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A bottom in home prices in 2009? 2010?
Tuesday, January 06, 2009
Almost exactly one year ago, a survey about the timing of an eventual bottom in home prices produced the colorful results shown below.
A fairly optimist bunch it seemed, the four realtors who answered 2008 were clearly more delusional than they were optimistic. At the time, it was noted:
If the 1990s housing boom/bust cycle in California is a good guide, we won't see a bottom in home prices nationally until five or six years after the peak which would put the next bottom closer to 2011 than 2009.With the year 2008 now stricken from the list of options and an open-ended guess for housing perma-bears added at the other extreme, now's as good a time as any to give it another try.
Free Website Poll
Once it scrolls off the main page, the survey will be left up in the sidebar for a few more days and a summary will be posted later in the week.
18 comments:
Why is there no option for 2008? We still haven't seen two months of 2008 Case-Shiller numbers.
The night is darkest just before the dawn.
It's really a toss-up this time, in my mind, between 2009 and a later date. On the one hand, the free market bottom would certainly be later, maybe 2012 or something. On the other hand, though, the Democrats have the consistent tendency to print and spend money with tremendous ferocity and complete disregard for future consequences, a strong motivation to reflate the housing bubble regardless of the inevitable and obvious consequences, and a virtual mandate to waste money like giddy retarded school children. I've been consistently astounded at the level of market manipulation and socialist programs proposed by the Democrats even when they didn't control the government, and each new low comes as a new, painful surprise.
Given that, I'm very hesitant to bet against the magnitude of the socialist interventions in the next year, which could very well cause the housing price bottom (in dollars) to happen in 2009. By mid-2009, the government could be paying everyone's mortgage, no matter how idiotic and/or fraudulent the original loan was, to keep all the "victims" in their homes (and as a side-benefit, keeping all the banks who gave out all the idiotic loans alive). After all, it's only money and future prosperity and national stability... to paraphrase Bernanke, we can't worry about the long-term problems until we take the worst possible actions in response to the short-term problems. Viva la Obamanation!
This may be something to check every few months???
ftp://ftp.cmegroup.com/pub/settle/stleqt
Why is there no option for 2008?
If you can mention one reason that the data for Nov/Dec will go up AND not go back down, I'll agree you have a point.
Simply given unemployment those 2 months, some of the worst for RE have a snow ball's chance at showing increases.
As an appraiser here in Southern California, I have predicted all along that the bottom will come mid to late 2010. Every downturn in real estate has lasted approximately 5 to 7 years. The peak according to our information was November 2005. You have to understand the foreclosure process to realize we are not close to the bottom. 90% of my business is appraising REO's for banks to determine listing prices. In an REO appraisal, the lowest sales in the area are selected, then 3 of the lowest REO active listings are selected. The closed sales comparables are adjusted down for time, the active listing comparables are adjusted down 5 to 10% to reflect the probable sales price. There is your estimate of value. Slightly below the lowest recent sales, and slighlty below the lowest active listings. Until you hear that foreclosures have almost completely died down, prices will continue to decline, and we are nowhere close to that happening.
Socal appraiser,
You forget to mention two things involving the foreclosure/appraisal process. In an REO appraisal, the bank also asks for an additional 90 day value, meaning they want to know the estimate of value 90 days from the date of appraisal, it is just a guess, but most appraisers usually bring it down another 10%. Many of the banks use that 90 day value as the listing price, as it usually takes awhile to get the property on the market.
Also, the bank not only gets an appraisal from an appraiser, they get a BPO from the Realtor who will be listing the property for them(brokers price opinion). These realtors come in even lower than the appraisal, these realtors are desperate to sell the house as quick as possible to get their commision. The bank looks at both the appraisal and BPO and then determines what to list the property at. You are correct, as long as foreclosures continue, price will drop.
"The night is darkest just before the dawn."
Great prose but of course complete BS. The night is darkest at midnight for obvious reasons.
"If you can mention one reason that the data for Nov/Dec will go up AND not go back down, I'll agree you have a point."
There is no need for the data for Nov/Dec to go up. We could have a technical bottom in December and the first month of nominal increases in January. This outcome is unlikely, but it can't be ruled out yet.
enough with the doom and gloom predictions....
you have no crystal ball
you are not even a real estate professional.
ITS TIME TO GET A LIFE BRO......
I would've bet dollars to donuts that SD Scientist's first comment was made facetiously.
Oh, well, either way it's funny.
Nick, Democratic meddling will only serve to prolong the bubble, so if you think it's coming, vote for 2014!
Couldn't agree more Linda. Although let's not just pick on the Dems. I think all politicians are disingenuous and will all (97%) vote for expanding deficits.
I voted for '14 as I do hope hyper inflation is not with us. Even with hyper inflation who would want to own a home here. Zimbabwe anyone?
I've been an Asset Manager for the past 20 years, and I've never seen a market worse than this one. It isn't a matter of being "doom & gloom," it's all bout facts. It's a fact that the ALT-A & Pay option ARMS are going to generate a mountain of foreclosures this year. Its also a fact that commercial real estate is quickly deteriorating and may seek a bail out. Add to that the credit card mess and car loan problems, and you have the banking industry receiving multiple punches this year alone! These are all facts, the industry and the government knows it. I've seen the reports, about 2.5 million foreclosures will take place in 2009. We're only about a third of the way through this financial mess. I agree with Peter Schiff and Max Keiser, with their recommendations to buy and hold actual gold & silver as a hedge for what may come.
I've been saying mid 2010 for a good year now at least, and Socal's numbers sound in line with other intelligent commentary I've read.
But it doesn't really take into account what the global economic picture is going to be by then. I think, all things remaining equal, it'll be mid-'10, but things could get much worse in the next year and a half... it's pretty much all up to the new Administration.
Also, consider that we're talking about nominal USD value of housing. If the "sprocket hits the chain", the bottom might be august/september 2009...
SOCAL--you mentioned one key "word", that being SOCAL!
SOCAL is a pho market just like everything else down there- when referring to the market, I hope you are referring solely to SOCAL. You're problems are unique to places like FL, Vegas, Roseville, CA etc.. To say they are even close comps to San Francisco, Pennsylvania etc, would be a mistake.. Places that are starting to cash flow there have already started to bottom and in fact are on the way back up..
Keep in mind that prices can bottom NOMINALLY while still falling in real dollar terms as inflation rages in other asset classes. If your home is worth 2% more after the bottom but inflation was 12% that year you still lost 10%.
Isn't the whole idea of pumping money into the economy to stop the asset prices from falling? It's fake though, as that will result in your other costs of living going up.
I love it when idiots with an obvious political agenda blaim one party for this mess. Seems to me that both parties do a pretty good job at spending money. Reagan tripled the national deficit and Bush doubled it. Hmmm... are they democrats? grow up, stop acting like Sean Hannity and Rush Limbaugh and think for yourself.
I'm a loan officer in the Minneapolis area. Although SoCal, AZ, NV & FL have it the worst, values are continuing to fall in many areas. We have a major negative feedback loop happening. Banks are restricting 2nd mortgages to 80CLTV - when they're available at all. That means for any home sold for > $521,250 in most areas of the country, buyers will need 20% down. That's a big nut to crack. Not so easy to borrow it against the 401k. And move-up buyers have no net proceeds from sale of their old house. First-time buyers are key, but there just aren't enough of them to reinflate the bubble, tax credits & low rates notwithstanding. Anyone who recently did a short-sale will be uncreditworthy for 2+ years. If they were foreclosed, 5+ years. Stated income programs are non-existent, knocking many people out of the prospective buyer pool. Rental property now requires at least 20% down, and borrowing the downpayment from the equity in one's own home is more difficult now. People with more financial wherewithall probably already own a primary & second home, limiting the number of investment properties they can finance to two. Seller-funded downpayment assistance was killed off in Sept 2008 and was heavily used in early 2008. FHA loans now require 3.5% down, which, while not onerous by any rational standard puts buying a home out of reach for many would-be buyers. My guess is that most people calling the bottom in 2009 have no direct experience with the changes in mortgage underwriting. It's true that qualified buyers can still buy a house with an FHA loan and only 3.5% down, but that's a significantly smaller universe of buyers than a mere two years ago.
And let's not forget that the national unemployment rate is still under 7%. Contemplate the likely job losses in auto manufacturing, auto sales, auto finance. Throw in declines in recreational vehicles, retail, restaurants (other than Mickey D's), etc. Even local governments and school districts will be laying off people due to budget shortfalls. Cities are cancelling building projects. Charities, theaters & museums are laying off staff. I could go on for hours.
I voted for 2012.
The Alt-A & Option ARM defaults are going to be enormous. Currently, only 4-8% Option ARM's are in default, with 60-70% predicted into 2010. There's over $1 Trillion of Option ARM's. Subprime will look like a dream compared to this stuff unless the banks negotiate with a borrower and reduce principle and give a 3% 30 year fixed (call them and they probably will do it if you have a Neg AM).
I expect prices to fall an additional 30% for 2009 in most markets. The prices are still way too high compared to income, coupling that with so little retirement savings American's have outside of 401K's.
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