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| 5/25 |
| 2004/8/10-11 [Reference/RealEstate] UID:32813 Activity:very high |
8/10 Nothing to see here. move along, yes this is another "housing market
crash is coming" link:
http://csua.org/u/8jd [nytimes.com]
\_ eh, whatevah, home prices in SoCal and NoCal will not crash, too
many yuppies with money who don't have any money in the stock
market. Prices will stagnate at some point; and will only dip if
something goes boom. Take it from someone who has no experience.
Can't say the same about other areas or states.
\_ Yeah, like they didn't crash during the early ninties...
(Someone who DOES have experience in the SoCal housing market
because my family has owned real-estate there for over fifteen
years, amongst other places around the globe)
\_ Wasn't that "crash" a small drop followed by several years
of stagnation? My mom bought her house right before the
crash and has done quite well regardless.
\_ After the peak in 1989, interest rates fell for 4
straight years, staving off a more severe drop. Where
are the interest rates going to fall to this time?
\_ FWIW, my neighbors paid $50K less than I paid for
my house. I bought mine in 2001. They bought theirs
in 1989. Of course, now values have doubled off of
their original price. However, the drop was
significant. It took 10 years to reach the original
price again. You could see a 30% drop or more
easily, which sucks if you just bought a place for
$600K and find it's worth $400K in 2 years.
\_ YOu must live in a lowsy neighborhood. My parents
bought their house in 1989 before the so-called
crash, and now it's valued at more than twice the
price they bought it.
\_ What part of 'doubled off original price' did
you not understand?
\_ in 10 years? the fact is that most houses
in my parents' street doubled in prices from
1989 to 1999. Only in the early 90s, it dipped
like 5%. That's hardly a crash.
\_ Your parents are lucky or you are full
of shit. In 1996 the median for houses
was $160K. In 1989 it was $176K. That's
a 7 year period over which there was
a loss. It wasn't until around 1998-99
that houses regained the old values. In
the early 1990s the dip was more
pronounced than "like 5%". In 1993, 43%
of *ALL* home sales (no matter when the
house was bought) were for a loss. The
median loss was $23K on a $200K house.
Median prices for La Crescenta, CA:
1990: $290K, 1995: $212K, 2000: $310K
2002: $382K, 2004: $537K
Median prices for Newport Beach, CA:
1990: $457K, 1995: $390K, 2000: $675K
2002: $800K, 2004: $1090K
\_ Probably lucky to purchase a house in
a city where the job are. And the
real estate growth probably will
continue since Google is there. The
price of a Mountain View (94043) house
in '89 was $260k, $350k in '95, and
$500k in '89 and now close to $650k.
Sadly, this is not the best part of
Mountain View and the schools are
average to good.
\_ My parent's house that I lived at for 15 years got foreclosed
on because of that. Too much leveraging. I still say there
won't be a crash; too many people with money these days, and
SoCal and NoCal will remain hot for yuppies looking for a new
home and speculators. -"eh, whatevah" person
\_ There are just too many millionaires out there in the
bay area. If google goes IPO, there will be hundreds more.
\_ If this another "housing market crash is coming!!!!!" article?
Please save the rest of us from following another content free
link description.
\_ like the internet boom and bust, the hottest regions will
have it the worst during the bust, just like your hot internet
stocks.
\_ No, because the most desirable locations will hold their
value better. San Marino was one of the best places to own
real estate during the last 'crash'.
\_ I really, really doubt it. How much did Internet stocks
inflate as a percentage over how many years (let's take YHOO)?
Then compare that to real estate. This is just a dumbass test;
I'm sure there are more fundamental differences.
\_ Not likely because: 1) land is scarce. 2) population growth.
3) house ownership is an American way of life. |
| 5/25 |
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| csua.org/u/8jd -> www.nytimes.com/2004/07/25/business/yourmoney/25watch.html?ex=1092283200&en=bad1ee29733b1b96&ei=5070&ex=1093752000 Business Although average US home prices continue to climb' the growth rate is beginning to slow. Six states even saw declines in housing prices in the first quarter. GRETCHEN MORGENSON Housing Bust: It Won't Be Pretty Published: July 25, 2004 L ET the stock market slide. As long as home prices keep rocking, it's easy for Americans to feel fat and happy. But what happens when the run-up in housing prices loses steam, or worse? The implications are sobering, not only for homeowners but also for the economy as a whole. The average home price in the nation rose 771 percent in the 12 months ended in March. But the first three months of this year showed far slower growth than previous periods. Freddie Mac The last time housing prices grew by less than 1 percent in a quarter was in the spring of 1998. More ominous, six states showed declines in housing prices in the first quarter: Vermont, Alaska, North Dakota, South Dakota, Iowa and Nebraska. In the most recent 12 months, prices have jumped by more than 15 percent in Hawaii and Nevada, by 14 percent in California, 11 percent in New Jersey and 10 percent in New York. In nominal terms, United States home prices are up 60 percent since 1995; in real terms, adjusted for inflation, they are up 37 percent. Viewed historically, home prices are up twice as much now as they were in the bullish real estate markets of both the mid-1970's and the 1980's. As a percentage of disposable income, home prices are more than 18 percent above the long-term average. Prices exceeded that average by only 4 percent in the 1970's and 85 percent in the 1980's boom. Michael Buchanan, a senior global economist at Goldman Sachs, and Themistoklis Fiotakis, a research assistant there, reckon that at current interest rates, home prices are now overvalued by 10 percent, on average. Because this figure spans the entire nation, the hottest markets - California and New York - are obviously more overpriced. The economists compute fair value in home prices by using a variety of measures, including interest rates, population and demographic data, and the overall health of the economy. If interest rates increased by one percentage point, the economists said, home prices in the United States would be overvalued by 15 percent. None of this would be worrisome if homeowners had not turned the paper profits in their properties into cold, spendable cash. But withdrawals from home equities have recently totaled 63 percent of household disposable income, according to the Goldman study. In the late 1980's, equity withdrawals reached only 25 percent of disposable income. Federal Reserve studies indicate that as much as half of the equity withdrawals went into personal consumption and home improvements. As a result, the Goldman economists estimate that equity cash-outs added 175 percent to the growth in the gross domestic product in 2003. That is a significant increase from the 125 percent kick that equity withdrawals added in 2002. Consumption would slip 1 percent, Goldman estimated, if housing prices fell by 10 percent, to the fair value level. But if prices decline to well below that, as often happens when overheated markets go cold, consumption may fall by 24 percent, Goldman reckoned. Such a housing crash took place in Britain in the early 1990's. At the market's low, home prices had fallen by 27 percent, 5 percent below Goldman's estimate of fair value at the time. Such a decline is not expected here, said Dominic Wilson, a senior global economist at Goldman. That's because home prices in Britain had escalated much more than they have in this country, even now. And interest rates had soared into the high teens, which is unlikely here. But even small declines in home prices could hurt the economy. "The precise degree of the vulnerability isn't going to be clear until we see house prices slow," Mr Wilson said. "You've never seen consumers this stretched, operating at levels of leverage we've never experienced before. House prices are starting at a level that is pretty high relative to what we think fair value is going to be, and the economy as a whole has gotten a lot more sensitive" to housing-related spending. Indeed, Goldman estimates that home equity lines of credit and the like have magnified the effect of housing wealth on consumption over the past decade, taking it to 10 percent from 4 percent. Although rising home prices have been stopped dead in the past by sharply higher interest rates, the Goldman economists note that bear markets don't necessarily need major triggers to get started. Small events can change the market's psychology, and asset bubbles sometimes just cave in on themselves. One risk that looms large, however, is that United States policy makers would have few tools to cushion the fall if a housing decline gained real momentum. Interest rates are already so low and fiscal policy so loose that little could be done to ease the pain. "This is one of a series of risks and imbalances that suggest there has been a price to the low-interest-rate policy that led the recession to be much shallower than it might otherwise have been," Mr Wilson said. "Fiscal and monetary policy are both already fully utilized. If things go wrong from here, the US finds itself in a more fragile position." |
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