Robert Gosney

Property Values Set to Fall from Bubble Peak to Long-Run Average

Our local market is down 70% from peak already.

Housing: Strong Recovery Ahead

We obviously overshot the top. Are you taking into consideration the possibility of an undershoot at the bottom? Would you call the rise in securities a dead cat bounce?


On Aug 24 02:37 PM Think-About-It wrote:

> Are you serious?
>
> "Housing will rise quite sharply, even accelerating over the next
> year or two..."
>
> For this guessing game I would use history as my guide. The history
> of bubbles popping suggest that they do no reflate "quite sharply."
> Occationally there is a dead cat bounce but that's all it is. I
> would look to a different asset class than the one that just imploded
> when searching for the next wave of accelerating growth.

What Housing Recovery?

How can anyone "move-up" to the higher price tiers until there is stabilization and appreciation at the lower and entry level price tiers? It seems to me that the recovery will take place at the entry level first.

You touched on the phenomenon of voluntary defaults. People walking away from houses not because they can't afford them but because they don't like their negative equity position. I don't know what portion of home foreclosures are voluntary and what are involuntary, but I do know that it's a significant proportion. That skews the numbers so as not to reflect (to some degree) the true economic realities. Putting more foreclosures on the market and driving prices artificially lower.

I agree that real estate has not stopped deflating. But, my guess is that it has the potential to "break-out" once it turns.

What's Driving Single Family Home Investors?

I'm buying now. As I pointed out in another response prices in my area are down 75% from peak. Replacement cost (including land) would be about 50% from peak, so I'm buying for roughly 1/2 of the replacement costs. So in my particular case, it's not rocket science, I'm betting that homes will appreciate up to replacement costs within a few years (thereby doubling my money). In the mean time I have a tangible asset that produces an income for me.

For my area right now, mortgage payments are less than rents. I'm sure that rents will come down but for the moment getting positive cash flows are easier than falling off a log.

Affordability is spiking too. That won't last forever.

Updated Case-Shiller 100 Year Real Estate Chart

Home prices will never be back to 1890 levels. They may not ever even be back to 1990 levels. Building policies have become infinitely more restrictive. Example: When I started building in 1986 permit fees were about $3.50 per square foot. Now (same locale) fees are around $22.00 per square foot. Building codes are more stringent, commodities higher, and the cost of meeting energy standards has gone up exponentially.

Foreclosures Getting Out of Control

So we had a housing bubble. Why has the correction been 40% so far rather than 15-20%? Voluntary defaults. Why would it spin out of control? Voluntary defaults. The voluntary default feedback loop is a self fulfilling prophecy. Keep your cash ready and look for any sign that the psychology is changing. There could be a stampede back into the market. I have read on Bloomberg that the last year that house prices reflected fundamentals was 2004. In my area home prices are below 1986 levels (about $0.25 on the dollar from peak [75% price decline]).

The Fundamental Value of Real Estate

real estate has made more millionaires than any other industry because real estate is not an investment.

Seeking Foreclosure Riches: What Does it All Mean?

gmm, you must be a democrat, right?

U.S. Housing: The Big Picture by the Numbers

if my real estate investments only went down 25% peak to trough i'd be throwing a party! i'm over weight in san bernardino county properties. mostly in hesperia. the local market for new residential construction peaked in may of 2006 at approximately $200 / sf. right now there are approximately 100 properties coming onto the market every day and about 30 go pending for the high desert area. the only res. properties selling are usually repos. their going for around $110 / sf. infill building lots peaked at around $115,000. now their worth $25,000 maybe. banks are only accepting comps for appraisals less than 2 months old so even if someone is willing to pay a premium for a new non thrashed house the comps are so bad that the houses won't appraise. local real estate agents will tell you that tract houses are losing 4% per month and customs are losing 3% per month (victor valley area). i've been in the business since 1986. houses in my little valley bottomed out at around 35% off and vacant land was off 66% in 1993. i'm guessing that we'll bottom at more than 50% off on houses in our little valley. i think that i read somewhere else that forclosures will spike towards the end of this year. we're still in a freefall in the victor valley.