Home Price Corrections: Is Worse Yet To Come?

Home Price Corrections: Is Worse Yet To Come?
Posted Byiana Olick
Topics:Real Estate | Housing
Sectors:Construction and Materials

Ok, so we all know that home prices are in the midst of a correction. After a 49% increase in the median price of a home from 2000 to 2005, well, something had to happen, right? But that doesn’t tell the whole story, because, yet again, that’s one of those big national numbers that really doesn’t mean anything to you and me and the price of our homes.

This is why I’m loving John Burns Real Estate Consulting, which took the numbers local and found just how much prices would have to fall for housing costs (this is including mortgage payments, property taxes and down payments) to return to each market’s typical ratio of housing costs/income, i.e. how far to make homes affordable. Check out their findings:

Necessary Price Drops to Reach Historic Affordability:
Miami, FL: -41.4%
Riverside, CA: -41%
Los Angeles, CA: -39.5%
Baltimore, MD: -37.2%
Washington, DC: -33.3%
Las Vegas, NV: -33%
Seattle, WA: -31.9%
San Diego, CA: -29.2%
Orlando, FL: -28.6%
Phoenix, AZ: -24%
Myrtle Beach, SC: -20.6%
Source: John Burns Real Estate Consulting

Now none of these markets is going to correct that much, says John Burns himself, they simply can’t. Homeowners aren’t desperate enough, and the economy isn’t bad. If sellers can’t get the price they want, they’ll just wait until things settle down a bit.

Okay, but this still presents a conundrum. We all know why the prices went up so much: free money. Adjustable rate mortgages fell from 7% to 3.5% during the boom, so buyers had no trouble at all taking on homes they truly couldn’t afford. Now that mortgage brokers/bankers have returned from la la land, I wonder how prices can’t go down this much. I mean, if you don’t have to sell your house, then fine, you don’t. But there are plenty of people out there who do have to sell, especially those whose mortgages will reset.

Foreclosures are on the rise, but most people don’t go into foreclosure, they simply sell, and take the loss. Unless I’m missing some major national salary boost that everyone but me got, then I think home price corrections--and I’m talking in the boom markets only--are going to be a lot more painful than anyone expects

http://www.cnbc.com/id/19678159/site/14081545

 

inflate or die.

 

I trade everything off charts, and that includes home prices. It's going to take at least two years to reach a bottom.

 

people laugh at me when I tell them that the housing prices are going to drop even more.

 

Housing prices were already so inflated in some areas they were due for a correction

 

"Now none of these markets is going to correct that much, says John Burns himself, they simply can’t. Homeowners aren’t desperate enough, and the economy isn’t bad. If sellers can’t get the price they want, they’ll just wait until things settle down a bit."

lol. Price corrections? What happened to the crash? Also the NAR, which has a done a lot better than the average trader on here at predicting prices, sees prices up 1.8% next year after a small single decline this year.

 

You're still defending your candy ass predictions from 2-3 years ago? You were WRONG moron, get over it.

 

2-3 years ago. Hmmm. Lets see 2004 and 2005 double digits up, last year single digits up. This year we see single digit down. And to think the apartment renters on here with their insurance or other "honorable jobs that they couldn't mention" wrote so much about the sure crash. There were even threads about buying vs renting to justify their tiny apartment existance. Whatever happened to the crash, ya know, crash being about what a 50% decline?

Of course when I mention something about getting a lawyer regarding private info being posted on here, they disappear, LMAO.

 

Oh, Covertibility. You had your day in the sun. I remember when you were posting every upbeat statistic you could find. Then you were posting about how it was just a short correction. Now you're saying, "At least it's not a crash yet." Give up already. You were right for a long time, but like any permabull (or permabear) you ended up wrong.

So what are you predicting now? Another turnaround? The end in sight?

I predict the Case-Shiller nationwide index bottoms out between 10% and 15% below its peak by the end of 2009, with bubble areas like Miami, Las Vegas, and SoCal seeing price declines in the neighborhood of 25%. That's a nominal index, so that considerably worse in real terms and of course worse for homeowners due to leverage.

Martin

 

You all can worry about this Housing correction, I'm going to worry about the absolutely insane premium RIo Tinto just paid for Alcan.

See any similarities over the past.. oh.. I don't know 20 years? to date??