Housing Prices: Steepest Drop in 20 Years

[Purveyor]

Source: Associated Press

S&P Says Housing Prices Fell by Steepest Rate Since Its Index Was Started in 1987

NEW YORK (AP) -- U.S. home prices fell 3.2 percent in the second quarter, the steepest rate of decline since Standard & Poor's began its nationwide housing index in 1987, the group said Tuesday.

The decline in home prices around the nation shows no evidence of a market recovery anytime soon.

MacroMarkets LLC Chief Economist Robert Shiller said the declining residential real estate market "shows no signs of slowing down


Read more: http://biz.yahoo.com/ap/070828/home_price_index.html?.v=5

[1932]

1. Somebody should start a rock band called "Soft Landing"

[YOY]

2. If this keeps up we might just be able to afford a house after years of being

forced out of the market by folks willing to make a quick buck and other folks who got duped by predatory mortgage marketing.

I guess that's good...for me...I feel a little selfish saying it but it's true.

I've told people that the prices they have been willing to pay are rediculous...

[soothsayer]

3. agreed. 20% isn't enough of a drop, imho.

[YOY]

4. It will continue to drop until prices stabilize to reality

Those who have been priced out of the market will find themselves back in. The predatory on line mortgage brokers are coming under fire even now. Their time is all but at an end. Banks are coming to their senses about giving decent and logical mortgage rates. Such is supply and demand...or so I hope.

I am curious as to what percentage of buyers in the "housing boom" fell under each category I mentioned previously.

[catmandu57]

14. By the time those priced out can get in

Credit to buy a house will be beyond their means. I've always felt we overpaid for our house, but they're going to have to carry us out of here, so it's value is in providing us a home.

[YOY]

15. I don't know...we're pretty fiscally responsible

We've been careful with our money. Our score is far from perfect but we are in what they have deemed the "excellent" range.

If they wouldn't loan to us then they won't loan to anyone.

[blondeatlast]

23. That time may be coming. the problem is that lenders count on home prices to increase.

Therefore they are willing to take risks. As prices drop and homes no longer sell they become a glut on the market and they see homes continuing to drop.

It no longer becomes a good investment for them.

Homes are already a glut on the market; builders are almost panicking.

[MarkInLA]

61. Unless you don't need credit

By the time all of this unravels, some of us will have some enough to buy a house with cash or at least have a huge down payment.

[kenfrequed]

51. Correction needed.

Yes this is a needed correction, however this price drop will cause quite a lot of headaches. People might see what their property is actually worth and look at their steep mortgages and choose to let the properties fold back to the bank. It might result in a feedback loop. Of course construction will take an even bigger hit on this as will dozens of related industries. Many new exurban developments and condos will go empty and those companies that invested in them will collapse.

Of course this is also going to wash through the entire market. But I am not an economist so what do I know.

[NeoConsSuck]

63. The ones who are going to walk..

are those who took a mortgage with no money down. Why would they continue to pay an upside down mortgage, when it will cost them nothing to walk away?

[TexasBushwhacker]

77. It will cost them their credit

Anyone who had a zero money down loan had good credit, maybe even great credit. Walking away from a loan will impact their credit rating in a big way AND the IRS can tax, as income, the difference between their mortgage balance and what the lender recovers from the sale.

If you want to walk away from a mortgage and not be a renter for 7 years, it's better to buy a new house before you've sold the old one. That's going to be difficult to do now since lenders are making it harder to qualify for loans.

[wordpix]

74. My house hunt last year turned up small fixer-uppers at $425K-450K so I didn't buy

Others bought at these ridiculous prices with the idea "the house will increase in value next year."
This is in the NE about 40 mi. out of NYC.

My thought instead was that I do not want to be saddled with a high mortgage that I will be slaving away to pay off for the next 30 yrs.

[YOY]

79. The lowest 2 BR 2 Bath we could find in the DC area (Arlington, VA actually)

Was a $380,000 piece of foreclosed garbage that needed so much work that it was ridiculous and VISIBLE mold growing in the kitchen. No shit! The Real Estate agents didn't want to take a little bit of elbow grease and bleach to it!

OK the DC area...and not some really nice part of it, but a regular middle class neighborhood.

How is someone on a government budget supposed to afford this?

It's beyond insane.

[beberocks]

6. Depends on where you live, but I think you are right-it will go down another @0% easily

I live in Sonoma County where prices went through the roof (median price house used to go for @$640K here, now down to @$540K). I wondered how all these people could afford a house, and in looking at the foreclosure data, most of them couldn't. Most of the recent foreclosures look like the buyers put little or no money down, and were able to get jumbo loans (loans over $400K are not uncommon here). Only about 7% of the population here can afford to buy a home. Bring the home prices down, and there will be more buyers, but buying at these inflated levels doesn't make sense.

[YOY]

7. Methinks this was some machination by economic forces beyond the average man's

Powerful folks looking for a quick buck and some not-so-powerful but above average income playing along. Some have made that money...now reality is coming for an unpleasant visit.

Perhaps I'm just being conspiratorial. I have no evidence of course.

[ooglymoogly]

55. IMO the housing bubble is inflation by an oversupply of worthless paper as housing is the hardest of

assets depending on how far it is leveraged...The Federal Reserve Bank (no part of the government) has been pumping paper into the market to spur over investment and over building as they did before the great depression and the Reagan recession when two of the greatest thefts in history took place. The final act in the farce is to pull the rug out from under that over investment...A German bank has already bought Billions of dollars of that debt for pennies on the dollar, so watch for this country to sink further and further into debt at the hands of the world bankers who own the Federal Reserve and will now up the anti with 4 aces up their sleeve setting the stage for another huge transfer of wealth from the middle and poorest to these greedy ruthless few.

[Auggie]

17. I'd like to know what the numbers were for the S.F. Bay Area

Our home doubled in value between 2001 to 2006.

[MADem]

10. I wouldn't feel selfish if I were you. I think affordable housing is damned near a right.

If people lived in their homes, and regarded them as HOMES instead of ATMs and "equity" there wouldn't be this problem. But then, the whole idea of this was to separate people from their money, and they did do that. Successfully.

Homes ARE overpriced now, but if you live in them long enough, you're going to get their value back. Real estate isn't a fast moneymaker, but over the long haul, it's pretty sure.

I hope TAXES go in the same direction as home values. That would be fair...!

[LisaM]

16. You are so right.

No one in Seattle seemed to give a crap that I have never been able to afford a house. This is the most overpriced city in the country when you compare salaries vs. what things cost. I know many people who either have overpaid, or have built up equity from buying their first house in the 1980s, who simply don't seem to care that I can't afford to buy. I work hard - have worked hard and supported myself since I was 20 years old - and have been priced out of the market wherever I've lived my whole working life.

I completely agree about people who think of their houses as equity, not as a place to live, make a life.

The big trend I've noticed in Seattle is the size of houses people want. Even with only two people, they want multiple bathrooms, ginormous kitchens, offices, you name it! 2500 square feet for two people is not uncommon.

[high density]

65. It hasn't hit my area yet

The $300k condos are still sitting there... empty.

[YOY]

80. It will fall

Unless they think it's going to magically come back. It won't.

[natrat]

5. yea but up 20% for 5 years a 20% decline only puts you a third of the way back or something

obviously some markets and types of housing will be the best value---here in the bay area people are so friggin rich that price declines have been nominal at best but one can only hope for fire sale prices-like i've been doing for 10 years,doh!

[FreeStateDemocrat]

8. House in my neighborhood is listed for 20% less than it sold for in April 2006

[demnan]

9. Even if mine loses 20% in value

I still think I'm ahead cause they went up more than than in 2005.

[LisaM]

19. MMM. Are you saying you overpaid?

I have really had it with people who either bought or sold houses for more than their worth. This has been happening in Seattle since the late 1980s, when Californians came and started buying property (as they term it) here. As one Californian so aptly put it at the time, "No one is forcing you to sell your $65,000 house for $150,000". Of course, those prices seem laughably low now, but the point is that nobody who was buying OR selling seemed to care that those of us who didn't work at Microsoft were being priced out of the city we lived in.

[CreekDog]

26. I live near SF and they were doing that to me, HERE

We've been priced out by Californians here and it's been happening for a while.

[scorpiogirl]

35. Yep. I live in the East Bay in a very wealthy town.

Prices in our town have been ridiculous for quite a long time! I can only hope prices go down soon or we can find a foreclosure to buy.

[Lorien]

73. Yep, me too. Mine has dropped in value from $480,000-510,000

to around $430,000. I bought it for $150,000 ten years ago. My neighborhood is extremely "trendy" right now, with improvements happening every day. But personally I think the a 1,700 sq. ft. 1925 Craftsman bungalow should only cost about $250,000. It was built for a middle class family, it should have a middle class price tag.

[flyarm]

11. GEE WHO WAS PRES WHEN THIS HAPPENED LAST..AHH YES

ANOTHER REPIGLICAN!!

wow they really do wonders for the economy don't they????????

[spinbaby]

12. They didn't say this happened 20 years ago

20 years ago is just when they started keeping records. This could be the biggest decline since the Great Depression for all we know.

[David__77]

13. True. Biggest NOMINAL drop since Great Depression.

We should be taking inflation out of the equation when speaking of this, however. If inflation were higher, we would likely be seeing a greater nominal price drop, but many homeowners are psychologically averse to a nominal decrease in sales price, notwithstanding their actual outstanding financial obligations.

[robinlynne]

25. Also, at least here in LA we had at least a 200% rise in prices over the previous 5 years.

A 20% drop is really nothing. Houses tripled and quadrupled in value over 10 years. literally. The building I live in was bought for one million dollars around 4.5 years ago. The owner is negotiating for another building on the same block, and they're arguing between 3 million and 5 million dollars. We are paying attention, because if he gets the 5th building on the block, already having bought 4, we're going to lose our homes. 20% decrease in price seems like a joke to me. I know it isn't if you just bought a home, but...

[David__77]

44. Percentages, percentages...

Funny things they are. We only need a 50% drop in real terms (which would be smaller when nominally expressed) to offset a 100% increase in prices in real terms (which was a larger increase when nominally expressed).

[robinlynne]

67. okay. I can follow that a 50% drop is equal to a 100% rise. BUt after that, you

lost me completely...

[cascadiance]

49. Loan terms are going to REALLY tighten up soon! Mark my words!

The big real estate mortgage firms are battening down the hatches. The subprime loans that has fattened them for so long are going down the tubes. When so many existing loans are failing at once now, these firms have to dip into their reserves to issue newer loans or really pull back on new ones. Some of these real estate firms that don't have any cash reserves are going to go out of business altogether. Huge layoffs are already being planned for some of these firms now as we speak. Once that happens, and people's salaries aren't getting larger any time soon, demand for these overpriced homes is going to drop that much more, and their prices will too! These stats are only a beginning of the fall of prices. I was earlier thinking of buying a house, but there's no f'in' way I'm jumping into the mix now until we get this "correction" to happen.

[davekriss]

68. 1987-1988 timeframe

There was a large drop in real estate prices at least in the Northeast. Reagan, of course, was in office. Fact is, with one exception, Republican Presidents left the economy worse off at the end of their terms, and Democratic Presidents left it better off. Voting Republican is just plain dumb for all of us. Their "vision" has always been bankrupt and so they usher in waves of bankruptcies. Bad news for main street.

[ooglymoogly]

18. The lead should have read...steapest decline since the last idiot was president

[ooglymoogly]

50. correction, steepest decline...epenthetic overload.

[Hissyspit]

20. Serious question from naive neophyte: Did the housing bubble burst?

I mean, this is a fulfillment of many of the prophecies/warnings of DUers here, who are once again again and again proven right, but does all that has happened over the past month qualify as "the housing bubble burst?"

[fed-up]

28. it had a slow leak starting at beginning of 2005-the leak is now a fast leak-

they are finally now starting to report it

they were in denial with much prodding from the association of realtors

but now with all the Zero down payment loans starting to reset the number of homes going into foreclosure will skyrocket

the last year or two has just hurt those that got the fixed/arm bait/switch loans in the early days of the predatory loan fiasco



I am so, so grateful for DU and its warnngs during the last few years. I got out of my fix/arm last Nov before word was out on MSM about the upcoming disaster

[Hissyspit]

37. O.K. so I'm going to make the argument that essentially the bubble burst

since the impact is much the same, but since the bubble was so big it could not EXPLODE instantaneously (i.e. over a few days, although some things DID happen over a few days). Maybe the metaphor/semantics doesn't work anymore?

See trekbiker's post in this thread: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=2969425&mesg_id=2969736

[kirby]

42. Housing is different than stocks

Unlike losing money by getting rid of a stock and 'cutting your losses'. Housing is much more flexible. Someone who loses money in their house may just decide to live there for 10 more years versus moving - its a tangible asset. They can 'wait it out' to some degree which means the burst is slow. The real problem is the adjustable rate mortgages given to people who wont be able to afford a higher monthly payment. They will not be able to 'wait it out', since missing payments will eventually trigger foreclosure.

[David Zephyr]

54. Yes.

And unlike stock, you can live in a house, write off the mortgage interest and the taxes. And, you can rent rooms out or the entire house and take depreciation on the property.

[wordpix]

76. however, some of this housing bubble can be attributed to people who flipped on speculation

They bought a house this week and sold it soon after, sometimes with no improvements. Or they'd paint it for $10,000 and sell it for $50K more. As we saw with the tech bubble in '97-'00, all of this works as long as there's a frenzy to get "in" before prices rise even more.

Then there's a point where people go, "I'm not paying $450K for a 2 br., 1 ba. fixer upper." This was the actual price about a yr. ago in my area. I looked from fall through May or so and just told my RE agent, until these prices come down, I'm not buying. She offered to put me in touch with some wonderful mortgage brokers who could make it happen and I just said no. Prices still aren't down enough for my liking but they're better. Just saw a small '50's house in good shape for $369K, which is at least a $75K drop over last yr.

[LSK]

31. there is not sudden burst, but its been slowly leaking for at least a year

[THUNDER HANDS]

21. good

my girlfriend and i would be living out of an apartment the rest of lives if the housing bubble didn't burst. Maybe young peole will be able to afford homes now.

[LisaM]

30. Young people? what about Baby Boomers like me?

Most people I know who are my friends and who are younger than I am, the GenXers, have bought houses by now. I'm what's known as a "tweener" - I missed the cheap housing on one side of the equation, and the good salaries on the other side.

[LynneSin]

22. A year ago there would be no way I could afford the house I just bought

It's too good of a neighborhood and the house was in top condition. Hopefully I can hold on to this place thru this rut and it should go way back up in value

[LisaM]

27. Did you buy it to make a life in, or to make a profit from?

That's what keeps me from buying. However, lately, two flippers in my neighborhood have been unable to sell their houses - they've been sitting there, with the prices sliding, for months.

[LSK]

33. flippers are one of the reasons we are where we are

All those people who read Rich Dad Poor Dad caused this mess to some extent.

However when real jobs are being exported out of the country, you cant blame people for trying to make a living in other ways.

[LisaM]

34. I have no problem with someone fixing up a house and making a modest profit

I have a huge problem with someone who tries to double or triple what they paid, because it keeps me (well, has KEPT me) out of the market myself, for my whole working life. I value hard work, not speculative ventures.

[LynneSin]

40. Definately live in for at least 5-10 years

not a good market for flipping

[LisaM]

45. I just want a nice-sized house with a big front porch

to live in the rest of my life, but I've pretty much accepted that I'm never going to get it. Sigh.

[Tight_rope]

24. My only hope is that the bucket falls out of the bottom here in Texas.

I live in Houston - Sugarland and the prices damn pathetic for a 3 bedroom shack.

[trekbiker]

29. check out the graph at this link

average home prices normalized for inflation from 1890 to 2006. The bubble that started in 1997 is unlike any asset bubble seen before in this country. A perfect storm of easy credit, new financial instruments that allowed 100's of billions of dollars to flow into real estate thru mortgage backed bonds... anyone with a pulse able to get a home loan which injected tens of thousands of new buyers into the home market that historically would never have been able to qualify for a home loan, banks in a frenzy to make these risky subprime loans and then sell them, appraisers artificially boosting home prices.. what a mess. This makes the real estate bubbles in the 80's and 90's seem like nothing and I remember sitting on my house for 7 years from 90 to '97 with almost zero gain here in California. This latest bubble could take 10 years to play out.

http://www.quickfilepost.com/download.do?get=b35b92c2e74841388be5f5d1a3e76779

[superconnected]

64. now that is a scary chart!

Thanks for posting it!

[superconnected]

32. Good news for me and I think most people that live in their means

and didn't take the mega house loans when they were available.

I'll buy when the price is right and they are a lot closer now then they were two years ago. I've seen a 100k drop in my area. Nobody could touch a house for under $350k in Everett, WA a year an a half ago. Now houses are typically selling in the $220's.

I'm waiting for them to go down to the $180s. I was considering I would have to move out of my area to get the right house at the right price a few years ago. Now it looks like that is not the way it will happen.

I think the people saying their houses doubled in value from '01-05 need to realize that was because of the inflation of house value from the megaloans lenders were willing to give out. That is what drove the prices up. Buyers were in competition with buys with much bigger loans. And they were unreasonable loans.

It only means their house will realize REAL value with time and not in an instant rash like they saw. All of this reminds me of how tech stocks were overvalued in the 90's and everyone gloated about them and then lost massively when they came crashing down - mostly 50% - 75% to a more realistic value.

I make more than most dual income familys. Since Im a single woman I don't have the cost others do who have familys to support. I knew something was wrong when "I" couldn't afford a house.

Sure I could have gotten a loan and paid a few grand a month mortgage, but then "I" am more financially responsible than that. A house I buy wont make me money until I sold it and I would be buying it with the plans of living in it for the rest of my life and not to sell it. So I wouldn't consider it an investment but a liability. I look at buying one as being cheaper than living in an apartment if one buys one at the right price, and that is the only reason for me to buy.

For the last 6 years they have not been cheaper than living in apartments and they were certianly not assets if I aquired it by a mega loan. As far as the equity being the asset, I say bullshit, since half of the mortgage there is no equity. For 15 years I would have been paying interest only.

So I'm glad I didn't buy. And I'm glad the prices are becoming more realistic where me and the other's here who are buying with the intention of it helping them *really* get ahead financially (by being less expensive than an apartment) and not by it being something they plan to (flip- and almost always lose money on because they don't wait the time for the value to be realized but instead just get themsevles in a bigger loan and more in debt on the next bigger house they flip it for).

We're going to get the opportunity that other generations had that many of us didn't get to see in the 90's and 2000's. It's an opportunity I was believing was gone. But alas, like stocks, yes the mania does catch up and they do become normalized. What we were seeing was a pipe dream of inflationed lending and not the reality.

[LSK]

36. dont celebrate yet, lets hope this doesnt tank the economy

It could indirectly screw a lot of people who do not even have a mortgage.

[superconnected]

38. The economy was tanked with the inflated lending and interest gauging

this is a market correction.

If anything it will help the economy.

Money won't be going to those big financial instutions but back into the pockets of the people.

Who lose here are the people who hold on to the couple grand a month mortgage, hoping values will go up and ignorning that people buying in for half of what they did will see the same value increase over time - but paid a lot less for the same value. And of course they won't see the value rise as fast and rash as it looked before the crash.

It's like the stock market. Those who held on to the stock in hopes that the over inflated value would come back, lost. I watched them deny it as the stocks were crashing around them. With a house it's super dangerous to do that because what if something happens where they can no longer make their mortgage payment. They lose where they live. But then, is it so bad that they may lose their house and be forced to come back in at half the payment for the same house. Oooow poor home owner. The smart ones will drop the house because of the cost of the loan, like the very few smart people in stocks did. Most home owners won't do that though. They'll ride it out and eventually dump the bad loan in a bankruptcy court. At least they'll get back in for a lot less cost to themselves than what they originally bought for. They'll be in a far better postion. But first they'll have to swallow the reality pill that it was a bad loan.

[Hissyspit]

39. I have never bought a house and was nervous all through this decade, too

so I hope you are right.

[wordpix]

75. I was really nervous before I bought my condo in '98---best move I ever made financially

My bottom line was and remains, it is cheaper to buy with a mortgage than to throw money away every month renting. Also with your own place you can fix it up the way you want and it's yours with no landlord hanging over you. Don't be so nervous about buying that it never happens, just do your homework and look for a good deal.

No doubt if you stay in your home 10-20 yrs., it will rise in value over that time. If not, you did not throw away your $ on rent so you still made out.

[natrat]

71. in the words of paul simon"one man's cieling is another man's floor"

[Bo]

41. Houses need to drop 40% at least....

The market is still so over priced.

[TexasBushwhacker]

43. Flippers are going to be caught holding the bag n/t

[sakabatou]

46. In other areas, housing prices are going up

Like my hometown.

[edhopper]

48. No they're not.

The rise in median prices are due to the lower end of the market disappearing. When only more expensive houses are sold, the median price goes up. The real price of the same home is down everywhere YOY.

[sakabatou]

53. ... O.o

I'm a little slow. Please explain in layman's terms.

[David Zephyr]

57. Actually, they are.

There are areas and neighborhoods here in Southern California where the demand still outstrips the supply which is the first law of economics.

The Platinum Triangle which takes in Beverly Hills, Brentwood, Bel-Air & West Hollywood and the Hollywood Hills continues to see appreciation because of the great demand to live in those areas. The same is true for certain beach communities and certain tony neighborhoods. The limit in availability is far greater than the demand and those that can afford homes in these areas will still pay what they must in order to have residences there. They are not affected by the ups and downs of working class and middle income neighborhoods. Many of these purchases are cash without any loans whatsoever.

As with all situations, one size never fits all. Sadly, the rich do get richer and the poor do get poorer.

Scamming the poorer working class into buying shoddy homes or into taking on greater debt with flaky loans has been the hallmark of the housing industry in this country since its inception. It happened in New York right after the revolution. Upton Sinclair wrote about poor Jurgis and Ona being tricked into their dream house which was a rip-off in his landmark book, The Jungle. The bankers handed out loans to the farmers in Oklahoma which they knew would result in the farmers losing their farms and to be picked up at fire-sale prices by agribusiness corporations.

The predatory lending practices coupled with the greed of some buyers who had to have bigger homes than they needed and pricey upgrades that they could have lived without has led the moth to the proverbial flame.

It will all wash out in the end. The country is about to enter into a recessionary period anyway and that will allow the Fed to lower rates and, sadly undermine even further the value of the dollar.

[edhopper]

59. You are technically right,

but at the same time confirming what I said.
When people talk of housing prices in areas, they usually mean a metropolitan area like L.A. or Phoenix. In these larger areas the prices are down. But the selling of a few very high-end houses within would push the median price up, while most prices are falling.
I was not referring to small districts when I said all areas are in decline because the Case-Shiller report, which this thread is based on, only deals with the larger areas.

[natrat]

72. rich richer por poorer-and mids pay more to live in nice areas and drift in to insolvency

[edhopper]

47. I firmly believe

that there are people who bought houses in 2005-06 that will never see their homes worth that much again in their lifetime.

[David Zephyr]

52. They will, if they can manage their mortgages for maximum of 24 months

The Feds will have to lower rates 1.) to give mortgage companies, banks and the borrowers some breathing room and, 2.) to stave off a recession.

[edhopper]

60. A return to the mean for housing,

if one looks at the Shiller chart, would be a fall back of 30%-50% in prices from their top.
I don't think holding on for two years will bring a return to these ridiculous valuations.
Housing historically sells at 4X average income. It is now at 8x-9X.
I stand by my statement, not in their lifetime.

[David Zephyr]

62. I've bookmarked this thread for future evaluation.

The nadir in the U.S. housing market will really begin this Fall as the "summer sales" period ends and inventory balloons and foreclosures rise even more. Low tide will be in the winter with a weak spring as well. Prices will begin to stabilize by summer (by that I mean stop declining) and thereafter modest gains can be expected along the two coasts and in the higher demand metros like Chicago.

Unfortunately, it appears to me that there now will be a recession. It's already started as manufacturing spending and consumer spending is slowing.

And it may be a that it is a recession that allows us (Democrats) the to take back the White House. It was the recession of 1992 that boosted Bill Clinton's improbable victory over an incumbent president who'd "won" the Persian Gulf War just a year earlier...a recession and the quixotic, on again, off again candidacy of Ross Perot. Republicans never do well during recessions.

I don't know what part of the country you live in, but certainly along the two coasts property values will continue to increase in the long-term for the rest of our "lifetimes". First, foreign investors love U.S. properties on the two coasts, and second, as Will Rogers said, "Buy land, they don't make it anymore."

In disclosure, I have done very well in real estate throughout my life, however I sold the last of my investment properties in June of 2006. I slimmed it all down to my main residence and my vacation home which I intend keeping. I also, most intelligently, got competely out of the equities market in May of this year (it's posted right here at the DU the very day that I did it) and I parked it all in cash. We are in a cycle now where cash is king, but real estate and stocks will have their day again...and I'll be there once more. I am sure of it.

And to keep things in perspective, the upside is that the vast majority of single family homes either are owned outright or are mortgaged with conventional 30 year fixed loans with more than 20% down.

[edhopper]

66. So expalin to me

how prices "stabiize" at an average of 8X median income. And how the biggest bubble in US history retracts in that short a period of time?

[David Zephyr]

69. Homes in Japan can require two generations to own.

Hence, the 30 year mortgage became the 40 year mortgage and now possibly a 50 year mortgage. The fact that prices stabilize at a given point has little to do with medium income. That may not be a popular statement, but it is the facts.

Real estate and commodities are slowly, but surely being drawn into tighter and tighter circles of control as wealth consolidates into fewer and fewer hands. The radical reversal of FDR's progressive policies and reversal of fairer distribution of wealth really began with the election of Ronald Reagan in 1980's.

More people will be taking out longer and longer loans on properties. The four year car loan became the five year car loan which became the common six year car loan.

In case you don't know (many here do), I am a socialist (not stalinist) and have been for the greater part of my adult life. I disclose this so you will know that I have no reason to argue with your greater point which is that the situation is unfair. What I am saying is that it is going to get more unfair until we have a fundamental change in how our government treats its citizens, wealth and property.

So, to answer your question, real estate prices are not dependent on middle class ownership which is a hard pill to swallow, but it is true. Loans can be structured out for generations if need be. The Japanese have been doing this for decades now.

[edhopper]

70. I understand your point.

You are saying that many who previously would own a home, will no longer. A piece of the expanding oligarchy.
This may be true, but only if the 5 million plus homes for sale in this country (an unprecedented number) will simply never be sold.
If all those home owners and builders decide they will never sell the houses, rather than sell them at an affordable price, then yes, price will stay high and nothing will sell.
Econ 101 , supply and demand, tell me otherwise.

[spinbaby]

82. Well, I don't know much about Japanese real estate

But I do know that the Japanese real estate bubble burst some years ago. What did that do to their economy? I seem to remember deflation.

[tridim]

56. Just checked the flyer on my neighbor's condo yesterday

Her asking price is $15,000 less than I bought mine for 5 years ago. Joy.

"Safe investment" my ass. :mad:

[liberation]

58. It is just a normal market correction...

It will be painful, but we will better off in the long run.

Americans need to start making money the old fashioned way: by earning it.

Everyone went to MBA school while engineering departments were filled to the rim with foreigners. The cool American kids never wondered that what is the point of everyone being a salesman if no one is making shit to sell.

The days of the kick buck with zero work are soon to be over. We just need to make sure that the ones who got us in this mess, the people at the top and the uber speculators get the blunt of the blame and the penalties (but I am not holding my breath for that).

[TexasBushwhacker]

78. Early 80's all over again

There will be winners and losers.

I was a brand new school teacher in Houston in 1981. Some of my fellow teachers we in a panic to buy houses because they just got more expensive every year and interest rates kept going up. There was a neighborhood of new "starter" homes not too far from our school. One of my friend bought a 2/1 for $50K at 14% FIXED interest! It was a cute little house, but I thought that was just nuts.

FF to 1988. I had 7 years experience under my belt and the same subdivision that my friend bought his house in was now about 50% foreclosures. I bought a 3/2 from the bank that owned it. It originally sold for $57K. It hadn't been occupied in over a year and they kept lowering the price. Interest rates had come down too. I got it for $37.5 - 2/3 what it originally sold for. I lived in it for 10 years and then sold it to a hairdresser from California for $57K - its original selling price. She was thrilled because she said houses like it in California were selling for over $100K. Now, 9 years later, it's appraised at $84K. I wouldn't pay that for it, but someone will, because it's cheaper than renting a 3 BR apartment.

So if you have wanted to buy but couldn't afford to, save up for your down payment. If a single school teacher can find something affordable, lots of people can.

[Prisoner_Number_Six]

81. I was talking to a real estate agent a couple hours ago

He's not making any money, and he's just this side of panic. It's the same all over- no matter what the government says, the industry is in real trouble. Nothing is moving.

[ozone_man]

83. Is it 1929 yet?

1928 still I think. This should have all happened four years ago, but the FED has been pumping like crazy. The dollar is worth 2/3 of what it was five years ago against the Euro, and after all the home equity money has been spent, all the cheap credit gone, the economic collapse will soon begin. Still only a few cracks in the dike at this point.

[w8liftinglady]

84. was that in the DFW area?

we have a plethora of subdivisions in the south Dallas/Ellis county area that I have a feeling will be virtual graveyards by the time this is finished.