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How long until a bottom in home prices?
Friday, January 11, 2008
The final results are in for the "Predict the bottom in home prices" online survey that had appeared on the sidebar for the last week or so.
In the final results above, 2010 and 2011 were about tied for the lead with 2009 and 2012 still battling for third place and four more real estate professionals expressed optimism for a turnaround this year.
The final results appear to be a much more reasonable estimate, but, remember that housing bottoms (and tops) are very "flat", so, if a bottom occurs in 2011, price declines in 2008 and 2009 are likely to far exceed the price declines seen in 2010 and 2011.
On a related note, now that falling home prices are becoming more deeply entrenched in the American psyche, we are likely to see all sorts of untoward activity as individuals compound their financial trouble by making even more bad decisions.
Bad decisions, that is, if they get caught.
In addition to the "Stop Foreclosure Now!" scams and companies that will strip copper tubing from abandoned homes, there may yet be a booming underground business in home arson as upside-down homeowners look to collect on insurance money and then walk away, instead of just walking away.
This report (hat tip s) in Fortune Magazine may serve as a good starting point for those looking for business startup ideas on ways to capitalize on the current housing downturn.Will foreclosures spark an arson boom?
That's not very neighborly - going to the police. In California, neighbors help each other.
As homeowners get more desperate, the insurance industry is bracing for an increase in arson.
NEW YORK (Fortune) -- Faced with foreclosure on her Russellville, Indiana home, Christina Snyder allegedly concocted the kind of plan that now has insurance executives on edge.
According to the county prosecutor, the 31-year-old Snyder allegedly offered to pay a neighbor $5,000 to help her burn down her house and make it look like a botched rape attempt - all in order to claim $80,000 in insurance money. Snyder wanted the neighbor to bind her hands in duct tape, write "whore" on her shirt, and then help her escape once the blaze was set, the prosecutor says. The neighbor demurred, instead reporting Snyder to police.
With the national foreclosure rate zooming and the real estate market in a two-year funk, the insurance industry fears more homeowners will see arson as a way out of their financial woes. A recent report by the industry-funded Coalition Against Insurance Fraud notes that with "untold thousands of homeowners struggling with ballooning subprime mortgage payments, fraud fighters are watching closely for a spike in arsons by desperate homeowners who can no longer afford their home payments."
6 comments:
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No, your doing it wrong! Your supposed to make it look like the wiring caught on fire after someone tried to steal all your copper. Botched rape attempt? Wow, please. No way the police will believe that. Well maybe if they sell real estate on the side.
On the housing bottom prediction:
I said 2009, but not because I think the natural market conditions would cause a turnaround in 2009 (in the absence of interventions, I'd say 2010-2011). I said 2009 because it's probable that a democrat will win the 2008 election, and thus the democrats will likely control the white house and Congress.
With that circumstance, a massive bailout is all but inevitable, to the detriment of everyone who didn't recklessly get involved in the bubble. Naturally the democrats will go way too far and create profit opportunities for people shrewd enough to profit from whatever "temporary" bailouts they put in place, which will put upward pressure on the market, and likely create a "bottom".
Anyway, thought I'd throw that out there as a rationale for 2009 as the bottom.
The range of options was too limited!
Absent "peak oil" and "peak spenders" I would've put the bottom around 2012. Housing certainly bottoms years after the economy recovers, as happened here in the 90's.
HOWEVER, given that we do have peak oil and the contractionary demographics, real estate prices are more likely to track the Japan model.
Soooo, figure major price declines the next 2 to 3 years, followed by a slow grind down for another decade.
Doesn't matter who gets in. You can't bail out this one. It's too big now and the government no longer has the power to do so. The only thing they can do is devalue the currency. 2013 is optimistic for a bottom. Look at how long it took real estate in Japan to bottom. This is worse.
The government could certainly bail out the housing prices, at least as far as dollar values go. Here's a possible scenario: the president announces a plan to give every person making less than the median income a $10,000 tax break, congress passes a law to loan unlimited money to subprime borrowers for interest-only for 8 years (at 1% interest rate), and the government agrees to buy any "distressed" properties at "market", and hold them until prices go above the buying price (rented out to low-income people as subsidized housing). Problem "solved".
As long as the government can print money, it can stop any devaluation of assets in US dollars. And I'll bet they will try.
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