ratios? Price/income ratios? Price/CPI? Forward-looking ownership/rental cost analysis? Retirement demographics? Median income housing cost analysis? For historical analyses, how far back do you take baseline data?
Each of these analyses will yield a different "right" price, which is presumably why there are few easy answers to the "when will the market correction end?" question.
JWB22, you should go work for the FED. They too think that the road to economic prosperity is to blow one bubble after another. Hey, maybe our government will be successful in blowing another bubble that drags us out of this mess. Problem is, bubbles do not lead to real growth, they lead to false growth.
The problems now are the result of our government fighting the recession in 2001 that was necessary to restore fundamentals after the dot.com bubble. They were successful in blowing up a real estate bubble, which made it appear that the economy was humming along. The last 18 months have shown that the economy was not humming along, it was false growth. That's because bubbles send a false signal to the market.
Bottom line, our Day of Reckoning will eventually come. The longer we delay it, the more painful it will be when it arrives. Trust me when I say the last 18 months will pale in comparison to what's in store once we get the real crisis.
James (#7): The answer to all your questions is "yes". Seldom will any two methods of valuation yield exactly the same results. But they should be in the same ballpark. Look at value from as many different angles as you can. If you find big discrepancies then check your assumptions. Moreover, don't confuse precision with accuracy. An appraisal (hypothetical example) done on a condo in Las Vegas in 2005 surely gave a "precise" estimate of the property's value. But as we now know, it was not even close to being an "accurate" gauge of long term value. Remember, it's almost always better to be more or less right than exactly wrong.
james - exactly, though if you do those analyses, you'll find they actually cluster pretty tightly. And I'd do that as a start - I'd also want to be aware of construction costs, local economics (are we talking sun belt, or detroit? Revere or Newton), raw land availability, interest rates, credit availability, and various other things.
Lots of stuff. But for most people its lots of money. So at the least the amount of effort put into the last day of shopping should be put in...
Lance, unsurprisingly, sums it up elegantly. But to put out a really basic metric - if you can rent a property out, and cover your monthly payment, its probably not a crazy price. Though it still might not be a profitable one. But the rental market is much less prone to nonsense, and therefore is a bit of a reality check
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