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Real Estate - How Much Further To Fall?  
User currently offlineEvilForce From , joined Dec 1969, posts, RR:
Posted (6 years 8 months 1 week 1 day 2 hours ago) and read 1150 times:

As I've mentioned in other threads, I cashed out my real estate holdings almost 2 years ago when things were booming.

Now that prices have come back down somewhat, any thoughts on how much further they have to drop? Are we nearing the bottom?

Right now I'd like to see another 10% decline in real estate pricing as I think that the markets are still over-valued. Anyone else sitting on the sidelines waiting to buy a house / investment property until the timing is right? Thoughts?

I've just started looking at houses again, and plan to buy this fall. I think by then we'll have more downward pricing pressure, uncertainty at the highest due to the election, and interest rates fallen further.

12 replies: All unread, jump to last
 
User currently offlineDtwclipper From , joined Dec 1969, posts, RR:
Reply 1, posted (6 years 8 months 1 week 1 day 2 hours ago) and read 1146 times:



Quoting EvilForce (Thread starter):
Are we nearing the bottom?

I don't think so, but it depends on what part of the country you are talking about. Here in S.E. Michigan I believe we are still far from hitting the bottom. My home is already well below our '99 build/purchase price, and I don't see it returning for at least 10 years. With that in mind, I just spent nearly 60K in home improvements, not with the hope of getting the money out, but enjoying my home for the foreseeable future.


User currently offlineDesertJets From United States of America, joined Feb 2000, 7781 posts, RR: 16
Reply 2, posted (6 years 8 months 1 week 1 day 2 hours ago) and read 1140 times:

I suppose it is all market dependent... more or less how strong is your local economy. So seeing a continued decline in S.E. Michigan is not shocking me at all.

From talking w/ my dad and one of his business partners (he does real estate to keep himself busy these days) in the Phoenix market likely the biggest driver of the market are the new home builders. If they are discounted their excess inventory why buy a "used" house in a given area or development when you can have something brand new for the same or less? So until the inventory of new builds drops enough that market will be pretty soft.

As an example of how much stuff has slipped one of my dad's clients (and long-time friend) closed on a new house in November for $285k. Had they bought that same house in November '06 it would have gone for roughly $410k. This is in a new subdivision that the builder (a rather large nationally known one) was closing out and dumping unsold inventory.


I suppose the drop in interest rates, whether you agree with it or not, might soften the blow by encouraging people to buy and get those who can to refinance out of their ARMs. Either way the market may remain pretty flat in most places for some time. A lot like what happened in the late 80s/early 90s.



Stop drop and roll will not save you in hell. --- seen on a church marque in rural Virginia
User currently offlinePope From , joined Dec 1969, posts, RR:
Reply 3, posted (6 years 8 months 1 week 1 day 2 hours ago) and read 1137 times:

Compare the historical rent to property value ratios and you'll have a pretty good idea.

User currently offlineAndesSMF From , joined Dec 1969, posts, RR:
Reply 4, posted (6 years 8 months 1 week 1 day 1 hour ago) and read 1125 times:



Quoting EvilForce (Thread starter):
I cashed out my real estate holdings almost 2 years ago when things were booming.

Smart, very smart!

Quoting EvilForce (Thread starter):
Are we nearing the bottom?

No.

Quoting EvilForce (Thread starter):
markets are still over-valued.

Most are.

Quoting EvilForce (Thread starter):
Anyone else sitting on the sidelines waiting to buy a house / investment property until the timing is right? Thoughts?

Looking to move up. I am not certain of inventory levels, but there is a large glut of homes, probably 2X more than what is required. We should be able to pick up a good deal by the end of this year. Unfortunately, speculation HAS NOT ENDED, yet. My understanding is that about 50% of foreclosed homes are being purchased by 'investors' who are assuming that prices will go right back up soon. After the spring selling season, once realization hits that homes prices will not go back up anytime soon, large inventory levels will show up.

Investment properties are iffy right now, as the rental inventory keeps increasing. So even if the price is right, lack of tenants can make the investment negative.

Quoting EvilForce (Thread starter):
interest rates fallen further.

Now I do believe that interest rates will fall further, but high home prices and large inventory levels will not bring the bubble back.

Quoting Dtwclipper (Reply 1):
enjoying my home for the foreseeable future.

A lot of people forget that homes are something to enjoy, and only have become investments in the last few years.

Quoting DesertJets (Reply 2):
As an example of how much stuff has slipped one of my dad's clients (and long-time friend) closed on a new house in November for $285k. Had they bought that same house in November '06 it would have gone for roughly $410k.

Here in SMF the drop off has been a lot worse. From a theorical high of about $600K for our house, we would be lucky to get $450K now. 40-50% drops are not hard to find now.

Quoting Pope (Reply 3):
Compare the historical rent to property value ratios and you'll have a pretty good idea.

Only measure that has worked long-term.


User currently offlineAsstChiefMark From , joined Dec 1969, posts, RR:
Reply 5, posted (6 years 8 months 1 week 1 day ago) and read 1108 times:

Here in Wisconsin, houses are not selling. My house was appraised at $164,000 two years ago. Now, it's listed at $99,000 and no one's even looked at it. In a way, I'm glad I don't have to deal with that crap anymore. There are houses that are half-built that have been abandoned. Subdivisions have been abandoned by their developers. There are a few houses in my neighborhood that have been for sale for over two years and whose prices have been reduced by 50%.

The market has a long way to go before it hits bottom. Hell, the rest of the country's just getting going (at dropping) compared to here. And things have been shitty for two years now and it's simply getting shittier by the day.


User currently offlineLTBEWR From United States of America, joined Jan 2004, 13120 posts, RR: 12
Reply 6, posted (6 years 8 months 1 week 1 day ago) and read 1102 times:

Here in the metro NY City/Northern NJ area where I live, prices have dropped a lot on the highest priced homes. To me, the bottom will hit later this year as more default, lose incomes from job losses and less overtime, and family expenses.
I find the homes that sell the fastest here are those that are relatively newer, not in risk areas (flood areas), not next to commercial properties, with desirable features like large kitchens, 2 car garages, plenty of closet space, are in good condition needing little work, are in towns with good schools, municipal water and sewer, reasonable property taxes and with reasonable pricing. Older unexpanded 'cape cod' 40's-50's era homes are not moving good at all.


User currently offlineEvilForce From , joined Dec 1969, posts, RR:
Reply 7, posted (6 years 8 months 1 week 22 hours ago) and read 1077 times:



Quoting AndesSMF (Reply 4):
A lot of people forget that homes are something to enjoy, and only have become investments in the last few years.

Agreed. I didn't buy my 2 houses as "investments" but rather to enjoy. However, I looked around and thought to myself.... this is dumb I can cash out, use the increase in equity alone and it would pay for almost 20 years of rent to live in almost as nice of a home.

Your comment about the speculators coming back into the market was interesting. I'll wait to see how the spring and summer progress on the pricing front.


User currently offlineAndesSMF From , joined Dec 1969, posts, RR:
Reply 8, posted (6 years 8 months 1 week 22 hours ago) and read 1070 times:



Quoting EvilForce (Reply 7):
this is dumb I can cash out, use the increase in equity alone and it would pay for almost 20 years of rent to live in almost as nice of a home.

That was very smart of you.

Quoting EvilForce (Reply 7):
Your comment about the speculators coming back into the market was interesting. I'll wait to see how the spring and summer progress on the pricing front.

I wouldn't want to touch anything till the 4th quarter, as the shakeout should be well established then. From the information I have gathered in the news, and having read about this for years, I have been surprised to always find a story about how some of the foreclosure buyers are 'investors', expecting the market to come back soon. It is even applicable to all in my office, except me.

At the same time, I work in the construction industry, and have seen more than my share of those who built/are building homes for rental purposes. And in 18 years in the industry can tell you that residential work increased by about 100% more than before.

I have also seen homes for sale, where an 'investor' thought they had gotten a deal last year, only to go into foreclosure this year.


User currently offlinePyrex From Portugal, joined Aug 2005, 4024 posts, RR: 28
Reply 9, posted (6 years 8 months 1 week 21 hours ago) and read 1059 times:

Interesting that you should mention that question right now. I just returned from a very interesting lecture and the guy giving it (an MIT economist) was predicting that the market would not start picking up steam for at least three years (there were a bunch of charts and correlations that made a pretty good point).

Quoting AndesSMF (Reply 4):
A lot of people forget that homes are something to enjoy, and only have become investments in the last few years.

That's right. It still amazes me how people buy too much house for their money and justify the giant mortgage payment as an "investment". An investment is something you do with your disposal income, after all the basic necessities (food, lodging, etc.) have been satisfied. You cannot just say "oh, I don't really need such a big attic this month" and shave it off your mortgage payment.



Read this very carefully, I shall write this only once!
User currently offlineAndesSMF From , joined Dec 1969, posts, RR:
Reply 10, posted (6 years 8 months 1 week 21 hours ago) and read 1054 times:



Quoting Pyrex (Reply 9):
It still amazes me how people buy too much house for their money

Not only that, but the quality of these large homes is suspect.

Not long ago I saw a large track home that sold for $1 million. To my surprise, they showed THE cheapest lights you could use in a bathroom! What else was wrong, then?

We also visited a house, priced at $700K, that had the EXACT dishwasher I had installed in my little house in 1994, that cost me a whopping $250.

For homes, I prefer quality over quantity.


User currently offline767Lover From , joined Dec 1969, posts, RR:
Reply 11, posted (6 years 8 months 1 week 21 hours ago) and read 1045 times:

As a home buyer in the ATL market, I am wondering where all these drastic deals are that I keep hearing about. We've been looking for a deal for about the past 6 months and it seems like homes are still very overpriced. I guess our market had such rampant growth that the decrease doesn't mean prices are falling below previous levels, they're just holding steady.

We'll still make money on our current home, so I'm not worried there, but we do need to make a few renovations if we want what other people around here are getting.


User currently offlineDucatiRacer From United States of America, joined May 2005, 247 posts, RR: 0
Reply 12, posted (6 years 8 months 1 week 19 hours ago) and read 1027 times:
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Quoting 767Lover (Reply 11):
As a home buyer in the ATL market, I am wondering where all these drastic deals are that I keep hearing about.

As was alluded to before, I think whether the market is dropping at all depends on what market you are talking about. Here in Dallas, I think the suburbs are feeling a little pinch, but single family homes near the Central Business District in places such as the Park Cities, Lakewood, the M Streets, and Kessler Park are still doing very well. In December we sold our second house in 4 years in Kessler Park, and made a low six figure profit after 2 years of ownership (we achieved a similar return on our first house, but we had done some extensive rennovations on that one). The house was on the market for only 11 days, and even that time was a consequence of negotiating with 2 potential buyers back and forth over several days. Generally, the housing inventories in the areas mentioned above are still moving well. That said, there has been some slowing of the rate that the values are increasing for sure, and some of the more expensive homes in our neighborhood are taking a little longer to move (those being in the 900K and above range - although an awesome mid-century modern a few blocks away from us just sold for well over a million after a rather short time on the market).

From what I have seen recently, the primary thing hurting housing values in the still-growing Southern cities like Dallas is the credit crunch. I have complete disdain for some of the tactics that mortgage companies got up to in recent years, and I have ZERO sympathy for folks who used stupid ARMS or interest only loans to buy a house they could not afford in their wettest dreams, but my friends who are mortgage brokers have said that those (fewer) lenders that are still able to make loans are now rejecting people for very minor credit infractions (one example I was given recently was a professional couple denied a mortgage at less than 10% by Citi because they had a medical charge-off for some ridiculous unpaid bill of $30 or so, that they never even recalled receiving a notice about, but apparently any cahrge off, regarless of size, busts the new standards). These super restrictive underwriting standards are making it very difficult for even folks who can afford a home to get into one for a reasonable amount. I mean, just because you can afford the payments on a 10% interest rate mortgage, does not mean you should be stupid enough to sign up for that. It seems that the average buyer is not necessarily able to get a good loan pre-approved in short order these days and that is turning some off to the whole home buying endeavor.


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