How's your housing market? (2 Viewers)

tommyGunZ said:

Uh-oh. December numbers for San Diego are beginning to trickle out, and it ain't good:

December Home Prices

Submitted by Rich Toscano on January 8, 2008 - 3:51pm.

I'm going to get the whole December resale data rodeo up very soon. In the meantime, here's a quick look at the pummeling taken by prices (as measured by our imperfect indicators, of course).

For the month of December, the size-adjusted median price was down 4.6% for single family homes, 5.8% for condos and 5.0% overall. That's right, for the month. The graph below shows the declines from the peak.

The plain vanilla median fared even worse, for what that's worth, down 6.4% in a single month. More to come...

Click to expand...

6.4% in a single month is disaster. I think the median home price was ~ 450k last month, which would mean that the median home lost ~ $28,800 of value last month.

2008 is going to be a very, very bad year for SoCal RE.

Click to expand...

OC Zed said:

Or very good depending which perspective you take.

Click to expand...

Canada's red hot real estate market continued to soar in the fourth quarter of 2007 with little sign of the traditional winter slump, according to new data released Tuesday by Royal LePage.

Many markets reported double-digit gains in the final months of last year, likely driven by booming energy sectors across the country, says the House Price Survey report.

"The fourth quarter of 2007 was surprisingly strong, with unseasonably high price increases and unwavering demand," said Phil Soper, president and chief executive of Royal LePage Real Estate Services.

Click to expand...

Condo mania hits as 1 Bloor St. goes on sale

toronto.ctv.ca

After paying people thousands of dollars to stand in line for a week in bone-chilling temperatures, investors finally got a crack at what is arguably the hottest property in Toronto.

Condominiums went on sale Tuesday night at 1 Bloor, located at the corner of Yonge and Bloor Streets. About 90 people have been waiting in line, holding spots for realtors hoping to secure a suite in the luxury building.

The demand was so high that developers raised the starting price to their units Tuesday morning to $500,000. Others are priced at more than $8 million.

The night before, the price range for the units was from $300,000 to $2 million.

"I have not seen this ever happen before in Toronto," said realtor Anna Cass, standing at the front of the line. "I've never seen a builder raise their prices so quickly, but it's the law of supply and demand -- this is business."

But for some, price wasn't an object. One agent told CTV News he had a client who was ready to offer $24 million for the penthouse suite.

Click to expand...

The tower, standing at 80 storeys, will be the tallest in Toronto. It is not expected to be built before 2011.

Click to expand...

SuperJohn96 said:

How about people lining up for luxury propery?

Condo mania hits as 1 Bloor St. goes on sale

toronto.ctv.ca

After paying people thousands of dollars to stand in line for a week in bone-chilling temperatures, investors finally got a crack at what is arguably the hottest property in Toronto.

Condominiums went on sale Tuesday night at 1 Bloor, located at the corner of Yonge and Bloor Streets. About 90 people have been waiting in line, holding spots for realtors hoping to secure a suite in the luxury building.

The demand was so high that developers raised the starting price to their units Tuesday morning to $500,000. Others are priced at more than $8 million.

The night before, the price range for the units was from $300,000 to $2 million.

"I have not seen this ever happen before in Toronto," said realtor Anna Cass, standing at the front of the line. "I've never seen a builder raise their prices so quickly, but it's the law of supply and demand -- this is business."

But for some, price wasn't an object. One agent told CTV News he had a client who was ready to offer $24 million for the penthouse suite.

Click to expand...

The tower, standing at 80 storeys, will be the tallest in Toronto. It is not expected to be built before 2011.

Click to expand...

link

Click to expand...

Foosball God said:

We're about to put our house up for sale. We bought it for 314k 2 1/2 years ago. The real estate agent we talked to suggested puting it up for 280k. We've got a corporate buyout available to us based on appraisers the corporation provides. They come out next week and judging by other people who have had the appraisers out our appraisel will come in in the 230 - 240k range.

Click to expand...

Pole Cat said:

Will be joining in on the fun in San Diego in a few months. Will probably rent for at least six months while i feel things out and figure out which areas represent a good investment. Of course, my house here in Baltimore has to sell first. Bought it for $115K in 2002. Listed it originally in September for $280K...now down to $249,000K. Expecting a couple of offers tonight/tomorrow in the $225-$240 range Outlook would be brighter if I didn't have six figures worth of law school debt that I was supposed to pay off with the proceeds.

Click to expand...

TommyGilmore said:

Foosball God said:

We're about to put our house up for sale. We bought it for 314k 2 1/2 years ago. The real estate agent we talked to suggested puting it up for 280k. We've got a corporate buyout available to us based on appraisers the corporation provides. They come out next week and judging by other people who have had the appraisers out our appraisel will come in in the 230 - 240k range.

Click to expand...

Will the corporate buyout cover all of the difference? If so, what's stopping the appraiser from low-balling the appraisel and then splitting the payoff with you?

Click to expand...

Realty reality: Housing prices are headed way down

Southland house prices have risen past sustainable levels for most homeowners.

By CHRISTOPHER THORNBERG

December 28, 2007

In 2002, the median price of a single-family home in Los Angeles was $270,000 and the median homeowner's income was $65,000. With a $50,000 down payment, the annual cost of that house (taxes, insurance and payment on a 30-year fixed-rate conventional mortgage) would add up to about 33% of the median household's income -- just under the 35% mark that the Federal Housing Administration calls the upper limit of "affordable."

By 2006, the cost of that same house doubled, to $540,000 -- pushed by unbridled speculation fueled by unparalleled access to mortgage capital. But median income rose a paltry 15%. So today that same set of costs come to 60% of gross income.

That might be a manageable burden when home prices are rising at double-digit rates, creating new equity that can be accessed to support spending -- but not when prices are flat and the home-equity ATM is closed.

There are "experts" out there who once preached that there was no bubble; they now preach that all real estate is local and that prices in your neighborhood won't be affected by foreclosures and price declines elsewhere.

The cold, hard truth is that foreclosures are serving only to hasten the painful process of shifting housing prices back to a level the market can sustain. Prices must and will fall. Everywhere. Probably 25% to 30% from their peak.

2008 is the year when gravity will reassert itself. You should be adjusting your expectations of your home's value so that it's correctly aligned with market realities. And when making important financial decisions today, be realistic and factor those declines in.

Christopher Thornberg is a founding partner with Beacon Economics.

Click to expand...

OC Zed said:

LA Times article on the emerging problem with the option ARM loans.

This is a separate issue from the subprime mess and really hasn't even exploded yet as the ARMs will not start adjusting in mass until 2009.

Click to expand...

Joe T said:

OC Zed said:

LA Times article on the emerging problem with the option ARM loans.

This is a separate issue from the subprime mess and really hasn't even exploded yet as the ARMs will not start adjusting in mass until 2009.

Click to expand...

sky falling?

Click to expand...

tommyGunZ said:

Foreclosures are exploding here in SoCal. Local analysts expect them to explode next year with the huge increase in ARM resets.

Early '08 is when I'm making my move.

Click to expand...

Colin Dowling said:

North Austin (Round Rock) - Just accepted an offer on my house that is 42.56% more then I paid for it in May of 2004.

Click to expand...

OC Zed said:

tommyGunZ said:

Foreclosures are exploding here in SoCal. Local analysts expect them to explode next year with the huge increase in ARM resets.

Early '08 is when I'm making my move.

Click to expand...

Status bump.

Click to expand...

What’s Next for New York City Real Estate?

By CHRISTINE HAUGHNEY

LOOKING back, 2007 was supposed to be the year that the Manhattan residential real estate market slowed down and began to look a bit more like the slumping national market.

But that didn’t happen. While there were periods when condominiums and co-ops sat unsold because buyers and sellers couldn’t agree on prices, the year ended with the average price of a Manhattan apartment rising to a record $1.4 million, though the number ballooned in part because so many wealthy buyers purchased extraordinarily expensive condos.

No one is predicting that 2008 will be a repeat of 2007. The sprawling pieds-à-terre may still sell for millions at the Plaza and 15 Central Park West, but in general, economists are predicting that prices will drop in some segments of the market and in some neighborhoods around the city.

“New York has had a very good run, and there are still a lot of people sitting around with cash,” said Christopher Mayer, the Paul Milstein professor of real estate at Columbia Business School. “But that doesn’t last forever.”

There are already signs of a more sober market ahead: Wall Street workers may face leaner bonuses this year and in years to come, borrowers may have a harder time getting mortgages and foreign buyers may reconsider the potential returns of investing in New York.

Mr. Mayer said that a national recession could weaken Manhattan prices even further because fewer workers could afford to buy in the borough.

Diane M. Ramirez, president of Halstead Property, is less concerned about a recession because the inventory of property on the market is currently low. She said that in the recession of the late ’80s, Manhattan dropped sharply because the city had an oversupply of apartments. “We had a deeper, longer recession than most cities,” she said. “We lost 20 to 50 percent value.”

When trying to gauge the real estate market — or, for that matter, the city’s economic outlook — the first stop is always Wall Street.

Wall Street jobs make up 5 percent of the total jobs in New York City but 23 percent of the city’s total wages, according to data tracked by the New York State DepartmenticesLabor. Annual bonuses are also tracked by real estate brokers with a fanatical devotion.

History shows that a great deal of the bonus money is used to buy real estate. Financial workers are typically the first buyers to show up with the cash in the spring buying market, and this helps shape demand for apartments.

“That energy of the bonus money really does get the spring market percolating,” Ms. Ramirez said. “The bonus tends to be the starting gate for them.”

While it may seem counterintuitive, considering how much havoc the subprime crisis has brought to the financial industry, one analyst is predicting that 2007 bonuses, which workers will receive over the next couple of months, will be about the same as last year’s record bonus year for some bankers.

These workers are compensated based on their performance for the whole year, and most banks did well leading up to the credit crisis last summer. So, while workers may not earn more than they did in 2006, they could still have plenty of money to put toward real estate.

Alan Johnson, the managing director of Johnson Associates, a firm that tracks compensation data, said that over all, bonuses should remain flat for a broad spectrum of the financial industry. “This year was a pretty good year for bonuses, roughly on par with 2006, some of them less, some of them more,” he said.

But, he said, that won’t necessarily be true a year from now, and this knowledge could keep traders and investment bankers from splurging on real estate this year as they have in past years.

“Everybody sees the storm clouds on the horizon,” because Wall Street firms have already had write-downs of more than $100 billion from their mortgage-backed securities businesses, Mr. Johnson said. “If you’re going to commit to some big purchase, it makes you pause. Your pay may go down.”

He predicts that by the end of 2008 employees at the top will be hurt the most: those whose total compensation of salaries and bonuses is more than $1 million could see cuts by 40 to 50 percent; those in the $500,000 to $1 million range could see cuts of about 20 percent; and those with pay of less than $500,000 could see 10 percent cuts.

Shai Shustik, the president of the brokerage firm Manhattan Residential Inc., which has many clients who work on Wall Street, says they are proceeding with more caution. “I don’t think people are as gung-ho and anxious to get out there and spend everything they made, like they did in 2007,” he said. “People aren’t going to stretch as much.” In the past, “the guys who tell you they’re spending $2 million spend $2.4 million or $2.6 million,” he said. “Now, they want to stick to $2 million.”

Many of these Wall Street employees might also find that their bonuses are being paid less in cash and more in stock.

Melissa Cohn, the president of the Manhattan Mortgage Company, said that one banker who had negotiated the contract on a $9 million town house had to pull out of the deal because he found out he would receive only $750,000 in cash from his total bonus. The remainder would take other forms, like stock, meaning that he would have less to spend in the near term on real estate. “He’s gone from the $9 million to $10 million range to the $5 million to $6 million range,” she said. “Everyone in general is being more conservative.”

Moving beyond bonuses, the fallout from the mortgage crisis is likely to touch a broad swath of the real estate market. Qualifying for mortgages, for instance, may be more problematic this year for buyers in all price ranges. The mortgage crisis, which was set off by defaulting subprime loans last summer, has forced lenders to tighten their standards across the board in both Manhattan and the boroughs.

Richard Barenblatt, a mortgage broker with the Apple Mortgage Corporation, advises his clients to prepare themselves for far stricter mortgage requirements than they would have faced six months ago.

For starters, lenders expect borrowers to make higher down payments for co-ops and condos. He said that before the broad defaults on subprime mortgages forced banks this past summer to tighten standards, buyers with good credit applying for full-income verification loans could qualify for mortgages worth 95 percent of the purchase price up to $1 million. Now these same buyers qualify for mortgages valued at only 90 percent of the price up to $1 million.

Some lenders are also requiring borrowers to have more money in reserve; for example, borrowers applying for jumbo mortgages — those surpassing $417,000 — may need to show that they have the equivalent of up to 12 months of mortgage payments in cash after closing.

Mr. Barenblatt encourages buyers to pay down credit card balances below 40 percent of their total combined credit card limits; for buyers with debt levels above that, he said, banks are less likely to approve mortgages.

He also thinks buyers should talk to their lawyers about getting mortgage and appraisal contingencies written into their contracts. A contingency is a clause that allows a buyer to back out of a deal if he or she can’t find a mortgage, if the lender changes the terms of the mortgage before closing or if an appraisal comes in unexpectedly low. In the past, sellers in Manhattan have often balked at contingencies, because there was usually another buyer waiting in the wings willing to buy without one. Mr. Barenblatt also encourages buyers to try to get preapproved for mortgages.

Condo buyers might find extra scrutiny when visiting the mortgage broker because lenders have seen too many cities around the country where new condos are sitting vacant or unfinished.

Some major lenders in New York have stopped giving mortgages at condo projects where the developer has not sold 90 percent of the units. These banks are imposing even stricter standards than those Fannie Mae and Freddie Mac are putting into effect on March 1 for mortgages below $417,000, according to Brad German, a spokesman for Freddie Mac. The threshold for the two government lenders: 51 percent of units must be sold.

“We changed our guidelines in response to shifts in the real estate market, including oversupplies in Florida, Las Vegas, Arizona and other condo markets outside of New York City,” he wrote in an e-mail message. “Our mortgage purchase guidelines are national in scope.”

These national guidelines are making it more difficult for condo buyers in Manhattan. Foreign buyers and financial industry employees have paid top dollar for these new apartments in the last year precisely because they required less money down and had more flexible requirements than co-ops.

Ms. Cohn of Manhattan Mortgage tells of clients who have had mortgage applications rejected by some banks because the building where they wanted to buy was not 90 percent sold out. “There has been an apocalyptic change in the lending market,” she said. “Banks that were market leaders have eliminated numbers of programs and products and have made sweeping changes.”

Foreign buyers, who have made about a third of the condo purchases in the last 18 months, have done so because they see it as a wise investment considering the weakness of the dollar, said Mr. Mayer of Columbia Business School. But, he added, even foreign buyers will walk away from deals if they don’t think Manhattan prices will remain strong or if they cannot expect high returns on their investments.

“They don’t need to buy real estate to make a bet on the dollar,” he said.

All of these situations could create a window of opportunity for buyers. In fact, certain market segments have already started to show signs of slowing.

Sofia Kim, who is the head of research for StreetEasy.com, said that out of the 24,000 apartments listed by the site at some point in 2007, about 20 percent, or 4,800, had cut prices, by an average of 8 percent.

Most sellers who cut their prices were offering one- and two-bedroom co-ops, Ms. Kim said. These price cuts were concentrated on the Upper East Side and in Chelsea, Greenwich Village and Midtown. In the coming year, she expects that sellers may continue to cut their prices if sales are slow.

Prices in Inwood and Hudson Heights, in the northern reaches of Manhattan, had dropped about 5 percent by the end of last year, according to fourth-quarter data released by Halstead Property.

Data from the Corcoran Group, tracking sales in Brooklyn in the fourth quarter of 2007, show that prices on certain types of apartments in coveted neighborhoods like Park Slope and Fort Greene had dropped slightly.

Some neighborhoods like Williamsburg and Greenpoint have had 15 percent price drops from their peak in the summer of 2005, and sellers are negotiating deals, said David Maundrell, the president of Aptsandlofts.com, a Williamsburg brokerage.

Brooklyn buyers, he said, have been especially fortunate in negotiating deals on new condos. Developers of new condos with fewer than 10 units have agreed to pay closing costs for buyers, while developers of larger projects have been willing to negotiate on price. “Most of my guys in the larger buildings will consider any offer,” Mr. Maundrell said.

Prices in New York City are not expected to be significantly affected by foreclosures this year, as the number of foreclosures in the city’s outlying neighborhoods is rising, but still low. Fourth-quarter data tracked by PropertyShark.com show that there were 605 foreclosures throughout New York City in the fourth quarter of 2007, a 71 percent increase over the 354 foreclosures in the same period in 2006.

But that is in a city of three million households and represents only 0.02 percent of New York City inventory. That’s far less than in Miami, which has a 0.25 percent foreclosure rate, and Los Angeles, which has a 0.21 percent foreclosure rate.

Ryan Slack, the chief executive of PropertyShark, said that the New York numbers may rise steadily through 2008, but they will still represent only a tiny share of the overall market. “They’re not that high a percentage of the inventory,” he said. “If you’re selling into the market, you’re going to be more affected by the dynamics of buyers and sellers than foreclosures.”

The rental market, which has been exceptionally tight for the last few years, is also showing some signs of loosening up. Marc Lewis, the chief operating officer of rentals and investment sales at Century 21 Fine Homes and Estates, says that the rental market slowed in the middle of September and has not picked up since.

The December survey of 10,000 apartments tracked by the Real Estate Group New York shows that the rental market fell from the previous month, especially on the Upper West and East Sides, and in Midtown East, Gramercy Park and SoHo. Some declines were striking; rent in studios in doorman buildings in the financial district, for example, dropped by $503, to $2,559 a month.

Mr. Lewis said there were fewer new hires relocating to Manhattan for jobs and paying high rents. He said that landlords were much more willing to pay commissions, offer a free month’s rent or both. And, he said, they’re much more willing to negotiate on apartments that rent for more than $2,000.

“If they have an apartment that’s empty for a week or two or a month, they’ll entertain an offer,” Mr. Lewis said. “It’s definitely going to continue for the next three, four or five months.”

In the end, economists and real estate brokers say they don’t expect Manhattan to suffer as severe a housing slump as the rest of the nation because there hasn’t been as much overbuilding.

That’s because banks stopped lending to developers to build more condos and developers turned nearly a third of the sites into other uses like hotels, offices and rental buildings, said Robert Knakal, the chairman of the commercial real estate brokerage Massey Knakal Realty Services Inc., based on what he saw from the projects that his company had marketed.

In addition, more of the condos that were built were snapped up by more Wall Street bankers and foreign buyers than some real estate industry experts had originally expected.

“What this means for the consumer is that there will be product available for them to look at, but not a significant oversupply,” Mr. Knakal wrote in an e-mail message. He added, “Buyers who are on the sidelines waiting for prices to drop significantly before buying may be there for a long time.”

Click to expand...

Mr. Barenblatt encourages buyers to pay down credit card balances below 40 percent of their total combined credit card limits; for buyers with debt levels above that, he said, banks are less likely to approve mortgages.

Click to expand...

tommyGunZ said:

Very, very frustrating to have the money to buy but be forced to wait or eat 15-25% in equity loss by buying now.

Click to expand...

OC Zed said:

I think this chart is fairly indicative of the level of appreciation that has occurred in all of California this decade, and provides an idea of where prices will ultimately settle...

Click to expand...

tommyGunZ said:

This guys absolutely nails it.

Realty reality: Housing prices are headed way down

Southland house prices have risen past sustainable levels for most homeowners.

By CHRISTOPHER THORNBERG

December 28, 2007

In 2002, the median price of a single-family home in Los Angeles was $270,000 and the median homeowner's income was $65,000. With a $50,000 down payment, the annual cost of that house (taxes, insurance and payment on a 30-year fixed-rate conventional mortgage) would add up to about 33% of the median household's income -- just under the 35% mark that the Federal Housing Administration calls the upper limit of "affordable."

By 2006, the cost of that same house doubled, to $540,000 -- pushed by unbridled speculation fueled by unparalleled access to mortgage capital. But median income rose a paltry 15%. So today that same set of costs come to 60% of gross income.

That might be a manageable burden when home prices are rising at double-digit rates, creating new equity that can be accessed to support spending -- but not when prices are flat and the home-equity ATM is closed.

There are "experts" out there who once preached that there was no bubble; they now preach that all real estate is local and that prices in your neighborhood won't be affected by foreclosures and price declines elsewhere.

The cold, hard truth is that foreclosures are serving only to hasten the painful process of shifting housing prices back to a level the market can sustain. Prices must and will fall. Everywhere. Probably 25% to 30% from their peak.2008 is the year when gravity will reassert itself. You should be adjusting your expectations of your home's value so that it's correctly aligned with market realities. And when making important financial decisions today, be realistic and factor those declines in.

Christopher Thornberg is a founding partner with Beacon Economics.

Click to expand...

Click to expand...

tommyGunZ said:

Mr. Barenblatt encourages buyers to pay down credit card balances below 40 percent of their total combined credit card limits; for buyers with debt levels above that, he said, banks are less likely to approve mortgages.

Click to expand...

You'd think this would be a no-brainer.

Click to expand...

Colin Dowling said:

North Austin (Round Rock) - Just accepted an offer on my house that is 42.56% more then I paid for it in May of 2004.

Click to expand...

stbugs said:

OC Zed said:

I think this chart is fairly indicative of the level of appreciation that has occurred in all of California this decade, and provides an idea of where prices will ultimately settle...

Click to expand...

While I always thought California was its own animal while watching house shows where they showed little dinky houses (not on the beach) selling for $1 million, that chart is a wee bit misleading. For example, I believe that the early 90s were bad years (declines) for LA/SoCal and of course the chart starts right around there. So, it is not surprising that in the late 90s there would be a correction for that when the economy turns around. Also, interest rates right now are about half of what they were before. In 1990, 30 year rates were still at 10%, down from the ridiculous levels of the early 80s (17.5% in 1982).Take a look at a payment for a 200k house:

6% - $1199

8% - $1467

10% - $1755

12% - $2057

So, if I bought a house in the mid 80s (around 12% average) at 200k, for the same payment, I could afford a 343k house right now at 6%. So basically, just on interest rates, a 70% increase is kind of reasonable. According to the wage inflation measure (LINK) I found while googling, another 70% increase is also reasonable from 1988 to 2006.

So, a 200k house in 1988 should be about 480k in 2007. Still some froth in there, but I would also have to say that the average home is also much larger, has more features, etc., so while it still can come down, simple inflation and interest rates would have had a big affect since 1988.

Heck, 1988 is about in the middle of how long my parents owned their house and well before the 1998-2007 runup and around 1988, there house had gone up quite a bit in value from 1970 when they first bought their house. Actually, now that I think about it, the multiple it went up from 1970-1988/1990ish was quite a bit larger than the jump from 1998-2007 (about 5x compared to 1x). Now, they didn't live in LA, but when you are talking about 20 years, even 5-6% appreciation will probably triple the house value.

ETA: I am not trying to rationalize some of the bubble prices, but just trying to point out that because of the appalling 1980s interest rates and 20 year timeframe, that that chart doesn't take into account that housing was probably "too cheap" before the huge runup as well. In 1988, people were probably afraid of/ignoring housing because of the ridiculous interest rates.

Click to expand...

BassNBrew said:

tommyGunZ said:

This guys absolutely nails it.

Realty reality: Housing prices are headed way down

Southland house prices have risen past sustainable levels for most homeowners.

By CHRISTOPHER THORNBERG

December 28, 2007

In 2002, the median price of a single-family home in Los Angeles was $270,000 and the median homeowner's income was $65,000. With a $50,000 down payment, the annual cost of that house (taxes, insurance and payment on a 30-year fixed-rate conventional mortgage) would add up to about 33% of the median household's income -- just under the 35% mark that the Federal Housing Administration calls the upper limit of "affordable."

By 2006, the cost of that same house doubled, to $540,000 -- pushed by unbridled speculation fueled by unparalleled access to mortgage capital. But median income rose a paltry 15%. So today that same set of costs come to 60% of gross income.

That might be a manageable burden when home prices are rising at double-digit rates, creating new equity that can be accessed to support spending -- but not when prices are flat and the home-equity ATM is closed.

There are "experts" out there who once preached that there was no bubble; they now preach that all real estate is local and that prices in your neighborhood won't be affected by foreclosures and price declines elsewhere.

The cold, hard truth is that foreclosures are serving only to hasten the painful process of shifting housing prices back to a level the market can sustain. Prices must and will fall. Everywhere. Probably 25% to 30% from their peak.2008 is the year when gravity will reassert itself. You should be adjusting your expectations of your home's value so that it's correctly aligned with market realities. And when making important financial decisions today, be realistic and factor those declines in.

Christopher Thornberg is a founding partner with Beacon Economics.

Click to expand...

Click to expand...

Horse hockey...another expert without a clue. New constructions prices will set the bottom of the market. Raw material costs and inflation will hold the line. My guesstimate is that we're talking about $75 a square foot.

Click to expand...

OC Zed said:

BassNBrew said:

tommyGunZ said:

This guys absolutely nails it.

Realty reality: Housing prices are headed way down

Southland house prices have risen past sustainable levels for most homeowners.

By CHRISTOPHER THORNBERG

December 28, 2007

In 2002, the median price of a single-family home in Los Angeles was $270,000 and the median homeowner's income was $65,000. With a $50,000 down payment, the annual cost of that house (taxes, insurance and payment on a 30-year fixed-rate conventional mortgage) would add up to about 33% of the median household's income -- just under the 35% mark that the Federal Housing Administration calls the upper limit of "affordable."

By 2006, the cost of that same house doubled, to $540,000 -- pushed by unbridled speculation fueled by unparalleled access to mortgage capital. But median income rose a paltry 15%. So today that same set of costs come to 60% of gross income.

That might be a manageable burden when home prices are rising at double-digit rates, creating new equity that can be accessed to support spending -- but not when prices are flat and the home-equity ATM is closed.

There are "experts" out there who once preached that there was no bubble; they now preach that all real estate is local and that prices in your neighborhood won't be affected by foreclosures and price declines elsewhere.

The cold, hard truth is that foreclosures are serving only to hasten the painful process of shifting housing prices back to a level the market can sustain. Prices must and will fall. Everywhere. Probably 25% to 30% from their peak.2008 is the year when gravity will reassert itself. You should be adjusting your expectations of your home's value so that it's correctly aligned with market realities. And when making important financial decisions today, be realistic and factor those declines in.

Christopher Thornberg is a founding partner with Beacon Economics.

Click to expand...

Click to expand...

Horse hockey...another expert without a clue. New constructions prices will set the bottom of the market. Raw material costs and inflation will hold the line. My guesstimate is that we're talking about $75 a square foot.

Click to expand...

Actually construction costs have come down in the past year thanks primarily to the drop in the cost of the land itself. In Southern California, "dirt" values fell as much as 25% in 2007. And, of course, raw materials become cheaper as demand decreases both domestically and abroad.

Click to expand...

stbugs said:

OC Zed said:

I think this chart is fairly indicative of the level of appreciation that has occurred in all of California this decade, and provides an idea of where prices will ultimately settle...

Click to expand...

While I always thought California was its own animal while watching house shows where they showed little dinky houses (not on the beach) selling for $1 million, that chart is a wee bit misleading. For example, I believe that the early 90s were bad years (declines) for LA/SoCal and of course the chart starts right around there. So, it is not surprising that in the late 90s there would be a correction for that when the economy turns around. Also, interest rates right now are about half of what they were before. In 1990, 30 year rates were still at 10%, down from the ridiculous levels of the early 80s (17.5% in 1982).Take a look at a payment for a 200k house:

6% - $1199

8% - $1467

10% - $1755

12% - $2057

So, if I bought a house in the mid 80s (around 12% average) at 200k, for the same payment, I could afford a 343k house right now at 6%. So basically, just on interest rates, a 70% increase is kind of reasonable. According to the wage inflation measure (LINK) I found while googling, another 70% increase is also reasonable from 1988 to 2006.

So, a 200k house in 1988 should be about 480k in 2007. Still some froth in there, but I would also have to say that the average home is also much larger, has more features, etc., so while it still can come down, simple inflation and interest rates would have had a big affect since 1988.

Heck, 1988 is about in the middle of how long my parents owned their house and well before the 1998-2007 runup and around 1988, there house had gone up quite a bit in value from 1970 when they first bought their house. Actually, now that I think about it, the multiple it went up from 1970-1988/1990ish was quite a bit larger than the jump from 1998-2007 (about 5x compared to 1x). Now, they didn't live in LA, but when you are talking about 20 years, even 5-6% appreciation will probably triple the house value.

ETA: I am not trying to rationalize some of the bubble prices, but just trying to point out that because of the appalling 1980s interest rates and 20 year timeframe, that that chart doesn't take into account that housing was probably "too cheap" before the huge runup as well. In 1988, people were probably afraid of/ignoring housing because of the ridiculous interest rates.

Click to expand...

OC Zed said:

BassNBrew said:

tommyGunZ said:

This guys absolutely nails it.

Realty reality: Housing prices are headed way down

Southland house prices have risen past sustainable levels for most homeowners.

By CHRISTOPHER THORNBERG

December 28, 2007

In 2002, the median price of a single-family home in Los Angeles was $270,000 and the median homeowner's income was $65,000. With a $50,000 down payment, the annual cost of that house (taxes, insurance and payment on a 30-year fixed-rate conventional mortgage) would add up to about 33% of the median household's income -- just under the 35% mark that the Federal Housing Administration calls the upper limit of "affordable."

By 2006, the cost of that same house doubled, to $540,000 -- pushed by unbridled speculation fueled by unparalleled access to mortgage capital. But median income rose a paltry 15%. So today that same set of costs come to 60% of gross income.

That might be a manageable burden when home prices are rising at double-digit rates, creating new equity that can be accessed to support spending -- but not when prices are flat and the home-equity ATM is closed.

There are "experts" out there who once preached that there was no bubble; they now preach that all real estate is local and that prices in your neighborhood won't be affected by foreclosures and price declines elsewhere.

The cold, hard truth is that foreclosures are serving only to hasten the painful process of shifting housing prices back to a level the market can sustain. Prices must and will fall. Everywhere. Probably 25% to 30% from their peak.2008 is the year when gravity will reassert itself. You should be adjusting your expectations of your home's value so that it's correctly aligned with market realities. And when making important financial decisions today, be realistic and factor those declines in.

Christopher Thornberg is a founding partner with Beacon Economics.

Click to expand...

Click to expand...

Horse hockey...another expert without a clue. New constructions prices will set the bottom of the market. Raw material costs and inflation will hold the line. My guesstimate is that we're talking about $75 a square foot.

Click to expand...

Actually construction costs have come down in the past year thanks primarily to the drop in the cost of the land itself. In Southern California, "dirt" values fell as much as 25% in 2007. And, of course, raw materials become cheaper as demand decreases both domestically and abroad.

Click to expand...

stbugs said:

OC Zed said:

I think this chart is fairly indicative of the level of appreciation that has occurred in all of California this decade, and provides an idea of where prices will ultimately settle...

Click to expand...

While I always thought California was its own animal while watching house shows where they showed little dinky houses (not on the beach) selling for $1 million, that chart is a wee bit misleading. For example, I believe that the early 90s were bad years (declines) for LA/SoCal and of course the chart starts right around there. So, it is not surprising that in the late 90s there would be a correction for that when the economy turns around. Also, interest rates right now are about half of what they were before. In 1990, 30 year rates were still at 10%, down from the ridiculous levels of the early 80s (17.5% in 1982).Take a look at a payment for a 200k house:

6% - $1199

8% - $1467

10% - $1755

12% - $2057

So, if I bought a house in the mid 80s (around 12% average) at 200k, for the same payment, I could afford a 343k house right now at 6%. So basically, just on interest rates, a 70% increase is kind of reasonable. According to the wage inflation measure (LINK) I found while googling, another 70% increase is also reasonable from 1988 to 2006.

So, a 200k house in 1988 should be about 480k in 2007. Still some froth in there, but I would also have to say that the average home is also much larger, has more features, etc., so while it still can come down, simple inflation and interest rates would have had a big affect since 1988.

Heck, 1988 is about in the middle of how long my parents owned their house and well before the 1998-2007 runup and around 1988, there house had gone up quite a bit in value from 1970 when they first bought their house. Actually, now that I think about it, the multiple it went up from 1970-1988/1990ish was quite a bit larger than the jump from 1998-2007 (about 5x compared to 1x). Now, they didn't live in LA, but when you are talking about 20 years, even 5-6% appreciation will probably triple the house value.

ETA: I am not trying to rationalize some of the bubble prices, but just trying to point out that because of the appalling 1980s interest rates and 20 year timeframe, that that chart doesn't take into account that housing was probably "too cheap" before the huge runup as well. In 1988, people were probably afraid of/ignoring housing because of the ridiculous interest rates.

Click to expand...

tommyGunZ said:

stbugs said:

OC Zed said:

I think this chart is fairly indicative of the level of appreciation that has occurred in all of California this decade, and provides an idea of where prices will ultimately settle...

Click to expand...

While I always thought California was its own animal while watching house shows where they showed little dinky houses (not on the beach) selling for $1 million, that chart is a wee bit misleading. For example, I believe that the early 90s were bad years (declines) for LA/SoCal and of course the chart starts right around there. So, it is not surprising that in the late 90s there would be a correction for that when the economy turns around. Also, interest rates right now are about half of what they were before. In 1990, 30 year rates were still at 10%, down from the ridiculous levels of the early 80s (17.5% in 1982).Take a look at a payment for a 200k house:

6% - $1199

8% - $1467

10% - $1755

12% - $2057

So, if I bought a house in the mid 80s (around 12% average) at 200k, for the same payment, I could afford a 343k house right now at 6%. So basically, just on interest rates, a 70% increase is kind of reasonable. According to the wage inflation measure (LINK) I found while googling, another 70% increase is also reasonable from 1988 to 2006.

So, a 200k house in 1988 should be about 480k in 2007. Still some froth in there, but I would also have to say that the average home is also much larger, has more features, etc., so while it still can come down, simple inflation and interest rates would have had a big affect since 1988.

Heck, 1988 is about in the middle of how long my parents owned their house and well before the 1998-2007 runup and around 1988, there house had gone up quite a bit in value from 1970 when they first bought their house. Actually, now that I think about it, the multiple it went up from 1970-1988/1990ish was quite a bit larger than the jump from 1998-2007 (about 5x compared to 1x). Now, they didn't live in LA, but when you are talking about 20 years, even 5-6% appreciation will probably triple the house value.

ETA: I am not trying to rationalize some of the bubble prices, but just trying to point out that because of the appalling 1980s interest rates and 20 year timeframe, that that chart doesn't take into account that housing was probably "too cheap" before the huge runup as well. In 1988, people were probably afraid of/ignoring housing because of the ridiculous interest rates.

Click to expand...

I agree with this. With rates down to ~ 5.5% now and likely going lower, it's going to enable folks to purchase significantly more house than they could have afforded on the same income back in the '80s.

Click to expand...

OC Zed said:

tommyGunZ said:

stbugs said:

OC Zed said:

I think this chart is fairly indicative of the level of appreciation that has occurred in all of California this decade, and provides an idea of where prices will ultimately settle...

Click to expand...

While I always thought California was its own animal while watching house shows where they showed little dinky houses (not on the beach) selling for $1 million, that chart is a wee bit misleading. For example, I believe that the early 90s were bad years (declines) for LA/SoCal and of course the chart starts right around there. So, it is not surprising that in the late 90s there would be a correction for that when the economy turns around. Also, interest rates right now are about half of what they were before. In 1990, 30 year rates were still at 10%, down from the ridiculous levels of the early 80s (17.5% in 1982).Take a look at a payment for a 200k house:

6% - $1199

8% - $1467

10% - $1755

12% - $2057

So, if I bought a house in the mid 80s (around 12% average) at 200k, for the same payment, I could afford a 343k house right now at 6%. So basically, just on interest rates, a 70% increase is kind of reasonable. According to the wage inflation measure (LINK) I found while googling, another 70% increase is also reasonable from 1988 to 2006.

So, a 200k house in 1988 should be about 480k in 2007. Still some froth in there, but I would also have to say that the average home is also much larger, has more features, etc., so while it still can come down, simple inflation and interest rates would have had a big affect since 1988.

Heck, 1988 is about in the middle of how long my parents owned their house and well before the 1998-2007 runup and around 1988, there house had gone up quite a bit in value from 1970 when they first bought their house. Actually, now that I think about it, the multiple it went up from 1970-1988/1990ish was quite a bit larger than the jump from 1998-2007 (about 5x compared to 1x). Now, they didn't live in LA, but when you are talking about 20 years, even 5-6% appreciation will probably triple the house value.

ETA: I am not trying to rationalize some of the bubble prices, but just trying to point out that because of the appalling 1980s interest rates and 20 year timeframe, that that chart doesn't take into account that housing was probably "too cheap" before the huge runup as well. In 1988, people were probably afraid of/ignoring housing because of the ridiculous interest rates.

Click to expand...

I agree with this. With rates down to ~ 5.5% now and likely going lower, it's going to enable folks to purchase significantly more house than they could have afforded on the same income back in the '80s.

Click to expand...

This is true, but the problem arose where people were buying houses based on monthly payments from teaser rates that reset in 2 to 7 years. Once the reset occurs to more traditional financing terms, they are left with a flaming bag of ####....The prices we've seen in the last 3 years was predicated, to a large degree, on this overly-cheap money.

Click to expand...

OC Zed said:

tommyGunZ said:

stbugs said:

OC Zed said:

I think this chart is fairly indicative of the level of appreciation that has occurred in all of California this decade, and provides an idea of where prices will ultimately settle...

Click to expand...

While I always thought California was its own animal while watching house shows where they showed little dinky houses (not on the beach) selling for $1 million, that chart is a wee bit misleading. For example, I believe that the early 90s were bad years (declines) for LA/SoCal and of course the chart starts right around there. So, it is not surprising that in the late 90s there would be a correction for that when the economy turns around. Also, interest rates right now are about half of what they were before. In 1990, 30 year rates were still at 10%, down from the ridiculous levels of the early 80s (17.5% in 1982).Take a look at a payment for a 200k house:

6% - $1199

8% - $1467

10% - $1755

12% - $2057

So, if I bought a house in the mid 80s (around 12% average) at 200k, for the same payment, I could afford a 343k house right now at 6%. So basically, just on interest rates, a 70% increase is kind of reasonable. According to the wage inflation measure (LINK) I found while googling, another 70% increase is also reasonable from 1988 to 2006.

So, a 200k house in 1988 should be about 480k in 2007. Still some froth in there, but I would also have to say that the average home is also much larger, has more features, etc., so while it still can come down, simple inflation and interest rates would have had a big affect since 1988.

Heck, 1988 is about in the middle of how long my parents owned their house and well before the 1998-2007 runup and around 1988, there house had gone up quite a bit in value from 1970 when they first bought their house. Actually, now that I think about it, the multiple it went up from 1970-1988/1990ish was quite a bit larger than the jump from 1998-2007 (about 5x compared to 1x). Now, they didn't live in LA, but when you are talking about 20 years, even 5-6% appreciation will probably triple the house value.

ETA: I am not trying to rationalize some of the bubble prices, but just trying to point out that because of the appalling 1980s interest rates and 20 year timeframe, that that chart doesn't take into account that housing was probably "too cheap" before the huge runup as well. In 1988, people were probably afraid of/ignoring housing because of the ridiculous interest rates.

Click to expand...

I agree with this. With rates down to ~ 5.5% now and likely going lower, it's going to enable folks to purchase significantly more house than they could have afforded on the same income back in the '80s.

Click to expand...

This is true, but the problem arose where people were buying houses based on monthly payments from teaser rates that reset in 2 to 7 years. Once the reset occurs to more traditional financing terms, they are left with a flaming bag of ####....

The prices we've seen in the last 3 years was predicated, to a large degree, on this overly-cheap money.

Click to expand...

OC Zed said:

stbugs said:

OC Zed said:

I think this chart is fairly indicative of the level of appreciation that has occurred in all of California this decade, and provides an idea of where prices will ultimately settle...

Click to expand...

While I always thought California was its own animal while watching house shows where they showed little dinky houses (not on the beach) selling for $1 million, that chart is a wee bit misleading. For example, I believe that the early 90s were bad years (declines) for LA/SoCal and of course the chart starts right around there. So, it is not surprising that in the late 90s there would be a correction for that when the economy turns around. Also, interest rates right now are about half of what they were before. In 1990, 30 year rates were still at 10%, down from the ridiculous levels of the early 80s (17.5% in 1982).Take a look at a payment for a 200k house:

6% - $1199

8% - $1467

10% - $1755

12% - $2057

So, if I bought a house in the mid 80s (around 12% average) at 200k, for the same payment, I could afford a 343k house right now at 6%. So basically, just on interest rates, a 70% increase is kind of reasonable. According to the wage inflation measure (LINK) I found while googling, another 70% increase is also reasonable from 1988 to 2006.

So, a 200k house in 1988 should be about 480k in 2007. Still some froth in there, but I would also have to say that the average home is also much larger, has more features, etc., so while it still can come down, simple inflation and interest rates would have had a big affect since 1988.

Heck, 1988 is about in the middle of how long my parents owned their house and well before the 1998-2007 runup and around 1988, there house had gone up quite a bit in value from 1970 when they first bought their house. Actually, now that I think about it, the multiple it went up from 1970-1988/1990ish was quite a bit larger than the jump from 1998-2007 (about 5x compared to 1x). Now, they didn't live in LA, but when you are talking about 20 years, even 5-6% appreciation will probably triple the house value.

ETA: I am not trying to rationalize some of the bubble prices, but just trying to point out that because of the appalling 1980s interest rates and 20 year timeframe, that that chart doesn't take into account that housing was probably "too cheap" before the huge runup as well. In 1988, people were probably afraid of/ignoring housing because of the ridiculous interest rates.

Click to expand...

I don't dispute your points on inflation and interest rates, but inflation was fairly steady from 2002 through 2006 and interest rates were already significantly low in 2002 and 2003, thus leaving the appreciation from 2004 and beyond as headscratching and unsupportable by historical fundamentals.

Click to expand...

DynOmite said:

I know this is a long shot, but anyone out there know much about the Westchester County, NY market? I am going to be a first time buyer, will be buying in the area and it seems like prices are still outrageous. Can I expect this throughout 2008 or is anyone of the opinion that this market will begin to come down?

Click to expand...

stbugs said:

OC Zed said:

stbugs said:

OC Zed said:

I think this chart is fairly indicative of the level of appreciation that has occurred in all of California this decade, and provides an idea of where prices will ultimately settle...

Click to expand...

While I always thought California was its own animal while watching house shows where they showed little dinky houses (not on the beach) selling for $1 million, that chart is a wee bit misleading. For example, I believe that the early 90s were bad years (declines) for LA/SoCal and of course the chart starts right around there. So, it is not surprising that in the late 90s there would be a correction for that when the economy turns around. Also, interest rates right now are about half of what they were before. In 1990, 30 year rates were still at 10%, down from the ridiculous levels of the early 80s (17.5% in 1982).Take a look at a payment for a 200k house:

6% - $1199

8% - $1467

10% - $1755

12% - $2057

So, if I bought a house in the mid 80s (around 12% average) at 200k, for the same payment, I could afford a 343k house right now at 6%. So basically, just on interest rates, a 70% increase is kind of reasonable. According to the wage inflation measure (LINK) I found while googling, another 70% increase is also reasonable from 1988 to 2006.

So, a 200k house in 1988 should be about 480k in 2007. Still some froth in there, but I would also have to say that the average home is also much larger, has more features, etc., so while it still can come down, simple inflation and interest rates would have had a big affect since 1988.

Heck, 1988 is about in the middle of how long my parents owned their house and well before the 1998-2007 runup and around 1988, there house had gone up quite a bit in value from 1970 when they first bought their house. Actually, now that I think about it, the multiple it went up from 1970-1988/1990ish was quite a bit larger than the jump from 1998-2007 (about 5x compared to 1x). Now, they didn't live in LA, but when you are talking about 20 years, even 5-6% appreciation will probably triple the house value.

ETA: I am not trying to rationalize some of the bubble prices, but just trying to point out that because of the appalling 1980s interest rates and 20 year timeframe, that that chart doesn't take into account that housing was probably "too cheap" before the huge runup as well. In 1988, people were probably afraid of/ignoring housing because of the ridiculous interest rates.

Click to expand...

I don't dispute your points on inflation and interest rates, but inflation was fairly steady from 2002 through 2006 and interest rates were already significantly low in 2002 and 2003, thus leaving the appreciation from 2004 and beyond as headscratching and unsupportable by historical fundamentals.

Click to expand...

I agree. There was definitely a bubble, how much of a bubble depends on where you live. I would bet that I would have an extremely hard time selling my house here in Charlotte for anything more than I paid (contract signed at the end of 2005), even though our market is still pointed to as one of the "hot" ones, although hot now means not dropping like a rock. I know that I would have lost at least another 10-20% if I stayed outside of DC and I sold my house there for almost $100k more than I paid here (for a much bigger and better house).

Click to expand...

Redwes25 said:

DynOmite said:

I know this is a long shot, but anyone out there know much about the Westchester County, NY market? I am going to be a first time buyer, will be buying in the area and it seems like prices are still outrageous. Can I expect this throughout 2008 or is anyone of the opinion that this market will begin to come down?

Click to expand...

I would be surprised if you had major price reductions in the really nice areas such as Mamaroneck, Rye, Scarsdale, Pelham, Chapaqua, etc...However, I have heard from a relative who is a real estate agent that New Rochelle has had major inventory build so deals might be found in certain areas. Other areas inventory has not built up and prices have not risen but not many price decreases.Even so we are dealing with one of the prime counties in the country and would be surprised if you saw major price decreases. I know the area has been unaffected (much like NYC) by the real estate downturn and incomes in NY tend to be higher then the rest of the country and they can support much higher prices.Anyway that is my two cents. Also, where exactly are you looking?

Click to expand...

DynOmite said:

Redwes25 said:

DynOmite said:

I know this is a long shot, but anyone out there know much about the Westchester County, NY market? I am going to be a first time buyer, will be buying in the area and it seems like prices are still outrageous. Can I expect this throughout 2008 or is anyone of the opinion that this market will begin to come down?

Click to expand...

I would be surprised if you had major price reductions in the really nice areas such as Mamaroneck, Rye, Scarsdale, Pelham, Chapaqua, etc...However, I have heard from a relative who is a real estate agent that New Rochelle has had major inventory build so deals might be found in certain areas. Other areas inventory has not built up and prices have not risen but not many price decreases.Even so we are dealing with one of the prime counties in the country and would be surprised if you saw major price decreases. I know the area has been unaffected (much like NYC) by the real estate downturn and incomes in NY tend to be higher then the rest of the country and they can support much higher prices.Anyway that is my two cents. Also, where exactly are you looking?

Click to expand...

Thanks for the reply...I figured this would be the case. We're looking at the river towns (tarrytown, irvington, etc), Scarsdale, Bronxville and perhaps Rye and Larchmont areas. Basically, anywhere with a good school system and within a 35-40 minute train ride to the city.

Click to expand...

videoguy505 said:

Thinking May '08 may be the time to stop renting and get a condo.

Click to expand...

BassNBrew said:

stbugs said:

OC Zed said:

stbugs said:

OC Zed said:

I think this chart is fairly indicative of the level of appreciation that has occurred in all of California this decade, and provides an idea of where prices will ultimately settle...

Click to expand...

While I always thought California was its own animal while watching house shows where they showed little dinky houses (not on the beach) selling for $1 million, that chart is a wee bit misleading. For example, I believe that the early 90s were bad years (declines) for LA/SoCal and of course the chart starts right around there. So, it is not surprising that in the late 90s there would be a correction for that when the economy turns around. Also, interest rates right now are about half of what they were before. In 1990, 30 year rates were still at 10%, down from the ridiculous levels of the early 80s (17.5% in 1982).Take a look at a payment for a 200k house:

6% - $1199

8% - $1467

10% - $1755

12% - $2057

So, if I bought a house in the mid 80s (around 12% average) at 200k, for the same payment, I could afford a 343k house right now at 6%. So basically, just on interest rates, a 70% increase is kind of reasonable. According to the wage inflation measure (LINK) I found while googling, another 70% increase is also reasonable from 1988 to 2006.

So, a 200k house in 1988 should be about 480k in 2007. Still some froth in there, but I would also have to say that the average home is also much larger, has more features, etc., so while it still can come down, simple inflation and interest rates would have had a big affect since 1988.

Heck, 1988 is about in the middle of how long my parents owned their house and well before the 1998-2007 runup and around 1988, there house had gone up quite a bit in value from 1970 when they first bought their house. Actually, now that I think about it, the multiple it went up from 1970-1988/1990ish was quite a bit larger than the jump from 1998-2007 (about 5x compared to 1x). Now, they didn't live in LA, but when you are talking about 20 years, even 5-6% appreciation will probably triple the house value.

ETA: I am not trying to rationalize some of the bubble prices, but just trying to point out that because of the appalling 1980s interest rates and 20 year timeframe, that that chart doesn't take into account that housing was probably "too cheap" before the huge runup as well. In 1988, people were probably afraid of/ignoring housing because of the ridiculous interest rates.

Click to expand...

I don't dispute your points on inflation and interest rates, but inflation was fairly steady from 2002 through 2006 and interest rates were already significantly low in 2002 and 2003, thus leaving the appreciation from 2004 and beyond as headscratching and unsupportable by historical fundamentals.

Click to expand...

I agree. There was definitely a bubble, how much of a bubble depends on where you live. I would bet that I would have an extremely hard time selling my house here in Charlotte for anything more than I paid (contract signed at the end of 2005), even though our market is still pointed to as one of the "hot" ones, although hot now means not dropping like a rock. I know that I would have lost at least another 10-20% if I stayed outside of DC and I sold my house there for almost $100k more than I paid here (for a much bigger and better house).

Click to expand...

Actually given your time frame you should be up 15-20% if you bought at a decent price/location. Congrats on bailing on DC at the right time.

Click to expand...

stbugs said:

BassNBrew said:

stbugs said:

OC Zed said:

stbugs said:

OC Zed said:

I think this chart is fairly indicative of the level of appreciation that has occurred in all of California this decade, and provides an idea of where prices will ultimately settle...

Click to expand...

While I always thought California was its own animal while watching house shows where they showed little dinky houses (not on the beach) selling for $1 million, that chart is a wee bit misleading. For example, I believe that the early 90s were bad years (declines) for LA/SoCal and of course the chart starts right around there. So, it is not surprising that in the late 90s there would be a correction for that when the economy turns around. Also, interest rates right now are about half of what they were before. In 1990, 30 year rates were still at 10%, down from the ridiculous levels of the early 80s (17.5% in 1982).Take a look at a payment for a 200k house:

6% - $1199

8% - $1467

10% - $1755

12% - $2057

So, if I bought a house in the mid 80s (around 12% average) at 200k, for the same payment, I could afford a 343k house right now at 6%. So basically, just on interest rates, a 70% increase is kind of reasonable. According to the wage inflation measure (LINK) I found while googling, another 70% increase is also reasonable from 1988 to 2006.

So, a 200k house in 1988 should be about 480k in 2007. Still some froth in there, but I would also have to say that the average home is also much larger, has more features, etc., so while it still can come down, simple inflation and interest rates would have had a big affect since 1988.

Heck, 1988 is about in the middle of how long my parents owned their house and well before the 1998-2007 runup and around 1988, there house had gone up quite a bit in value from 1970 when they first bought their house. Actually, now that I think about it, the multiple it went up from 1970-1988/1990ish was quite a bit larger than the jump from 1998-2007 (about 5x compared to 1x). Now, they didn't live in LA, but when you are talking about 20 years, even 5-6% appreciation will probably triple the house value.

ETA: I am not trying to rationalize some of the bubble prices, but just trying to point out that because of the appalling 1980s interest rates and 20 year timeframe, that that chart doesn't take into account that housing was probably "too cheap" before the huge runup as well. In 1988, people were probably afraid of/ignoring housing because of the ridiculous interest rates.

Click to expand...

I don't dispute your points on inflation and interest rates, but inflation was fairly steady from 2002 through 2006 and interest rates were already significantly low in 2002 and 2003, thus leaving the appreciation from 2004 and beyond as headscratching and unsupportable by historical fundamentals.

Click to expand...

I agree. There was definitely a bubble, how much of a bubble depends on where you live. I would bet that I would have an extremely hard time selling my house here in Charlotte for anything more than I paid (contract signed at the end of 2005), even though our market is still pointed to as one of the "hot" ones, although hot now means not dropping like a rock. I know that I would have lost at least another 10-20% if I stayed outside of DC and I sold my house there for almost $100k more than I paid here (for a much bigger and better house).

Click to expand...

Actually given your time frame you should be up 15-20% if you bought at a decent price/location. Congrats on bailing on DC at the right time.

Click to expand...

Well, even though I love the location and I think it is a decent price, things around here seem to have slowed down a lot lately. Houses in our neighborhood are still selling and not much below asking price, but I still can't see us getting anywhere above the purchase price. Inventory is pretty abundant, but unlike where I left, it is still moving. I know our house is a little on the higher side of the neighborhood, but that was because we wanted to do every upgrade we could think of during the build that would be a lot more $$$ down the road. I just couldn't see getting 15-20% more than we paid based on comparable sales, even though sales around here are within a couple % of asking price, even in this buyer's market.By the way, make sure you vote to add me as a permanent team in CHUG.

Click to expand...

BassNBrew said:

stbugs said:

BassNBrew said:

stbugs said:

OC Zed said:

stbugs said:

OC Zed said:

I think this chart is fairly indicative of the level of appreciation that has occurred in all of California this decade, and provides an idea of where prices will ultimately settle...

Click to expand...

While I always thought California was its own animal while watching house shows where they showed little dinky houses (not on the beach) selling for $1 million, that chart is a wee bit misleading. For example, I believe that the early 90s were bad years (declines) for LA/SoCal and of course the chart starts right around there. So, it is not surprising that in the late 90s there would be a correction for that when the economy turns around. Also, interest rates right now are about half of what they were before. In 1990, 30 year rates were still at 10%, down from the ridiculous levels of the early 80s (17.5% in 1982).Take a look at a payment for a 200k house:

6% - $1199

8% - $1467

10% - $1755

12% - $2057

So, if I bought a house in the mid 80s (around 12% average) at 200k, for the same payment, I could afford a 343k house right now at 6%. So basically, just on interest rates, a 70% increase is kind of reasonable. According to the wage inflation measure (LINK) I found while googling, another 70% increase is also reasonable from 1988 to 2006.

So, a 200k house in 1988 should be about 480k in 2007. Still some froth in there, but I would also have to say that the average home is also much larger, has more features, etc., so while it still can come down, simple inflation and interest rates would have had a big affect since 1988.

Heck, 1988 is about in the middle of how long my parents owned their house and well before the 1998-2007 runup and around 1988, there house had gone up quite a bit in value from 1970 when they first bought their house. Actually, now that I think about it, the multiple it went up from 1970-1988/1990ish was quite a bit larger than the jump from 1998-2007 (about 5x compared to 1x). Now, they didn't live in LA, but when you are talking about 20 years, even 5-6% appreciation will probably triple the house value.

ETA: I am not trying to rationalize some of the bubble prices, but just trying to point out that because of the appalling 1980s interest rates and 20 year timeframe, that that chart doesn't take into account that housing was probably "too cheap" before the huge runup as well. In 1988, people were probably afraid of/ignoring housing because of the ridiculous interest rates.

Click to expand...

I don't dispute your points on inflation and interest rates, but inflation was fairly steady from 2002 through 2006 and interest rates were already significantly low in 2002 and 2003, thus leaving the appreciation from 2004 and beyond as headscratching and unsupportable by historical fundamentals.

Click to expand...

I agree. There was definitely a bubble, how much of a bubble depends on where you live. I would bet that I would have an extremely hard time selling my house here in Charlotte for anything more than I paid (contract signed at the end of 2005), even though our market is still pointed to as one of the "hot" ones, although hot now means not dropping like a rock. I know that I would have lost at least another 10-20% if I stayed outside of DC and I sold my house there for almost $100k more than I paid here (for a much bigger and better house).

Click to expand...

Actually given your time frame you should be up 15-20% if you bought at a decent price/location. Congrats on bailing on DC at the right time.

Click to expand...

Well, even though I love the location and I think it is a decent price, things around here seem to have slowed down a lot lately. Houses in our neighborhood are still selling and not much below asking price, but I still can't see us getting anywhere above the purchase price. Inventory is pretty abundant, but unlike where I left, it is still moving. I know our house is a little on the higher side of the neighborhood, but that was because we wanted to do every upgrade we could think of during the build that would be a lot more $$$ down the road. I just couldn't see getting 15-20% more than we paid based on comparable sales, even though sales around here are within a couple % of asking price, even in this buyer's market.By the way, make sure you vote to add me as a permanent team in CHUG.

Click to expand...

New constructions prices moved about $15 / sf in most new developements between 9-05 thru 12-06. 07 was flat to 5% gain. The upgrades don't bring full value, but I'm think you're better off than you expected.Will do on the vote.

Click to expand...