Party like it's 1999: With the housing double-dip "confirmed," real housing prices and...


Party like it's 1999: With the housing double-dip "confirmed," real housing prices and price-to-rent ratios have regressed to 1999 levels... and there's still no end in sight. "Prices have now fallen by more than they did during the Great Depression [and] will fall by at least a further 3% this year, and perhaps even further next year."
Comments (37)
  • kmi
    , contributor
    Comments (4587) | Send Message
     
    The price drop will pull rents down as well.
    31 May 2011, 06:58 PM Reply Like
  • The Enterprising Value Inve...
    , contributor
    Comments (571) | Send Message
     
    I bet it won't. Rents are driven by the demand for housing, which in turn is driven by household formations, overall population growth and job growth. Obviously the latter has been relatively weak but all three are still positive. As such, rental rates have been shooting up quite noticeable as people move out of foreclosed homes into rentals. Contrary to what some may think, people aren't going to live on the street. Rental vacancies are almost back to 2007 levels.

     

    sites.google.com/site/...

     

    So now you have the few who can afford a house and those who cannot. Since rental rates are going up and housing prices are falling (due to too much supply, not lack of relative demand) those who are able to obtain financing to own rental units should be making a killing. Look at some of the price charts for the apartment REITS. They are doing extremely well right now because of this.
    31 May 2011, 07:22 PM Reply Like
  • gameoverman
    , contributor
    Comments (23) | Send Message
     
    Rents are up $50 on average in the US since 2006. They have fluctuated, but the overall trend is up.

     

    www.census.gov/hhes/ww.../
    31 May 2011, 07:38 PM Reply Like
  • kmi
    , contributor
    Comments (4587) | Send Message
     
    I own several hundred apartments in the suburban NY area and am seeing rents decline or hold from what I was getting two years ago.
    31 May 2011, 07:39 PM Reply Like
  • The Enterprising Value Inve...
    , contributor
    Comments (571) | Send Message
     
    You're data points are not exactly a sample that will likely be similar to the population.
    31 May 2011, 07:41 PM Reply Like
  • kmi
    , contributor
    Comments (4587) | Send Message
     
    They don't have to be. I rent to primarily working class/middle class folks who do not receive government subsidies, my demographic is precisely the consumption class and the folks most likely to consider purchasing homes.
    31 May 2011, 07:47 PM Reply Like
  • kmi
    , contributor
    Comments (4587) | Send Message
     
    Gameoverman, don't forget that the data you site is trailing while the data I am providing is current.
    31 May 2011, 07:48 PM Reply Like
  • gameoverman
    , contributor
    Comments (23) | Send Message
     
    Sure, but you're using empirical data and I'm using nationwide data from Q1 2011. Trailing yes, but it's current enough for me. I don't know how you can assume that your experience is representative of the entire US apartment rental sector.
    31 May 2011, 08:06 PM Reply Like
  • kmi
    , contributor
    Comments (4587) | Send Message
     
    I've been in business for a long time, if you think I'm wrong you're welcome to ignore my 'experience' and make your own bets.

     

    I could tell you why REITs are performing as they are, but I suppose you don't care much about that data either.
    31 May 2011, 08:16 PM Reply Like
  • dieuwer
    , contributor
    Comments (2924) | Send Message
     
    Rents can fall if more and more people decide to room together. Whereas two people may have decided to rent two apartments, they now decide to roommate and rent only one apartment.
    Therefore, vacancies rise, rents plunge.
    31 May 2011, 09:46 PM Reply Like
  • Bill S. Friend
    , contributor
    Comments (715) | Send Message
     
    Prices for commodities namely food are stretching family budgets, and when facing hunger or combining households, diminished housing demand is the outcome. Foreigners are facing increased immigration status scrutiny especially when seeking hard to find jobs. When talking 10-20 million illegal immigrants their movements might move markets. Eventually banks' hands will be forced and mortgages will be issued regardless of qualifications, this will be determined by the Fed and when the spigot is turned off. Housing will once again be affordable. The solution is to make all mortgages assumable and at the prime rates banks enjoy.
    31 May 2011, 10:16 PM Reply Like
  • Bill S. Friend
    , contributor
    Comments (715) | Send Message
     
    Why are Reits performing well?
    31 May 2011, 10:19 PM Reply Like
  • Buddy Canuspare
    , contributor
    Comments (406) | Send Message
     
    My rent here in Seattle hasn't changed since January, 2008. The rent I'm charging my tenant in Waterford, MI hasn't changed since March, 2009. I don't expect either to increase anytime soon.
    31 May 2011, 11:57 PM Reply Like
  • lowdawg81
    , contributor
    Comments (500) | Send Message
     
    Im torn on which way I think rent pricing will go. Both sides provide quality veiw points and facts to support them. Though the one thing I havent seen thrown into the equation is TAXES. For as prices fall for the value of homes, local governments will probable offset this through higher property taxes, since reducing spending to reflect income is never seems to be the actual outcome.

     

    This makes me believe that rents really wont be falling much if any. There maybe some pricing strength but this is offset by lack of income growth and strain from rising food and energy costs. So Im assuming that landlords will be cutting back on services like lawn care and snow removal.
    1 Jun 2011, 12:32 AM Reply Like
  • realornot
    , contributor
    Comments (1263) | Send Message
     
    Time for a Double-dip party! It is definitely hitting the bottom of the bottom. Should look for deals within the next 4 years.
    31 May 2011, 06:59 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4293) | Send Message
     
    This is more bad news for neo Keynesians and those who thought monetary policy could pull us out of this depression. "It's the balance sheet stupid," should have been the mantra, but the easy money crowd believed in the tooth fairy. Government spending with borrowed money might work if there was any possibility that the money could be repaid. When (if) the Fed ever tries to sell the crap on its books, it will be for pennies on the dollar, either through deflation or hyperinflation. Either way, those assets are next to worthless.
    31 May 2011, 07:15 PM Reply Like
  • Duude
    , contributor
    Comments (3413) | Send Message
     
    If only we could be at year end 1999 S&P 500 levels.
    31 May 2011, 07:16 PM Reply Like
  • AnchorMan
    , contributor
    Comments (115) | Send Message
     
    anyone who bought a house in the last year really got hosed by these people advocating they buy because it wont get cheaper! You would have to be real dumb to buy any property other than rental property (condo's in major markets) in this environment.
    31 May 2011, 07:18 PM Reply Like
  • radicall
    , contributor
    Comments (533) | Send Message
     
    Anchorman... I bought a house in late 2009 in california and I think it was a good decision - I am paying less than I would pay in rent for a similar house.

     

    The value of the home may have gone down a bit, but since i plan to live in it and not sell it in the near future - I think I am saving money (plus building some equity in the house as an added bonus).

     

    But yes, it could have gotten cheaper or it could have gone up a bit - there was no guarantee either way and I did realize that before buying the house.
    31 May 2011, 08:53 PM Reply Like
  • AnchorMan
    , contributor
    Comments (115) | Send Message
     
    Radicall, my bad for not mentioning I am in Chitown, and I wont even pretend to know anything about the Cali markets, so you quite possibly have made a great decision to buy. All real estate is local (I was an agent for years and still maintain my license just in case it all goes horribly wrong for me at the office) .

     

    I bought in 2006, so I am getting killed right now but fortunately I can make the payments. But I do feel trapped, and the only way out would be to take a significant hit as stupid me put down 20% instead of just 3.5% so I cant walk away as easily.

     

    So here's my problem: have we ever seen 30 yr fixed rates this low? and home prices this low? so you buy that house, get a great deal and lock in for 30 years at 4.75%. Now something happens and you have to sell 5 , 10, 15 or even 20 years from now. Its unlikely rates will stay the same. So your potential buyers are looking at your house and doing the math at 7% or higher and they cant swing it.

     

    Also, The college generation are these buyers I am referring to, and they have watched their parents take on a ton of debt to send them to college and then watch them get foreclosed on, lose their homes and having to rent. I just don't see them running out as thirty-something newly weds to buy a house. We saw the impact of the great depression on that generation of kids, and I think we will see a similar impact again.
    31 May 2011, 09:37 PM Reply Like
  • dieuwer
    , contributor
    Comments (2924) | Send Message
     
    radicall,
    what are you going to do when tax-and-spend Californian politicians decide they need more money and raise property taxes? Your entire salary will go to taxes and repairs eventually. Face it, you are trapped!
    31 May 2011, 09:43 PM Reply Like
  • radicall
    , contributor
    Comments (533) | Send Message
     
    AnchorMan . .there is worse things too, I realize that in the next 10 years housing prices will remain flat at best. here are some additional reasons why:

     

    a) 20% down payment requirement (courtesy Dodd Frank) will stifle new demand.

     

    b) There is talk of getting rid of Mortgage interest deduction due to the "Moral Hazard" of encouraging home ownership. If that happens - prices have to fall a lot, to make buying more competetive than renting - although it may also push up rents so it could even out.

     

    c) Interest rates as you point out will be higher in the future, even more so if Fannie and Freddie leave the market to private players.

     

    I didn't like the rapid appreciation of Home prices in the 2000s any more than I liked the Oil price appreciation. For the overall economy, these things that everyone needs are best if they remain affordable for the general public, i.e. - appreciate no faster than CPI.

     

    I understand the psychological impact on the younger generation, but I also realize that the less people spend on their mortgage, the more discretionary income they have - which will be stimulative for the economy.

     

    Has real estate bottommed out? Nobody really knows - but if it is cheaper to buy than to rent - people should really consider it (if they are willing to make the comittment to the area).

     

    Most people live in the same house for 5-7 years on average. If it isn't cheaper than renting (over a 5-7 year period, assuming a 2% annual rent increase) - why buy?
    31 May 2011, 10:02 PM Reply Like
  • Poor Texan
    , contributor
    Comments (3527) | Send Message
     
    "I just don't see them running out as thirty-something newly weds to buy a house."

     

    Also, owning a home takes constant maintenance from gardening to plumbing. I'm not sure this younger generation is as eager to tie themselves down.
    31 May 2011, 11:09 PM Reply Like
  • J 457
    , contributor
    Comments (1000) | Send Message
     
    Bought in Cali in Jan 2011 with a 3.875% rate. I thought I should at least get something for my dollar before they become worth less. Yes prices could go lower, but I don't want to live in a camp ground or tent- need to have a place to sleep at night. This housing mess will prove to be the biggest financial scam in all the 20th century.
    1 Jun 2011, 12:29 AM Reply Like
  • JohnBinTN
    , contributor
    Comments (4375) | Send Message
     
    Owning a home does NOT require as much maintenance / upkeep as people are led to believe.
    1 Jun 2011, 06:02 PM Reply Like
  • aekara27
    , contributor
    Comments (86) | Send Message
     
    Wait. Remind me again how much funny money the government has spend to keep housing prices up?

     

    The only way housing has a chance to actually find a bottom is if some how the unemployment rate drops significantly and its not going to any time soon. Also some how foreclosures must pull back. For those folks that want to buy, wait patiently because I would not be surprised to see another 20% drop if not more.
    31 May 2011, 07:22 PM Reply Like
  • Buddy Canuspare
    , contributor
    Comments (406) | Send Message
     
    So, are they going all the way to zero? If not, where does the fall stop?
    31 May 2011, 11:59 PM Reply Like
  • realornot
    , contributor
    Comments (1263) | Send Message
     
    Something is happening though. I am increasing seeing more empty homes and apartments as well. See more and more rental signs but no renters.
    31 May 2011, 07:40 PM Reply Like
  • tigersam
    , contributor
    Comments (1707) | Send Message
     
    When there is no end in sight, then it is the end. Prices will start going up with your blink of eyes. So if you are in the market for a house it is the best time to buy it.
    31 May 2011, 08:00 PM Reply Like
  • TonyNed
    , contributor
    Comments (267) | Send Message
     
    Sweet! How much longer until my house is actually worth nothing?
    31 May 2011, 08:02 PM Reply Like
  • JohnLocke
    , contributor
    Comments (383) | Send Message
     
    As long as the government keeps subsidizing the birth rate via entitlement programs the "stupid people will keep breeding" to paraphrase Green Day.

     

    Why offer rentals? When I can fleece them on a "Rent to Own"

     

    The owner finance game is expanding incredibly either via land lease or just the owner holding paper. Large down payments and an expected default inside of 24 months is a great deal for an owner holding paper:-)

     

    Anyone seen a plan by our government to actually reduce the unemployment numbers?
    Kinda wierd that all of the TARP / QE dollars stayed inside of the banking system and were not used to allocate capitol to small business as a matter of fact it amazed me that citibank got a bailout then reduced my business creditline buy 25%...

     

    I wonder what would happen if QE was allocated directly to small business to foster growth and hiring, wage suppression and Union busting would slow down dramatically and more dollars would start circulating at all levels. I think this is a better alternative then TBTF banks pumping the commodity and stock markets to the point of lunacy.

     

    31 May 2011, 08:46 PM Reply Like
  • Bill S. Friend
    , contributor
    Comments (715) | Send Message
     
    You are correct sir! That money went down the rabbit hole never to be seen again. Paulson got congress to act hastily and also got a no prosecution clause! The money would have been better spent as a tax rebate to individuals.
    31 May 2011, 10:28 PM Reply Like
  • zhellc
    , contributor
    Comments (58) | Send Message
     
    One more "gum" for those depressed mind to chow. "Double dip" or "double recession" enough of those crap. Now the Greece default crap is subdued so they find this data to chow. They have tried for two years now but the global economy is still growing. My suggestions to those is to go see your "Dr" and get some Abilify for your depressive mind.
    31 May 2011, 09:43 PM Reply Like
  • JohnLocke
    , contributor
    Comments (383) | Send Message
     
    "Now the Greece default crap is subdued"

     

    This is code for The Greeks are having to sell off their national assets to their creditors.... Yup the crisis is averted for sure *rolls eyes*

     

    The only growth I care about is right here in the USA, The Global economy as you put it is simply a system of labor exploitation.. If you want to ride the next wave you need to learn Swahili since the African continent is the last available continent that needs to be made "Middle Class"
    31 May 2011, 10:42 PM Reply Like
  • Jim Nelson
    , contributor
    Comments (78) | Send Message
     
    Me thinks you'all are wrong to worry so much about real estate values. Investing is for the stock market, not the HOME (real estate market).

     

    The only thing for certain is death and taxes. One thing for certain is that at sometime everyone gets too old to go to work and earn income. When that time comes ask yourself if it is better to OWN a HOME or pay rent until you are in the grave. Doesn't matter much if one owns a shack in the desert or a palace in the city. The important thing is to have it paid for. That means no mortgage payments. Life passes by extremely fast. NOW is the time to begin to pay for your retirement home. Do not wait until you cannot work anymore to begin.

     

    Speaking from 76 years of experience.

     

    Jim Nelson
    31 May 2011, 11:57 PM Reply Like
  • nobby73
    , contributor
    Comments (1176) | Send Message
     
    It's merely confirmation that the Wall Street recovery has failed to trickle down.

     

    Another point is, the more they throw money at the problem, i.e. devalue the currency, the less affordable the suburban lifestyle becomes. Many homes are in areas that are simply unviable, and no matter how long the banks hold them on their books, houses 30 miles out of Phoenix, no matter how pretty, will never attain the bubble prices.
    1 Jun 2011, 02:44 AM Reply Like
  • realornot
    , contributor
    Comments (1263) | Send Message
     
    housing double dips and now dragging econ double dips as well.... Ouch!
    1 Jun 2011, 11:59 PM Reply Like
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