Why home prices may never recover

[edhopper]

http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/why-home-prices-may-never-recover.aspx?page=1

I have said before, there are those who bought at the height of this bubble (2004-2006) who will not see their house at that price in their lifetime.

[ashling]

1. Reset button has been pressed

[sellitman]

2. Since I am not reselling my home that's ok.

All others will be bailed out by the Obama administration anyway.

:sarcasm:

[Warpy]

3. I feel really sorry for folks who bought during this time

because the feeling in any bubble market is that if you don't jump at it today, you'll be priced out tomorrow. They saw it as their only chance to get into the market and they took it.

How do you know it's a bubble? Look for hucksters. When people appear telling you how to make money off housing, or dotcom IPOs, or Beanie Babies, or tulips, or any other commodity, sit on your hands and hold onto your money. That's a sure sign the market is due for a nasty correction in the next few months to years.

[edhopper]

4. There were so many

obvious signs that we were in a housing bubble. Not least of which was Robert Shiller saying we were in the biggest housing bubble in World History!!
Of course, just like Iraq, the MSM refused to air the voice of any reasonable person.

[notesdev]

5. Check out the date on this

http://www.fool.com/personal-finance/retirement/2005/10/26/real-estate-bubble-you-bet.aspx

[Warpy]

7. I missed that when it came out

but when my dad died 3 months later, I had the presence of mind to count the "for sale" signs in his area and figure out the party was over, at least in Florida.

Those indicators in that article are good ones to follow. It was said before the stock market crash that hot stock tips were coming from cabbies and elevator operators. When that happens, it's time to get out of any market...or to avoid getting in.

[imdjh]

8. So do I, but someone should be talking about perspective at a national level

Change the question people are asking. Stop asking, "Did I pay too much for my house?" or "Do I owe too much on my house?" and start asking, "Can I rent an identical house for less than my mortgage payment (with tax consideration) and if I can is the difference worth living in someone else's house where I can't make it the way I want it?"

People now pay for cars more than their parents probably paid for their first house. In thirty years that car will be worthless. The same still cannot be said of a house. If you paid a million dollars for a house that is now worth $500,000 then you might consider walking away. But if you bought an average house and it's now worth 50% of what you paid for it, then you might consider why you bought it in the first place, why you paid such a premium, and then legitimately reckon that those factors will cause it to come back faster than some of the houses you didn't consider.

Consider this. People who bought tract homes in major suburbs in 1990 got scared when the housing market went to hell shortly thereafter and the builders were slashing prices on the remaining homes and sites in the development. But those people who held onto their overpriced houses could sell them today, even in this messed up market for twice what they paid for them. So assuming they didn't leverage the hell out of the house to play the stock market, they'd be able to sell their house and buy a really nice retirement home in Florida for cash.

[Warpy]

9. That's what I've said for years: know your market

In some markets in California, renting a comparable property was a fraction of the monthly PITI whack. It was sheer lunacy to buy property under that set of conditions.

My own market never saw a real bubble, and owning even through 2006 still provided a hedge against rising rents, one that is even better now even though people "lost" on paper due to oversupply of housing built to satisfy out of state speculators.

A few markets have seen property values fall below rent. It's sheer lunacy to rent in those markets, unless a person expects to move within five years.

I don't think housing has fallen to its lowest yet. I do, however, think the biggest drop is just about over. If you know your market, you'll know your decision.

[edhopper]

10. depending on the market.

In Florida, maybe. In New York, the fall hasn't begun and it will be a looong way down.

[imdjh]

6. It all depends on where you live and how crazy it got

The waterfront homes here still fetch a multiple of their original price and considerably above a home of similar size and quality inland. As Will Rogers (or someone like that) said, they aren't making anymore waterfront property. If you paid a million dollars for a 1970's suburban tract home in SIlicon Valley, you might be screwed for a long time. It was never worth a million dollars, and frankly you should have known that just by looking at it. Artificial exclusivity will not hold up against natural exclusivity. You will pay more to live in San Francisco, because there are enough people willing to pay for the natural exclusivity of the fixed housing market there, and you will pay less to live in Las Vegas or Phoenix where there were no physical boundaries which made hyped up "executive" neighborhoods worth more than the cost of building the house plus a reasonable profit for having someone else do it for you. You will pay more for a view of the water or the mountains than you will a view of your neighbor's back yard.

I'm wondering what the effective of the drop in housing prices will have on urban renewal. Will urban pioneers see the even greater value in purchasing run down homes in risky neighborhoods now that they can get them even cheaper and spend their money on seriously ridiculous improvements? Or will they stretch to buy the reduced price granite counter tops (how incredibly tiresome) in the previously reclaimed neighborhood? Will the gentrification move forward or will the deterioration reclaim the gentrification like it did when it first took these neighborhoods downhill during the exodus to the outer suburbs in the 1940's and 50's?

What will HGTV do?

[GoesTo11]

11. I knowingly overpaid for my house

I expected there would be a drop in prices, and certainly no great increase. But since I moved for a job I wanted, and I didn't feel like renting for several years waiting for a fall, it seemed worth it anyway. I was willing to lose some substantial amount for the convenience and for feeling settled in life (although $500,000 or something like that would be way too much, $50,000 may not be) It bothered me that houses cost 5 times what they would cost to build. That just ain't right. If you have a beautiful beach on the ocean, sure. But for a "hot" city, which really looks like all other cities? Can't be worth it.

[question everything]

12. We lived in California in the early 90s

when many, who purchased their home at the then peak - 1989 - were lamenting a loss of $100K. A huge sum that day.

Yet, they recovered, and then some.

I don't know about this time. Certainly the ones who have never had the income to justify their homes will lose theirs, if not already have. But one can never say "never."

[edhopper]

13. One thing to remember when talking about other periods

when housing boomed and busted. This time was the single biggest housing bubble in world history. All other post war bubbles pale in comparison.
Houses became 3, 4 and 5 X over valued.
It will take a very, very long time to get back to those prices. A lot of inflation will have to take place.
Look at this bubble compared to the 1980s boom.