BluefoxToday blog : Where Are Home Prices Going?

Where Are Home Prices Going?

We’ve all heard the news reports about the potential for a double-dip in housing, and perhaps, the overall economy. Unemployment seems out of control; debt levels are becoming unmanageable; and many are wondering what the future holds for the housing market. Where home prices going and what is the potential for prices to recover to the levels of 2005/2006?

 

There are lots of opinions, but here are some points to consider:

The recent meeting to discuss the future of housing, including the GSEs Fannie and Freddie, while generating lots of news, was not expected to produce anything of significance that would improve the situation in the short term. The billions of taxpayer liability associated with Fannie and Freddie—extreme “worst-case” estimates range as high as $1 trillion—cannot be erased. And if the structure of these entities is significantly changed to remove risk to taxpayers, interest rates will increase and home sales will suffer.

According to many experts, structurally high unemployment will be with us for years. And, those without jobs or who are underemployed lack the financial ability to purchase homes. New home sales follow the employment rate, and with the permanent loss of millions of manufacturing and other jobs, millions of potential buyers have been removed from the housing market.

Monetary policy seems confused at best. With disagreement from both inside the Fed as well as among some inside the administration, there seems little doubt that the “green shoots” once reported, have faded and died. Printing money on a massive scale ultimately leads to inflation; and borrowing and spending has left us deeply in debt, so deeply in fact, that in less than eight years interest on the national debt will equal $1 trillion, the largest single budget item—and a good portion of those dollars will be paid to bondholders in China.

In the first quarter of 2009, almost half a million small businesses (less than 100 employees) closed their doors, costing about 1 million jobs. In a struggling economy, such job losses will continue, removing a significant segment of new home buyers from the marketplace.

The latest foreclosure numbers show that they are spreading into the heartland. While much of Middle America and the northwest had avoided the worst of the problem, default notices have recently increased significantly, with more than a third of the states experiencing a doubling of foreclosures.

 

Those who are unwilling to face the reality that the U.S. is in serious economic trouble and that our “leaders” seem unable or unwilling to take the steps necessary to bring about a recovery, may ignore the facts, but that doesn’t change them. And while economic conditions vary dramatically from one part of the country to another, the economy in general is very ill, and the experimental “medicines” that have been administered have brought only temporary relief. A long-term cure must be proposed, yet many economists and political observers see that as unlikely.

 

Proponents of an additional and perhaps larger stimulus have pointed out that current winding down in the economy is due to the effects of the first stimulus wearing off. What they seem to ignore is the very real fact that a temporary stimulus provides only temporary relief. The original stimulus, just like Cash for Clunkers and the Homebuyer Tax Credit, did little or nothing to create sustainable economic improvement. Such artificial measures do little other than to provide politicians with quick, feel-good results intended to demonstrate their commitment to solving the problem; and feel good solutions never last. It’s time to wean our “leaders” and our citizens from the belief that success must be measured in short term results.


So, where are home prices going? Is recovery just around the corner? No. Many years will pass before homeowners feel that the housing market has recovered; and the ensuing period will be fraught with uncertainty and additional foreclosures. The expectation that home values will quickly return the their recent highs or that prices must continually increase will be replaced by the reality that prices, in general, will follow the rate of inflation. To do otherwise would mean that homes would soon be beyond the reach of the average buyer. That’s the reality, and that’s where home prices are going.

The Housing Guru: the expert source for all your housing questions

Comment balloon 180 commentsJohn Mulkey • August 20 2010 03:52PM

Comments

We are seeing our properties starting to stabilize in Portland OR. DOM's are still climbing but prices are not dropping unless in rural areas, too far from employment centers. 

Posted by Carol West, Real Estate Agent, Hillsboro, Beaverton, Portland (Carol West Real Estate, LLC) almost 8 years ago

Carol - In the coming years, some areas will be asking, "what recession?" while others will still be in the struggle.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

We are Europe, which is George Soros's dream! 

Mission accomplished.

Posted by Jay Markanich, Home Inspector - servicing all Northern Virginia (Jay Markanich Real Estate Inspections, LLC) almost 8 years ago

The present government and it's opposition is not focused on the cure, the American consumer.  They focus on the Wall Street Gangs, the banks, etc.

As long as the American consumer is drowning in negative equity, ruined credit and despair, there will be no recovery. 

 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) almost 8 years ago

Prices are down, interest rates are shockingly low, but the buyers are still on the fence.  They're worried about job security and are focused on getting out of debt--not taking on more.

Posted by Norma Toering Broker for Palos Verdes and Beach Cities, Palos Verdes Luxury Homes in L.A. (Charlemagne International Properties) almost 8 years ago

Watch Peter Schiff videos on youtube and maybe throw in some Alex Jones and Ron Paul. You'll then understand that the dollar will eventually collapse.

Posted by Satar Naghshineh (Satar - Amiri Property and Financial Services Corp.) almost 8 years ago

Pretty scary stuff John, but I do believe it's truthful. However, people will still buy homes, whether they are investors or home owners, they have to live somewhere. The houses will just be less expensive. 

Posted by Lisa Udy, Logan Utah Realtor ( Platinum Real Estate Group) almost 8 years ago

Thanks for the Reality Check.  

Yes we are hopeful and optimistic, but unless new leaders are voted into office this November, America will continue its downward spiral.  Even then, it may be too late - due to the Massive Tax Increases coming in the next few years.

And ditto to what Jay said in post 3...  George Soros is the power behind Obama and Company, as well as NPR, Huffington Post., and Mainstream Media.

Posted by Fred Griffin, Licensed Florida Real Estate Broker (Fred Griffin Real Estate) almost 8 years ago

John: I see your point(s) and agree that the stimulus that we saw as a much needed ladder out of the mess we were in is now the chain for financial slaves as we all work harder than ever to see less and less for our efforts! terrific post and full of the data we rarely get to hear and read in one place...thank you very much!

Posted by Paula Hathaway, REALTOR, LBA, ...The Most Informed Agent In The Hamptons! (Douglas Elliman Real Estate) almost 8 years ago

Thank you for a timely and sober assessment.  

Posted by Lola Audu, Audu Real Estate~Grand Rapids, MI ~Welcome Home! (Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate) almost 8 years ago

Hi John,

Interesting observatons, from a Canadian perspective, the trouble started with and will have to be resolved by taking a very hard look at the general lending practices (not just mortages) around the world.

There is no way the world can sustain debt financing levels to the degree we have become familiar with.

So where will prices go, they will move with and in sync with common sense debt service ratio's once we get all the junk cleaned up, which will be another year or two before we will start seeing some real upswing.

Our Market did not have the default and foreclosure levels you have seen, and for the most part our lenders and mortgage insurance companies are in healthy condition, so all we need is market confidence, and the USA, getting back to work.......

Happy selling

 

Posted by Peter Pfann @ eXp Realty Pfanntastic Properties in Victoria, Since 1986., Talk To or Text Peter 250-213-9490 (eXp Realty, Victoria BC www.pfanntastic.com) almost 8 years ago

Jay - Soros is Greek; I think you're on to something.

Lenn - As long as the American consumer is drowning in negative equity, ruined credit and despair, there will be no recovery.  Exactly!

Norma - And many don't have jobs to worry about.

Satar - I agree that the dollar has serious problems, and the administration isn't making progress in turning things around.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Lisa - I agree.  There will always be a market for homes; the one we're entering is just smaller than we'd like.

Fred - What concerns me is that most of the incumbents are being returned to office, not a great way to have change.

Paula - Thanks for your comments.

Lola - And thanks for stopping by.

Peter & Linda - Yes, debt is a real killer that can infect our economy for decades.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Oh Housing Guru...once again you live up to your moniker..good, though sobering words you have posted.
                         We are soon putting this whole process to the test as we list our Home here in our part of
                         Macomb County, Michigan.  Wish us luck as we realistically enter the Home seller status.

Barb & Sal

Posted by Barb & Sal Dragotta, Macomb County Michigan almost 8 years ago

Barb & Sal - I'm sure you won't need luck.  You have a significant advantage over your unknowing competitors--you'll know the best price, how to appeal to buyers, how and where to market, how to negotiate--all the tools necessary to effect a sale.  But I'll rub my lucky rabbit's foot for you  "just in case."  

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

In a recent post, an AR member wrote that all the bad news should just be avoided and we should get on with our jobs as realtors.  That seemed to make sense to me, but your posts reveals the truths of the current situation, and it's going to be hard to stick our heads in the ground and avoid these problems.  I happen to agree that things will not improve for years to come, sadly.

Posted by Margaret Goss, Chicago's North Shore & Winnetka Real Estate (Baird & Warner Real Estate) almost 8 years ago

Hello Housing Guru!

I hate to say I agree with you, but I do...

The only thing that makes me positive is that I am usually wrong!

I hope I am again.:)

Ken

Posted by Ken Tracy, Helping clients buy and sell since 2005 (Keller Williams Realty Infinity) almost 8 years ago

John....Where are housing prices going?  Everything I've read says it is a declining market.  However does this change my outlook on real estate... ABSOLUTELY NOT~

Posted by Valerie Osterhoudt, ABR, Cromwell, CT Real Estate ~ 860.883.8889 (Johnson Real Estate, Inc.) almost 8 years ago

Home prices will not go up until the short sales and foreclosures have been absorbed.  Which in Tucson, Arizona will be another year or two.  After that our market is poised to make a great comeback.

Posted by James Servoss (Keller Williams Southern Arizona) almost 8 years ago

Hi John,

 

In Florida we are expecting several more years of declining then stablizing and finally slow appreciation. I beleive we are not out of the woods. Too many foreclosures, way too many short sales and high unemployment.

 

And the good news is still no big hurricane in Florida since 2005!!

Posted by Nona Swann, Serving the needs of the Sellers in Brevard County (Swann & Associates Real Estate) almost 8 years ago

There is a path out, but I doubt Washington could find it with a map, a GPS, two flashlights and a kidnapper dragging them along it... 

The path is the free market...  It can create jobs. 

ELIMINATE the corporate tax... which is actually second place to passing the FairTax and getting rid of the IRS and income taxes. 

It would make the USA the biggest tax haven in the world... companies would RUSH to headquarter here in order to save on taxes.  Manufacturing would get VERY competitive here with the favorable tax treatment for exports. 

People would have to hide to avoid having a job...  And when jobs come back, the economy comes back... and when the economy comes back, the government gets revenue.  Of course, they would need to hold the line of spending.

Posted by Lane Bailey, Realtor & Car Guy (Century 21 Results Realty) almost 8 years ago

Margaret - I believe that we must be aware of the actual conditions that exist in order to make the most prudent decisions for our businesses.

Ken - We can all hope that we are wrong, but we should be prepared just in case we're not.

Valerie - Fortunes will be made by those who take advantage of the changing market.

James - But folks will have to have jobs before they'll be in the market for a new home.

Nona - That is good news, especially when the forecasters have predicted several stormy years since then.

Lane - Politicians and bureaucrats believe that bigger government is the ONLY solution. They're unwilling to give the people an opportunity to solve their own problems.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

If values dropped 30% and the recovery means 5% annual increase in value, it will take years to get back to where we were 5 years ago.

Posted by Dave Halpern, Louisville Short Sale Expert (Keller Williams Realty Louisville East (502) 664-7827) almost 8 years ago

We are fortunate in Texas to have a more stable market.

Posted by Sharon Parisi, Dallas Homes (United Real Estate Dallas ) almost 8 years ago

I'm typically very optimistic about my local market, but from a "big picture" view it is sobering.

In the next month, I am going to put my personal home on the market, so fingers crossed!

Posted by Kerry Lucasse, Your Nest Atlanta Real Estate Consultant (eXp Realty - Nest Atlanta Team) almost 8 years ago

John,

We're on the same page. A recent post I did says taxes need to double now. At all levels.

Posted by Terry Chenier (Homelife Glenayre Realty) almost 8 years ago

We have got to stop spending, and thinking we won't have to pay the bill.  Cut back government, A LOT. 

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) almost 8 years ago

I agree and I don't see any relief in the next 4 qtrs. I expect will will bottom out locally in Q3 or Q4 of 2011 then we will remain on the bottom for several quarters before starting a long climb in little incremental steps out of the Greatest Recession.

Posted by George Bennett, Inactive Principal Broker, GRI (Inactive) almost 8 years ago

We need to find a way to create more jobs.  The future appears dismal without changes.

Posted by Christine Donovan, Broker/Attorney 714-319-9751 DRE01267479 - Costa M (Donovan Blatt Realty) almost 8 years ago

Dave - Exactly!

Sharon - Yes, some markets have seen few problems.

Kerry - I'd love to sell my home, but it's not the time in my market.

Terry - The big problem for us is that our "leaders" either don't recognize or fail to address the real problem.

Carla - But do you expect politicians to do that?

George - Sounds like a reasonable assessment.

Christine - If we don't create jobs, it will be a dismal future.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

John - Let me gaze into my crystal ball...

 

Heck, I have no idea, but I do see the market picking up and folks beginning to buy and sell with more confidence. We do have a strong market in the DFW area, but I am optimistic. I second the jobs creation as a requirement for a strong stable market. A pro-business government would be a huge blessing for a change...

Posted by Brent & Deb Wells, Prosper TX (LivingWell Properties) almost 8 years ago

A plan of Action for Families is of the utmost importance right now. Here in Mass there is no Principal Reduction on Primary Residents.. Why do a Modification into a Neg Am Program"? We'll only have more Fall Out at the End of the term.. Of course depending on your area.. Where is our Furture? Whoms to say.. I feel we need to deal with this as a Community.. Goverment, uh Time Wasters/Money Spenders... One Programs Changes three will rise... There is so much more to this as we all know... Well.. Thats just a personal Thought...  Our Communities Need Us More Than Ever... Our The Market Here is Heading to another Drop....

Posted by Ingrid Johnson (eXp Realty) almost 8 years ago

John, I too wish that I didn't agree with you, but I do also.  That is unless there are some major changes at the top which doesn't seem likely anytime soon. 

We are fortunate to not have been hit nearly as hard as so me areas in our markets in Colorado.  Yet we can still feel the pinch here also.

Posted by Vickie Slade, Service You Can Trust ~ Someone You Can Depend On (Colorado Landmark, Realtors) almost 8 years ago

Were in the situation that we are willing to sell our house at around a 60K (at the table) loss  to then go pay cash for a much smaller house.  We want to be completely out of debt including our mortgage that we sill owe $250K left on it.  The 60K will be gone now, but in the 27 years it will take me to finish paying off our 30Year, we will save over 100K.  So I am looking at it as a win.  :)  But it is still hard to stomach a 60K loss in just 2 years. :(

Posted by Lori Bonicelli (Bonicelli Design) almost 8 years ago

John, the problem is our country doesnt make anything.  China owns us. :(

Posted by Lori Bonicelli (Bonicelli Design) almost 8 years ago

We will skid across the bottom for a few years and then slowly recover.  In 4-5 years there will be a housing shortage due to not building.

Posted by Mark Lackey (Atlanta Housing Source at Solid Source Realty, Inc.) almost 8 years ago

Home prices here are going up.....

As far as your other topic - when we start to give incentives to companies creating jobs here in the US rather than giving them incentives to ship those jobs over seas. That is when our employment situation will get better. Right now India and China are loving their good fortune at our expense - we gave it to them gift wrapped.

Posted by Bruce Swedal, Denver Real Estate almost 8 years ago

Hi John,

I don't know where Carol is getting the data from, I'm in Portland Oregon also and the latest "market action" report from RMLS shows price declines everywhere, ranging from -3.6% to -11% in the Portland Metro area, for the month of July 2010, as compared to July 2009. I believe prices are headed down still, and the reason for this is the "shadow inventory" that the banks sit on, foreclosed properties that haven't come back on the market yet, some for years since being foreclosed on. The "notice of default" lists I look at every single week, at least in the tri-county area here in Portland, are still very long. Most homes selling are under $250,000 with the high end homes selling only if heavily discounted. I believe we're going to have a lot of inventory to work with, but it doesn't help anybody to bury your head in the sand and pretend it's not happening. Lots of people I know are "on the edge" and don't know from one week to another if they'll still have a job... George Soros?... God help us all... I come from Europe, lived there half of my life, European socialism may seem like a good solution on the surface, but the Americans don't know what it means to live in Europe: starting a business is extremely difficult, only the rich or very "well off" financially can afford a house, the rest of the population in urban and even suburban areas lives in apartments, TINY apartments, you pay taxes "through your nose" and prices are very high on everything. I know one lady in Austria that would come to New York every couple of years just to shop: towels, clothes, housewares etc... it's so much cheaper.

Posted by Dana Cotenescu (John L Scott Real Estate - Portland, Oregon) almost 8 years ago

Hi, John.

I think you hit the nail on the head with pointing out that jobs are the root of the problem.

Why isn't Washington spending its efforts (and our money) to help get jobs growing again instead of these 'bandaids'?

How many jobs would be available for our citizens if all of the illegal aliens were sent home?

How many jobs could we make available if Washington was spending its efforts to entice corporations to bring the jobs back home instead of overseas?

Very frustrating.

Posted by Rich Temen almost 8 years ago

You say it will be years before homebuyers "feel" more safe and ready to resume "business as usual."  I really think "feel" is the operative term because much of the decline is really based on feelings rather than facts.  Yes there are some dips and economic indicators.  But people are listening to media and making decisions based on the negative "feelings" that creates... for example, here in Seattle Microsoft just reported it's best 3rd quarter EVER.  The newspaper reported, "Microsoft Reports Great Profits...For Now."  Everything is slanted to the negative.  And that snowballs.  Even people's decisions to go into foreclosure (when it's a decision, which it often is at this time) are often based on this media environment and the lack of confidence it creates.  Unfortunate that humans are such social animals that we all jump on the bandwagon even when it's rolling over a cliff.

Posted by Edy Kizaki (eXp Realty) almost 8 years ago

Good Post! Very Well thought out. Pretty much nailed it.

Messing with Fannie and Freddie will have a-lot to do with it. If they mess with it to much you will see Rates Jump up and prices of homes go lower- fairly quickly.

 

Posted by Ben Yost - 303-587-4297, FHA, VA, Conventional - Mortgage Loans in De (First Time Home Buyer, Mortgage Rates, Pre-Approval) almost 8 years ago

It is all about jobs and until unemployment improves nothing else will improve.  Even people with relatively stable employment are skittish.

Posted by Dennis Martin, J.D. (Real Estate One Charlevoix) almost 8 years ago

I agree that jobs are needed to improve the housing market.  However, I don't think we'll see much of a recovery until interest rates rise.  Historically low interest rates might have helped improve a slacking real estate market.  But right now the credit market is so tight in part because private sector investors don't want to invest their money in such a low return.

Posted by Dawn Crawley, Find Pinehurst Homes (Dawn Crawley Realty) almost 8 years ago

A good friend of mine with Morgan Stanley directed me to youtube to watch a video documentary called "Melt Up".  It's an hour long but very well done.  For the best viewing experience, hit pause after you open it and let it load for awhile before hitting play.

Posted by Gregg Schoh (Montana Land Company, Flathead Valley Montana) almost 8 years ago

The housing market is headed down as soon as the foolish government market propping ends.  There is 0% chance that any market is actually "stabilizing" since that implies an actual free market.  "Temporarily Artificially Propped" would be a better description.  See my blog post: Our Phony Real Estate Market.  Also, see my research below.

There is no way that home prices have reached a bottom. I analyzed the data in the NAR Home Affordability Index (HAI) from 1/1989 thru 5/2010 and found that the Median of the Ratio of Median Home Price to Family Income is 2.92 and the Average of the Ratio of Median Home Price to Family Income is 3.07. The lowest reading over this same period occurred in 12/1990 at 2.654. Therefore, it is safe to say that from a historical perspective the typical price of a median home should be about 3 times the median family income. The 5/2010 reading was just under 3 at 2.965. The problem is that we are not in a “typical” economic environment – we have record foreclosures that seem to persist and 10% unemployment. Given that the lowest reading of 2.654 occurred in 12/1990 and that our current economic conditions are far worse than 12/1990, it is logical to conclude that the ratio should be below 2.654. If the ratio declines to 2.5, home prices will decline by nearly 19%. If the ratio declines to 2.5 and family incomes decline by 5%, home prices will decline by nearly 25%. Given that personal incomes are declining and that a 2.5 ratio is probably a bit optimistic, I believe it is very feasible that home prices will decline by an additional 30%.

Posted by Jim McCormack, Nashville Short Sale REALTOR - Stop Foreclosure (Nashville Short Sale Specialist - Jim McCormack - Edge Advantage Realty, LLC - 615-784-EDGE (3343)) almost 8 years ago

John,

Of course prices are going down, there is no 2nd home market or investors. Until DC creates some stimulus for the investment back into real estate we will se the whole larger economy fail and flonder. They will come back once confidence comes around, but with current environment, I do not see that soon...

Posted by Anonymous almost 8 years ago

Posted by Manny Gonzalez (Negotiable Realty LLC) almost 8 years ago

John,

Of course prices are going down, there is no 2nd home market or investors. Until DC creates some stimulus for the investment back into real estate we will se the whole larger economy fail and flonder. They will come back once confidence comes around, but with current environment, I do not see that soon...

Posted by David Evans, HUD NLB Cumming GA (RE/MAX TOWN AND COUNTRY) almost 8 years ago

I'm no housing expert and know little about financing but I think our biggest problem is many Americans have lost the can do attitude that made us a world power.

We need an attitude adjustment, it has never been easy to be good at something, but the end result is always worth it.

Posted by Paul Lesieur (203kloanmn) almost 8 years ago

Posted by Manny Gonzalez (Negotiable Realty LLC) almost 8 years ago

Never Fear...the Government is Here!

That said, the prices will go down and up depending on Location, Location, LOCATION.

AND...depending on the "rate of inflation", the prices for homes will hit the 2005/2006 level within a few years.  The Home to Gold value will change little but the Home to Dollar value will ascend with the number of inflated dollars it takes to buy the same Value denominated in Gold.

Homes are a commodity as well as an abode for the family. 

If we reach Hyper-Inflation as we did under Jimmy Carter's reign...the 2005-2006 levels will be attained and over run quite quickly.

Posted by Tom Waite, So Cal-Apartment Bldg Investments (Thomas Waite Real Estate Broker) almost 8 years ago

John, if prices follow the rate of inflation with homes, and we are headed toward deflation, prices will short term moderately sink more. Great summary on the the last two years of economic tailspin.

Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) almost 8 years ago

Stop the outsourcing of jobs.  Re-instate the tariffs on imports.  Increase the estate taxes and tax rates on the uber wealthy, stop the loopholes allowing them to move their monies tax free elsewhere, force employers to hire HERE.  Free market..are you kidding?  That's what got us into this mess.  We need the free market with more regulations.  Corporations are not going to willingly do ANYTHING to help the average person in America.  It's all about the Shareholders values..keep em going up.  That's what the banking industry did and is continuing to do. 

IN the desert area, sales have stabilized for the past 18 months in the $350,000 and below.  In the higher prices, they continue to drop and will continue to do so for a couple more years probably.  This housing bubble was artifically created and it will not return to 2006 levels because those levels were NOT real or sustainable.  Let's be realistic.  Houses are not ATM machines.  Let's change our mind sets and buy a home to live in, raise the kids in, love in and perhaps retire in.  We are very spoiled and don't even know how good we have it here in the USA.  What a fabulous place to live.

Posted by Kimberley Kelly, SFR, HAFA, GREEN, I do Real Estate like I played polo-to WIN! (HK Lane, Christie's International Affiliate, 760-285-3578) almost 8 years ago

So many Americans sat back and watched our manufacturing base move to foreign countries and did nothing. As a person who was displaced by all this and had to find a new job I am not a bit surprised the housing market has gone sour. No good jobs equal no good consumers. We will recover though, but everyone will suffer before we do. Not just those of us who took it up front. All I can say is hang in there America because we are more resilient than we think we are. I myself refuse to think doom and gloom. Anyone want to join me?

Posted by James Pierce (Realty Executives Associates/Knoxville Realty) almost 8 years ago

Oh where is the Reagan philosophy? He was SO right when he said: "Government isn't the solution to our problems, government IS the problem!" (Beginning with Barney Frank who lit the fuse on the bomb that is this economy.)

Posted by David Knox (David Knox Productions, Inc.) almost 8 years ago
I agree with everything that's been written here. But let's make lemonade -add a little sugar and water - rather than dwell on the sour lemon. (1) Obama still hasn't shut down our profession, though his destruction of the middle - class & man - seems imminent. (2) This will be an investor-buyers' market for at least a few more years - so get out there and help your buyers - there's nothing any of us can do (except vote, of course) to (a) alter this economy, or (b) turn back the hands of time. We're stuck here. Adapt. Survive. Prosper. But please don't contribute to the dilemma. Retain your integrity. Be honest with both sellers & buyers. Prices will continue to fall without jobs! But how much lower can rates go?! The best service we can provide is truth & honesty. It'll be a buyers' market for a while. Now get out ther and find buyers! Tim James drtimjames@USA.net
Posted by Tim James (Prudential California Realty - La Jolla) almost 8 years ago

Reading over many of your comments above, I find it incredible that you have so quickly forgotten that the Bush/Chaney years (8 if I remember correctly) did nothing to help our economy and have in fact created the current  economic crisis. This is not a political comment as I have no party affiliation. I vote for the best based on the information available. Anyone with any sense would understand that no matter which party has control, it will take years to undo the current mess we are in. Let's try to be positive.

Posted by amazed in maryland almost 8 years ago

For any agent understanding the reality of what is going on in this market, or thinking that the market is stabilizing because of a false market through tax incentives will be out of business next year. The only possibility of a recovery even starting next year is confidence of having a more balanced Congress.  This will be the third straight year that our budget has been chopped for the following year.  This is the time for all to take a look in the mirror and see what we want to look like next year.

Posted by TIM MONCRIEF, Over 2,000 homes sold….. (Keller Williams Realty) almost 8 years ago

prices are only going to go down and stay down for a few years.

Posted by David Lee ~ Orange County, Ca ~ Cash Flow Specialist (United Realty) almost 8 years ago

Bush/Chaney did not wreck this economy. Barney Frank did. Bush tried to fix the subprime mess before it got too out of hand. Bush made tons of mistakes, but the economy is not one of them. 

Posted by David Knox (David Knox Productions, Inc.) almost 8 years ago

Thanks for the sober analysis. A problem cannot be solved unless it is first clearly identified. The decision makers should be asking the commenters on post what the problems and solutions are. I wonder if the White House and congress ever ask front line Realtors what they think.

Posted by Dave Halpern, Louisville Short Sale Expert (Keller Williams Realty Louisville East (502) 664-7827) almost 8 years ago

Let's be positive.  Someone please pass the rose colored glasses.  Ah that's better.  :[{

Posted by Hercel Spears (Advanced Realty Education HomeSmart Realty) almost 8 years ago

In a nutshell, nowhere, at least not right now.  I can honestly tell you that 2008 & 2009 were good years here in Oklahoma despite not being good elsewhere but 2010 is a much different story here.  It has slowed to an absolute crawl here and that is quite disturbing.  People are worried about the direction this country and our economy is heading and until consumer confidence grows, I don't see much changing.

Posted by Russell Benson (Berkshire-Hathaway HomeServices/Anderson Properties) almost 8 years ago

The easiest way to predict where house prices are going is to keep an eye on the employment numbers.

People without jobs can't buy houses and people with jobs worry that they'll join the people without jobs.

This administration offers no security for the consumer, government debt has people worried and the future of the tax code is completely unknown.

The political climate now offers one sure thing = uncertainty, and that's toxic for home buying.

Posted by Peter Lake, Associate Broker (Harborside Sothebys International Realty) almost 8 years ago

It's at teh height of despair that prices are the best.  The latest unemployment numbers had around 100K census worker layoffs so it was really a pretty good report on the rest of the jobs picture.  Everyone picks out the very worst and focuses on it right now.  There are many opportunities and those that look for them will prosper.

Posted by Jon Wade, Steamboat CO Real Estate (The Steamboat Group) almost 8 years ago

The affordability index is the key to house prices. Jobs that are meaningful and consistent are required first. Then you can look to a good and solid real estate market.

Posted by Brian Madigan, LL.B., Broker (RE/MAX West Realty Inc., Brokerage (Toronto)) almost 8 years ago

Great question? I wish we had a crystal ball to predict price movements up or down. In our area we seem to be flat to down but that really depends on which towns and cities we are talking about. It is my opinion, which is not scientific at all, that we very well my see another 5% - 10% drop in prices, nationally. I hope not but if there is even one event that happens anywhere or in any market it could have a serious impact on Real Estate. The world economy is tettering.

Posted by Doug Dawes, Your Personal Realtor® (Keller Williams Realty - Topsfield, MA) almost 8 years ago

To John Mulkey #12 who said George Soros is Greek:

He is, in fact, Hungarian by birth.

 

Posted by Peter Lake, Associate Broker (Harborside Sothebys International Realty) almost 8 years ago

Don't read the papers, Don't listen to the pessinist's, MAKE YOUR OWN MARKET!

as in every economy and evry industry. when there is change, there is opportunity. some agents are having the best year of their career. Its up to you, one thing is clear, you can't keep doing the same old thing! find your niche and thrive.

Posted by John Savignano, Realtor - Hopkinton and Metrowest MA Real Estate (RE/MAX Executive) almost 8 years ago

This stuff isn't rocket science.....

We were at an unsustainable level of borrowing and consumption when the bubble burst.

Now people are talking about recovery back to the "normal" level.

Does that make sense to you?  Wake up and smell the coffee... this IS normal.

Posted by Ray Wood almost 8 years ago

Preach it Brother!

Posted by Dave Haas almost 8 years ago

I absolutely agree with everything you've stated.  I am from Texas and have live in South Arkansas, and have for almost 6 yrs now.  Here, it is so isolated, most people don't know that there is a recession because its been slow here all there life, so I don't believe home prices have changged much.  However, I sure won't criticize a single person for what is going on in their own market or even their office.

I don't believe in doom and gloom but first, you have to pull your head out of the sand and then you have to take action based on what reality is.   And, if we don't like the current policies in place, we have to get our tail out and vote!

Posted by Mickey Mouse (Disneyland Real Estate) almost 8 years ago

John, your excellent post has generated responses of widespread frustration.  The question is, why isn't this discontent receiving more notice in Washington?  There are some pretty good suggestions voiced in AR, based on street knowledge.

I fear we are undergoing fundamental changes in the economic structure of America, resulting in a permanant downsizing of the middle class.  Yet, Washington seems more interested in power and politics, with a fixation on blaming either Bush or OBama for our problems.  Where's the resolve to really address the issues and implement solutions with long-term benefits?

Posted by Al Kernek (Pacifica Endeavors LLC) almost 8 years ago

Thanks John for the information. 

Posted by Ginger Foust, Home Stager Oakhurst CA, Dream Interior Redesign & Staging (Certified Staging Professional) almost 8 years ago

I don't believe we will see improvement with the current administration.  Whoever the next president is, whether democrat or republican, they will get the credit for recovery.

Posted by wendy friend almost 8 years ago

You are talking about the big elephant in the room that no one wants to mention!  While some parts of the country will feel it much more than others, the fact remains that we as a nation are in debt over our heads both individually and collectively. 

Our economy is long from being out of trouble.  According to Dr. Lacy Hunt of Hoisington Management Bond Fund (one of the few economists who has called these turn of events right on for as long as I've been following him (1997), we are mirroring Japan's economy and recovery and this could last another 10-15 years barring any unforeseen "new discovery, invention or another vehicle that will cause jobs to be created and stimulate the economy".  You can't spend your way out of trouble, which is what the current administration (and those before) are trying.  It's called the Great Experiment, and that's all it is. 

It won't be long before people will be GLAD to get the prices of the late '90's and early 2000's.  Forget 2005 and 2006 prices!  It still goes back to supply and demand.  Even in Austin, one of the healthiest economic areas of the country we are seeing twice as many listings come on the market than we are seeing absorbed - that can only mean eventually the prices will come down.  No brainer!

We still are in the business of selling houses and people need a place to live. But, without understanding the big picture, we are doing our clients a disservice by sticking our head in the sand about what is really happening.  If their house value plummets and you helped them purchase it, when they look for someone to blame, guess who it will be????

Great post, John!

Posted by Teresa Roberson (Roberson Residential, a Private Label Realty® Co.) almost 8 years ago

I get asked how the RE market is doing all the time. I tell most that I think we have come in for a "soft landing" price wise and that we are at or near our bottom IF things stay as they are. But that is impossible that things like interest rates months of inventory monitary policy etc are fluid and will always be changing. I don't think interest rates can go any lower than they are today, but hey what do I know. I thought they would be much higher by now. People buy monthly payment and as interest rate go up the amount they can afford to offer on a home will go down. All this is IMHO

Posted by Erik Reilly, Long Island NY, CDPE e-Pro Lic RE Associate Broker (Remax Shores Nassau Suffolk Queens Counties) almost 8 years ago

Your post is right on.  Some many brokers and homeowner's are in serious denial.  A good example is I saw a new listing a few days ago, the owners bought the property in early 2007 (paid too much for it then) and now want to make 25% on it in todays market. It ain't gonna happen.

We can sell plenty of property here if we could get it financed.  I talked to a couple of brokers that are far more knowledgeable than I am, and they told me 50% of the contracts written here never close, financing being the main reason.

Posted by Dick Whittington almost 8 years ago

Our home prices in bay area actually improving 2-3% from last year but it is different story 40 miles from bay area.

Posted by Joe Patel almost 8 years ago

The U. S. economy is centered on housing.  A new home brings business to title companies, lenders, real estate companies, builders.  A real estate transaction brings business to Wal-Mart, Home Depot, Sears.  It means local taxes and better schools.  Right now, the country has no appetite for real estate.  Americans are in a very bad mood.  If unemployment is at 9.5%, 91.5% of the population is employed, but many of the employed are nervous.  The spending in Washington has pissed us off.  We know enormously higher taxes are coming.                                                            Change, we do need change.  Hopefully Americans will express their mood at the polls in November.

Posted by Bonnie Cox (RE/MAX Masters) almost 8 years ago

Housing markets may up or down in different areas.  That is to be expected.  However, what you say is right on & until the jobs happen & housing values in general stop going down, we are all out of luck.  This is going to be a long haul because the extreme measures that need to be taken, we do not have the guts or will to take them.

Posted by Jirius Isaac, Real Estate & loans in Kenmore, WA (Isaac Real Estate &TriStar Mortgage) almost 8 years ago

John:

 

This is a great post.  You summarizd what is going on in the market well.  It is the reality of where we are and we are a long way from having a balanced market.  I am surprised on how the stock market continues to do despite the housing numbers, employment and debt numbers.

Posted by Marguerite Roland, Northern Virginia (RE/MAX Allegiance) almost 8 years ago

Housing markets may up or down in different areas.  That is to be expected.  However, what you say is right on & until the jobs happen & housing values in general stop going down, we are all out of luck.  This is going to be a long haul because the extreme measures that need to be taken, we do not have the guts or will to take them.

Posted by Jirius Isaac, Real Estate & loans in Kenmore, WA (Isaac Real Estate &TriStar Mortgage) almost 8 years ago

It wasn't that long ago when we saw the ridiculous "Mc Mansion" trend of home building. Two people living in 5000 square foot manse that required way too much energy and way too much upkeep.  Away we went with the "mine is bigger than yours" consumption. Two huge SUV 's in the driveway. Debt up to and over our eyeballs,, It was never going to end !.. WOW,, How lucky could we get ?.. 

Now those dinosuars are for sale or foreclosed and sitting on the market for years. Nobody wants them. And just try to sell that Hummer ! We were GREEDY.. Like spolied children we didn't want to be told NO. The "selfish flu" turned into a rampant cancer and suddenly the former show offs are driving Prius's and living in condo's.

Then add the cost of two wars and the stripping away of our children's future to pay for them. Denial is not just a river in Egypt.

We LOVE to point fingers,, and one side can blame the other all day long and get exactly nowhere, Or we can try to take the long view, that ALL politics and economies are local and begin by going out to dinner at the mom and pop cafe down the road that has no investments in China.

Posted by Anne Vigneri, Serving the Mariposa California (CASA VERO Staging & Redesign) almost 8 years ago

Hi John,  You've painted a very bleak picture - though sobering.  My bet is that voting another new batch of politicians into office won't cure a thing until the rest of us agree to some very tough changes.

Posted by Bill Gillhespy, Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos (16 Sunview Blvd) almost 8 years ago

Lots of blame going on here.  What does that accomplish?  Blame the Federal government for not doing more and then gripe about more government control.  You can't have it both ways.  Stop whining and start working.  People still need homes.

What are the states doing to solve some of these problems?

 

 

 

Posted by Pam Canova almost 8 years ago

John,

You really give food for thought.

It is very unfortunate that the new administration came with the "change", which is basically how to keep doing the same, when doing it the same way is no longer sustainable.

And even more unfortunate thing is that the population wants exactly this: maintain what can't be maintained any more.

We are still heavily under the influence...

Posted by Jon Zolsky, Daytona Beach, FL, Buy Daytona condos for heavenly good prices (Daytona Condo Realty, 386-405-4408) almost 8 years ago

Athough the Bush era may have led to the current economic swamp the current people have done nothing but prop it up.  Look for more of the same.

Posted by Wayne Longman almost 8 years ago

> As long as the American consumer is drowning in negative equity, ruined credit and despair, there will be no recovery.  Exactly!

Did I miss something here.  We seem to be expecting prices to remain down or go down further, which will only increase negative equity (in a double-negative sort of way).  Then this sounds like a vicious cycle with no way out.

> prices, in general, will follow the rate of inflation

As a national housing market kind of statement, fair enough.

But perhaps our government already has the solution by using the above.  Assuming for the moment that the American dollar does not crumble.  The overtime at the printing presses creating money from nothing must, in the not so distant future, give rise to inflation.  Apparently we are going to inflate our way out of this situation because then all the negative equity goes away.

Posted by Robert T. Boyer, San Diego Real Estate & Mortgage Loans, Ph.D. | VA Home Loan (FHA Loan, VA Loan, Jumbo Loan,FHA Loans,VA Loans,Jumbo Loans) almost 8 years ago

With credit harder and harder to come by, it's only getting harder not easier to make it thru this.

3 years ago I started my company and personally had over $60k in credit card debt. Since then I have refinanced my house to get a 4.5% rate on my home. I paid down that $60k to $15k at this point. 

And... my credit score now is worse than 3 years ago. Why? As I paid down debt, my card companies lowered my credit limits and cancelled cards. 

So in digging myself out of the hole now I have a lower credit score than when I was up to my ears and drowning in it. Does that make any sense? 

I can see the light and am on a path to zero credit card debt within the next 12 months. I will make it. And with my house refinanced at a lower rate, things are good. 

But I need to finance anything, my credit is midrate at best. That stinks and makes no sense.

Posted by Erica Ramus, MRE, Schuylkill County PA Real Estate (Erica Ramus - Ramus Realty Group - Pottsville, PA ) almost 8 years ago

Home prices go where wages go. You earn less you buy less. Jobs left when we sold off the parts to our corporations and called it progress. The banks could change that by pushing a 50 year mortgage like they did by taking automobile loans from 3 years to 5 and 7 year notes. However, the owner of such a mortgage will never be out of debt. They will use any and all equity to maintain the homestead. The dream is over.

Wake Up! When China tells us not to build a new weapon system we won't because they will be are controlling the money flow.

Posted by Gregory Bain, For Homes on the Jersey Shore (Mezzina Real Estate & Insurance) almost 8 years ago

Home prices in my opinion will remain steady. I think we have seen the bottom and might see some appreciation in the coming months.

Posted by Robert Amato (Bob Amato of Empire Home Mortgage Inc) almost 8 years ago

In our area it is currently a sellers market and has been for a couple of years, however, the rate of price increases has slowed down.

Posted by Gene Riemenschneider, Turning Houses into Homes (Home Point Real Estate) almost 8 years ago

This week I attended a meeting with Calvin Schure, Director of Economic Analysis for Freddie Mac, and I was actually more encouraged than discouraged.  I think that although we need a good dose of reality at times like these, we as real estate professionals have to be on guard against joining in the negative media circus.  Bad news makes good news, but it's rarely as bad as they make it sound, and that may actually be the case here.  Although you bring up some valid concerns that we all share regarding the reckless spending, unemployment, etc... here are a few positive points that Calvin shared, that indicate we may fare better than some suspect.

  • The banking sector is recovering faster than anyone thought possible

we are seeing a return to profitability and receding credit costs and the diversity of US markets acts as a safety net. 

Week lending reflects a lack of demand more than structural damage to the financial sector.

  • The record fiscal deficits are largely cyclical or temporary
  • The "real economy" is resilient

Productivity growth at 40-year highs signals a strong economic engine.  The sword cuts both ways...boosts profits, but delays jobs recovery.  Economic potential is still growing 3+ percent.

  • Interest rates at historic lows

For the past seven weeks, interest rates have had record lows, which continues to make homes more affordable.

Although we have much to be concerned about, there is still much to be thankful and hopeful about and especially in our state...Michigan, where we have been dealing with the highest unemployment in the nation, I like what Calvin said about it..."We are still worse than the national average, but we are getting less-worse faster"

We can all agree that a recovery is going to be slow, but lets not loose hope.  Maybe it will get "less-worse...faster" for all of us.

 

 

Posted by Randy Poll (Greenridge Realty Inc.) almost 8 years ago

Any of us who think the market will recover after a given period of time isn't considering government policy. More taxes, more regulation adversely affects job growth & a healthy economy. Hyper-spending has never been a successful solution to economic crisis.

As Ronald Reagan so aptly said, "Government isn't the solution to the problem. Government IS the problem."

Thanks for a great post, John. I reblogged it.

Posted by Tom & Lisa Slaughter (Century 21 Coast to Coast, Clearwater Beach, FL) almost 8 years ago

John-- Great job of laying out the problem and current conditions, so I thought I would look through the responses for solutions. I found about a half-dozen attempts as solutions out of 93 responses. Most of them, if not all of them, come with potentially severe collateral effects, and I think no one mentioned the only solution that has a better chance than a snowball in heck: send pols to DC and to the state and local governments who indeed understand that they are brothers and sisters in caring for the well-being of our country and citizens.

Our pols, both state and national are siblings practicing fratricide, and unfortunately they are much better at that than at getting on with the business they were hired to do. In a for-profit business, very few of them would survive their first performance/salary review.

But-- how can we make the needed political changes? How do we find the candidates? How can we get them elected, considering the spreading poisons of our current political crop?

George Soros a Greek? Ridiculous response! Why do we allow people to spread rumor and lies without calling them out on it? With Google and Bing, there is no excuse for not fact-checking before hitting the enter key, avoiding a shoot-from-the-lip atrocity.

We had a civil war in this country once, when people refused to reason together. Are we going there again?

Posted by Denver Johnson (West USA Realty, Mesa AZ) almost 8 years ago

John,

And you don't even cover the tens of trillions of dollars in unfunded liabilities such as SSN... and the 40 Million or so Americans now hitting retirement.

Or all of the shadow inventory of REO homes out there sitting vacant... or all of the Millions of Americans not even paying their Mortgage and living in their homes for free for right now.

As for inflation... well everybody who thinks that using inflation to erase debt is going to solve the negative equity issues needs to remember that EVERYTHING goes up in price. When we have around 40 Million Americans already enrolled and receiving food stamps... well... don't expect inflation to help the housing market any. Payrolls are generally the last thing that adjust to inflation and with the current unemployment rates, businesses do not have to raise incomes to keep employees around. In fact, I've come across situations where companies have laid off employees just to hire new employees for less pay / benefits.

We have a Private & Public debt problem... greater then it was during the Great Depression. The Government's solution to keep the music going has been... creating more debt and increasing liabilities when revenue/capital is decreasing.

BRILLIANT!

We are basically on one of the last credit cards after playing the transfer the debt game. Anybody thinking that home values are going to return to bubble zone values anytime soon are completely delusional.

 

 

 

 

 

 

Posted by Paul Francis, Las Vegas Real Estate Agent - Summerlin Homes (Francis Group Real Estate) almost 8 years ago

We all need to contact our congressmen (and women) and demand that the Bush tax cuts NOT expire...Small business, which is the backbone of America, simply can't take any more. If the tax cuts expire, more and more will be jobless.

And we also need to boot our current legislators.

Washington has to stop spending money it doesn't have - and they only way they'll understand is if we the voters toss out the big spenders.

As for the stimulus money - the ways it was spent boggle the mind. How many million was that to teach Chinese prostitutes (in China) to drink responsibly??

Posted by Marte Cliff, your real estate writer (Marte Cliff Copywriting) almost 8 years ago

Thanks for sober/ concise and clear overview of the some of the dynamics of the problem. I do however think that many of us as Americans tend to suffer from Amenesia so in a few tears we will be saying what recession, just as some of us are saying we miss George W. did we forget how we got into this problem .

Posted by A C Barnes almost 8 years ago

great points - although disheartening.  Obviously, the unemployment rate and the fear it fosters continues to negatively affect the housing market. 

However, I have to reiterate the importance of local market conditions.  In the south suburbs of Chicago you can purchase a house and pay less monthly PITI than rent.  That spurs home purchases (only if you are employed of course).  Most of my buyers are first time home owners that are tired of paying the same or more in rent than they would pay to own a home (which at the end of 30 years they own outright). 

Also consider basic supply and demand issues.  Building is way down, which will reduce supply (sadly not as much as the reos entering the market).  Hopefully reos will decline when mortgage holders start to modify mortgage rather than foreclosing on underwater assets (seems to be a no brainer). 

Also, the echo boomers (baby boomer children) are reaching the age they want to purchase their own homes - increase in demand.   

 

Posted by synthia noble almost 8 years ago

 

If it's not the fault of the Bush/Chaney years how can you explain going into their 8 years in office they had a 800 Billion dollar surplus now it's over a trillion dollar deficit.

Corporate GREED is what got us here and honestly I do not see how that will change

Posted by Don Bernier-Virtual Homes Real Estate almost 8 years ago

I practise in the SF Bay area (Silicon Valley). Consider myself very fortunate. It has been a kind of immune to rest of the real estate world except for the outlying areas that have got crushed. Last 1 year the market came back strong & I was convinced we put in  bottom. However, I am seeing signs of cracks again arround here. The activity is slowing down &  a lot of buyers I meet at the open houses dont seem to have the motivation to commit to buy and definetly concerned about their jobs. Lower interest rates are like candy but buyers dont seem to have the sweet tooth for that. I guess that tells something. Job market is not humming but this economy if anything is the biggest drag I should say.

I am convinced that the all the efforts by the Govt to keep the housing market above water has really backfired. I wish sometimes nothing should have been done & the market would have corrected itself faster & we would have been back to normal by now . But I guess this is pushing the recovery out.

 As Realtors I think being Positvie is a good thing but I don't think we should ignore Reality. I guess we are heading back down in values & we will have to hunker down & say this is new reality. At these interest rates if we are not seeing the buyers come back...that says something that we need to pay attention to...Double dip or not...we just need to do what we do best. Guide the home buyer & seller the right way...Keep selling:-)

Posted by Bharath Talluri almost 8 years ago

Well put Randy - everything is cyclical.  I remember being in a meeting  in 1984 with several banking executives.  They said with certainty that "we will never see interest rates below 10% - NEVER!  This past week I was talking with a young lender who said we will never see interest rates above 10% - it just made me laugh. 

Our newspapers  say housing prices are up on one day and then have them plunging the next day based on another report.  In my area of Northern CA - SF Bay Area, every deal that I have been involved in has had multiple offers. The homes that take a beating have strange floor plans, are over priced to begin with or are in less desirable areas.

Posted by Ann Wilkins, Oakland, Berkeley, Piedmont CA (Golden Gate Sotheby's International Realty) almost 8 years ago

Seems to me that we are in the throes of a major societal transformation that really has little to do with who is in office, but everything to do with our culture's measuring stick for economic well-being ---  centered around never-ending growth, and a 'more is better' mentality --- which disregards consequences on individual's well being in favor of ever increasing GNP.  Such thinking by corporate and industry leaders resulted in the 'irrational exeburance' that lead us to perceive spiraling out of sight home prices as a positive phenomena, even though first time buyers could only afford these homes by taking on unsustainable loan terms.

Hoping that prices return to 2005-2007 levels is like hoping that the dinosaurs return.  This is not going to happen, and even if it could, would not be in our best interest.  Let's get on with our lives,   take the bitter pill of having participated in our industry's own wrong headed thinking, scale down as needed, stop focusing on the machination of government to 'save' us,  and focus instead on participating in a future that is economically sustanable.  Small is better.

 

Posted by Sharon Hawthorne (ASK Realty) almost 8 years ago

John, you have a way of sobering people up.

I agree with the last sentence of #4 Lenn. In addition, salary wages must be amicable w/ home prices. Of course, unemployment levels have to seriously drop...Figure it out Washington, that's what we pay you to do.

BTW, Soros is not Greek rather, Hungarian Jewish.  

Posted by Dimitri Matsis-REALTOR® (818) 599-6083 (Troop Real Estate Inc. Westlake Village CA) almost 8 years ago

Thought provoke post for sure. Thanks for getting it out to us today.

Posted by Patricia Aulson, Realtor - Portsmouth NH Homes-Hampton NH Homes (BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate ) almost 8 years ago

The recession will be over when it's over. I've been through tough times before and prospered through hard work, creativity, and a determined positive attitude. I refuse to participate in this or any other recession. I remember 16% mortgage rates and a 22% prime rate during the first couple of years during the Reagan administration. It makes no difference who is in power. I only care about doing everything I can think of that is under my control. Forget about blaming other people or looking for scapegoats. It's a waste of time and energy..

There are no easy answers and there is no magic solution. Don't look to government or any other entity for help. Go out there and create your own job. If you have to work for less, do it. If you have to do more work for the same money, do it. If you have to cut expenses, do it.

America has given in to negativity. Eliminate negative people from your life, turn off the news, and value what's good in your life. Work until you drop because it relieves stress, promotes self esteem, and creates the possibility of good things happening to you and those you serve. Never give in and never give up. This is still America and it's about time for Americans to wake up and remember that we still have it in our power to create our own reality.

Posted by Charlie Elwis (Charlie Elwis Realty) almost 8 years ago

Home prices are going down in the basement.

To may homes to less folks with purchasing power.

Must start creating jobs with new technologies and stop exporting the jobs and importing goods that we buy cheep and then trash in our local environment.

It is that simple.

Posted by Timo Yannopoulos, Buying and Selling Kansas City Homes (Platinum Realty Licensed in Missouri) almost 8 years ago

The post asked but did not directly answer the question:  When are we going to get back to 2005-2006 values?

There are two plausible answers:

1) In about 20 years.

2) About 3-4 years after our government again pushes the lenders to do the kind of irrational things lenders love to do just so long as everybody is doing it and every US body appears willing to guarantee their irrationality.

Whichever comes first.

Posted by Jim Hale, Eugene Oregon's Best Home Search Website (ACTIONAGENTS.NET) almost 8 years ago

Great post, John, and right on target in almost every respect, which, unfortunately is true. The double dip in home prices for the Phoenix market and housing in general has been all over the news locally and I find my friends and clients buying into what the media says. I agree with you in that the biggest culprit is the economy and its domino effect. People don't feel secure about their job, if they have one, and even if they do, they don't know how long they'll have it and who is going to buy a home with the negativity  about the housing market and lack of funds. We really need a leader, or leaders, now with a vision to fix this economy like Reagan had to do back in the 80s. I don't feel confident that the present administratior or leader is up to the task. Maybe if we have a change in the November elections and get more of a balance in Congress and someone emerges with a good plan, this could change. But I may be overly optimistic. This is America, after all!

Posted by Lynn BEHLENDORF (HomeSmart Real Estate) almost 8 years ago

Graet Post & refreshingly to the point. The bottom fix to our recovery is jobs & job security. Large companies are still planning lay offs (attrition, retirement, consolidation of services/centers) to increase or maintain their bottom line and the Wall Street financers are still making more money through hidden stock exchanges than loaning money to Main Street. Our Congress had a chance to fix loop holes in current laws to get our economy growing again but chose instead to play "keeping my job" politics (several bipartisan bills to close the loop holes never made to the committee floors).

It's time to elect a Congress with a mind set of this is my one & only chance to make things right for the people and not how to keep my job forever.

Posted by George Wilson (Lincolnton, NC) almost 8 years ago

It is amazing to me that someone could be accussed of being negative for bringing forth factual data.  How can we properly advise if our heads are in the sand?  I have seen so many financial hardships created by overpriced listings. Listings that had they been priced properly would have sold and not been forced into a foreclosure or short sale because the value decreased so significantly.  Agents with their heads in the sands are costing homeowners a great deal.

Homes prices are still declining and the overall economy is in horrible shape.  There have been many bandaids placed... and more importantly I believe a false sense of recovery communicated from the government through media outlets.   This talk of recovery is only to get Americans spending so that perhaps we might spend our way out of this recession (second great depression) to actually see a recovery. 

  • Foreclosures are on the rise. Some areas are hit harder than others but very few areas are untouched. And this problem is getting worse and widening.
  • Unemployment is not improving
  • Underemployment is not improving
  • The US debt is unimaginable

Knowing the condition of the market and speaking reality is not being negative, it is being real. And I believe that being real allows consumers to make educated decisions and in the end helps to improve the market because more homes will close because more homes will be priced right.

Being real does not mean we all need to crawl in bed for the next 5 years.  This is actually an exciting time for those who work hard and in their business every day.  We are learning important lessons in these declining times.  I am actually more excited today about real estate than I was in 2005 and 2006.  When we know reality we know what we need to do to work through the conditions we are dealt.

 This is the market where market share is gained and millionaires are made. 

Posted by Lorie Gould almost 8 years ago

When you aim for the "Rich", you hit the "Poor!" The current Administration & the Dems do not understand this, as most have never ran a small business. Hopefully, this November and the finality of the income tax situation (either way, lower the better though) will unlock the private sector "hiring freeze." Then we can sell more homes and people can get back their lives.

Posted by Blaine Williamson (McClain-Williamson Realty) almost 8 years ago

Wow- here come the politics-again- blame no real solution on both sides. The simple fact is we have blown budgets for over 30 years and we need to ALL pay the piper. If you lucky enough to be in the top 1-2% - pony up. IF you are among the 30% + that pay no taxes- get ready to pony up.

The big thing I always can't believe is the idea of people carrying mortgage of $ 3000 or more. Great if you have the income (year in and year out say for 10+ years) pay and be happy you have the lowest rates in 60 years.

Here's the point buy a house, as a home first, and think about BEFORE you buy. Do you want a $ 4000 mortgage when times are tough, when your kids are in college, when you want to retire, etc. I think real estate is local, markets are local, but you will not see people jumping into to large mortgages ANYTIME soon - now or 5 years from now. Folks - the last 10 years created a group of people who made mortgage pymts ( due to crazy lending) that you won't see again. The psedo-wealthy are gone for good.

Posted by Mark Smith (Cherry Creek Properties, LLC) almost 8 years ago

I agree with Jay M. at the top.

And I'm staying put in my 3 bedroom house, even though we have 4 kids.  We can afford the mortgage easily, and that's a comforting feeling in this economy.

There is room for my business to grow, but we're playing it conservative on hiring, so I'd say the economy is pretty shaky overall.  But it has stable sections, namely pharmaceutical and computers (especially in the Raleigh, NC area).  So that makes home values & prices pretty stable around here.

Posted by Jeremy Wrenn, President, Wrenn Home Improvements (Wrenn Home Improvements) almost 8 years ago

I agree with the inflation argument.  As prices on goods and services go up, so will real estate values.  However, if we are in a deflationary environment, real estate values might drop. In my opinion, the indicators are mixed, and real estate values could go either way.

Posted by Brian Porter (JMA Properties, LLC) almost 8 years ago

Great post and a blast of reality about realty!  As a group we do well in an upward market (new home sales and upgrades).  We do well in downward market (sell offs, investments and downgrades).  We hurt when the market is flat peaked and bottomed out.  We hurt when the government tinkers with the natural laws of the housing market (like now and the past 12 years). 

What can you and I do?  MACRO: we vote for natural market condition candidates (you know whom I am speaking of).  MICRO: We show up to work each early morning, run our businesses with duplicatable processes and systems that guarantee results, be honest even when others are not.  We set aside cash from the feasts to keep us up in the famines of closings. 

I hope this helps!

Tony Barker, Broker,Trainer,Mentor

Premiere Home Realty Inc.

premiere-homes.com

832-867-0835

Posted by Tony Barker (Premiere Home Realty - Tony Barker 832-867-0835) almost 8 years ago

Maybe the government should have just given all the bail out money to the people (tax cuts, cash payouts) and not the banks who gave it to their executives.  I'll bet this economy would be humming along, including the housing market, about now.  We'll never know.

Posted by Don Dalton (Aloha Realty Group) almost 8 years ago

For some odd reason my recent comment did not send -- soooo I am commenting again.  In Texas, we are more fortunate than most regarding the economic concerns.  It was announced Friday by the Texas Workforce Commission that Austin in up in jobs 18,600 for July.  However, during that same month home sales in Austin were down nearly 35%.  I suspect August will be more of the same. 

Posted by Anne Edwards Johnson, Austin Realtor | HookemhomesATX (512)917-5260 (JP and Associates) almost 8 years ago

Prices will track the CPI and they should...

We have been taught that the free interplay of market forces will right inequities and level the playing field.  Hard work and sacrifice will be rewarded.  We expect that truth will prevail. Justice will be served. We are   assured the social contract between the governed and the ruling regime will be honored.  .  Banks are not lending to small business.   Noblesse-oblige urged by the President has had no effect on TARP banks who were saved by taxpayers.  This only works when market manipulation is absent, when elites are held accountable and politicians stop dithering.

Until jobs return, people are stuck.

Posted by Richard Paille almost 8 years ago

I have become convinced that a broad recovery will be a long time coming and we have no one to blame but the private sector lenders, appraisers, and those wonderful folks in Congress.  The inventory has got to be sucked virtually dry to pull some values above water.

So here are some ideas:

1. mandate that appraisers compare like to like. no more comping regular resales to short sales.

2. tax surcharge on lender's loans that are set at 1 point or more above today's rates. Make it high enough to really hurt. Then maybe lenders will start those modifications with forgiveness of the surcharge for those loans reduced. That will help to reduce the numbers going into foreclosure. 

3. bring back a modified tax incentive.  A tax deduction for closing related expenses for 1st time buyers.  Zero captial gains for homes or rental properties purchased in the next 12 months provided they are held for at least 5 years.

Posted by Rick Fifer, Broker/Owner, Vintage Homes Realty (Vintage Homes Realty) almost 8 years ago

Lane, you are right that this administration will not find out the obvious way to a better recovery.  But this way, Fair Tax and eliminating the corporate income taxes will have their own costs.  Unemployment for government workers, lowering the tax base temporarily when government really needs to raise taxes.  At the point where we are, there are NO simple easy solutions, just better and worse ones.

Sharon from Texas, one reason your market has not dropped is that it was already well below the rest of the country when it started, and because Texas did not allow any cash out transactions.  The Texas rule seemed ludicrous to a Georgia lender trying to help a client get a lower house payment, but it did two things: slowed housing prices artificially fueled by people needing to get higher prices after they had "cashed out", and kept people from exhausting the equity in their homes so that the market automatically remained more liquid.  One of my friends moved to Texas after looking for a job for 8 months here in Atlanta, said it was like going to an island of safety.

How many of you real estate agents know what the Federal Reserve just did?  They outlawed the payment of yield spread premium.  As of April 1, this will essentially kill off the few mortgage brokers left standing.  How does this affect you?  No longer will a client have the choice to pay a higher interest rate to reduce their closing costs.  No more will borrowers who want to refinance with "no closing costs" to save equity in their homes have the choice.  And for your information, brokers bring loans to market at a national average of 32% lower cost to consumers.  And those borrowers you have who are borderline?  You can write them off because Bank of America, Chase, Wells Fargo, etc will not touch them.  The Fed has just put a nail in the coffin of the real estate market and y'all slept through it.  I didn't see any of you mounting protests.  So you can look forward to an even bleaker sales picture.

My advice is to get busy and make as much money as possible before April, then get together with a bunch of friends and buy some island somewhere and try to live on it.  You won't see your social security checks or retirement, and that 401K you saved so long for?  It's going to be taxed to oblivion.  So much for working hard and getting ahead in America. 

And you can bet that George Soros has someting to do with it.

Posted by May Smith almost 8 years ago

Great info, John! I believe most of that is too true! We need to speak up & vote and start saving.

Posted by Don Wixom, "Looking out for your next move..."tm (RE/MAX Advantage Nampa, ID) almost 8 years ago

John - We're in general agreement.  We have a while to go here.

We have a structural problem that's weighing us down - it's a wildly overgrown public sector.  An across the board 20% cut in all public sector budgets would send our economy into the stratosphere. 

Local, county, state and Federal, the pigs are gorging at the trough - and judging by some of the comments here, some of us are doing it too.  Stop making it worse with these give-aways and incentives and 'stimuli'.

Think about what you could do with a real, across the board, 20% tax cut - not just Federal income tax, which fewer people pay every year.  Gas taxes, excise taxes, property taxes, liquor and cigarette taxes, capital gains taxes, estate taxes, land transfer taxes, FICA taxes, Medicaid taxes, etc.. Right now over half your income goes in taxes - a 20% tax cut is like a 40% raise.

How to pay for it?  Well, the 20% budget cut is a first step, coupled with a 20% pay cut for all public employees, 20% on all public pensioners, means test Social Security and Medicare, use REAL COLA's to determine Social Security benefit increases and cut 'future increases'.  And yes, the rich would get tax cuts too - boo frikkin hoo.

And it goes without saying, VOTE AGAINST EVERYBODY WHO SUPPORTED THIS CRAP IN NOVEMBER!!

Posted by J. Stephen Gregory (Mom's House on the Cape) almost 8 years ago

Prices seem to be dropping back to 04 levels.  Not a bad year for me. However there is still no movement forward, everyone is waitting for some thing to break one way or the other.

Semper Fi!

Pat Ogle

www.AnnapolisHomes4You.com

Posted by Pat Ogle, Associate Broker,CRS,GRI,ePRO - SEMPER FI! (Champion Realty, Inc) almost 8 years ago

John:

Reduced unemployment, jobs creation, small business creation, lower tax rates to individual and startup small business are just a few of the wonderful things that will make this economy blossom.  Until then, a disapportionate amount of the recovery benefit will continue to flow to only the largest.  Special interests groups and congresses infatuation with serving their "special" needs must be reined in.  Not just on the monetary side of the support the special interests groups needs, but also the political activeism that allows them to operate under different constraints (or lack there of) than the ordinary citizen.

Royce Vanderpool, REOS, Broker ; Devan Realty and Development Corporation

Call me at (407) 463-1010 if you need to purchase or sell real estate (commercial, residential or investment property) in the Orlando or central Florida region. I am a qualified specialist in REO foreclosure property.

Posted by Royce Dean Vanderpool, GKC, RMC, REOS, CIAS, BPOR - Principal Broker (Devan Realty & Development Corporation) almost 8 years ago

Brent & Deb - I agree.  Until we get "real" jobs, housing will struggle.

Ingrid - Yes, we won't solve this or any of our problems until we, the people, demand leadership, not political rhetoric from DC.

Vickie - Some areas have definitely missed the worst; here in GA we weren't so lucky.

Lori - Sounds like you're making prudent, but painful, choices--something DC should learn to do.  And yes, we owe a huge debt to China; and I don't mean we owe them thanks.

Mark - While some have predicted a coming shortage, I don't see it happening.  The market cannot turn that fast; and there will always be builders ready to jump on any opportunities.

Bruce - Millions of jobs are gone forever, and that ultimately affects housing.

Dana - Thanks for your perspective.

Rich - And how many jobs would we have created if we really used the "stimulus" for "shovel-ready" projects.

Edy - I do understand your comments about the perceptions of the economy, but the reality is bad.  Sure some companies are reporting great profits, but much of it is due to demanding more from a smaller workforce and closing plants.  I've lived through all the recessions of the past 4 decades and I can assure you that we now have worse conditions than ever in many ways.

 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Ben - Thanks for your comments; and I agree on Fannie and Freddie.  DC's attempts to find a solution could create serious problems.

Dennis - I agree.

Dawn - And when we see higher interest rates, sellers will feel the pain.

Gregg - Thanks for the link.  I'll check it out.

Jim - It is certainly possible that your "worst case scenario" could come to pass.

Anonymous - I think it will be a long time.

Paul - Attitude and commitment is certainly a part of it and we're getting no leadership from DC.

Tom - Yes, and if it's inflation that drives up prices, homeowners are still the losers.

 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Gary - It is interesting how the financial "experts" differ on whether we'll see deflation or inflation.  I think they may both be correct, with deflation continuing for a time and then roaring back with some serious inflation--unless, of course, the FED is able to deal with the trillions in additional printing.

Kimberley - Some good points, and unfortunately, I don't see govt. breaking up its marriage to Wall Street.

James - I don't plan on focusing upon the negativity and just "hang in there."  I believe we need to take action, to demand leadership from our leaders and to fire those who refuse to lead.

David - Vote them out and demand term limits.

Tim - I agree that there are opportunities for those who can approach the new market with some creativity and hard work.

Amazed - Many here, myself included, did in fact criticize the former president for failing to lead; however, the problems began before Bush and have grown over time.  And we have only one administration in power; they have the reins and must lead us on a new path, not the same old one that got us into this mess.

Tim - I agree.

 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

The only objection I have to your analysis is that it is far too optimistic.

Posted by Bob Jenkins almost 8 years ago

David L - Overall you may be right.

David K - My problem is with ALL those who play politics rather than providing leadership.

Dave - Unfortunately, DC seems to have little interest in talking to anyone on Main Street.

Hercel - I'll need to borrow a pair.

Russel - Yes.

Peter - And the uncertainty keeps business from hiring.

Jon - There are opportunities, but many in the U.S. can neither see nor reach them.  I disagree on the jobs numbers being pretty good.  We have the highest number of long-term unemployed in history.

Brian - Yes, meaningful and lasting jobs.

Doug - I agree.

 

 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Peter - The comment was "tongue in cheek."

John - I totally agree that we're the "masters of our fate," but we'll be prone to error if we ignore the facts.

Ray - I wrote a post to that effect several months ago.

Dave - Amen!

Francie - It's up to us.

Al - And if we believe Washington to hold the key to recovery, let's demand action from our elected officials.  Most of the incumbents are being sent back to DC.

Wendy - You're probably correct, and many of the people fail to attempt to understand.

Teresa - Thanks for the thoughtful analysis.

Erik - And ultimately for all of us, it's just a guess.

Dick - Many sellers have yet to face the reality of this market.

Joe - CA has some of the best as well as the worst markets.  Of course you're a big, diverse state.

Bonnie - I hope we see some real change in November, not just a different breed of politicians.

Jirius - Neither the politicians nor the public are ready for the pain that would be required.

 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Marguerite - I suspect we'll have a "reality check" in the stock market at some point.

Anne - But most are too "busy" to concern themselves with participating in the solution.

Bill - Exactly!  Nothing will change but the suits.

Peter - Thanks for the input from "down under."

Pam - What are WE going to do is the question.

Jon - At some point we must agree to some pain; otherwise we'll be due a pain much worse.

Wayne - The problems have festered, unattended for years.

Robert - That is a realistic and very possible scenario.

Erica - You're in the same boat with lots of others.

Gregory - Not a pleasant thought, but not without reason.

Empire - In some areas.

Gene - Conditions do vary widely, but overall they're not good.

Randy - I'd comment on a couple of points: The banking sector "recovered" because we pumped billions of dollars into the big banks, most of which would have been insolvent without taxpayer support.  And many are still insolvent if they actually value their portfolios at true value. And productivity has increased because companies closed plants and cut their workforce.  That helps their bottom line but adds to unemployment.  And though interest rates are at historic lows, they have failed to stimulate the market. 

Sure it's not Armageddon, but it's not rosy either.

 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Tom & Lisa - Thanks for the comments and reblog!

Denver - As I mentioned in a previous response, my comment about Soros was a "tongue in cheek" response to a "tongut in cheek" comment.  I guess I failed to make it clear. 

Paul - Our problem is similar to a Ponzi scheme that has reached the mathematical end of the line.

Marte - Contact our elected officials?  Many don't know who they are : (

A C - We seem to have terminal amnesia.

Synthia - Some interesting points, but for most the bottom line is that the economy doesn't inspire the confidence to purchase.

Don - While I don't defend Bush, the alleged surplus was merely more of DC's financial wizardry.  All POLITICIANS of recent decades are due some of the blame; and we, the people, share in the guilt.

Bharath - Good comments.

Ann - And your success demonstrates that "real estate is truly local."

Sharon - I agree with your assessment, but don't believe the average citizen is ready to accept it.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Dimitri - Sorry for the bad reference to Soros.  As I've pointed out, it was meant "tongue in cheek."

Patricia - Thanks

Charlie - You said: There are no easy answers and there is no magic solution.  That's the reality we must all face.

Timo - And that's pretty simple!

Jim - Or when we create so much inflation that home prices soar.  (It's possible)  But my answer was: Many years will pass before homeowners feel that the housing market has recovered

Lynn - I'd like to be optimistic about a "leader" emerging, but I've grown to be pretty skeptical of DC.

George - And to begin by electing great local officials.

Lorie - I agree completely.

Blaine - I'd like to share your optimism.

Mark - I agree that it's a shared responsibility, but I don't see the masses ready to admit so.

Jeremy - Prudent choices.

Brian - Unfortunately in an inflationary environment, many lose out.

Tony - Sound advice.

Don - I'd still take mine if they want to pass the bowl around again.

Anne - Texas missed the early problems, but some areas are rapidly catching up.

Richard - And we need leaders who understand that private enterprise is where jobs are created.

Rick - You'll have to send some different folks to DC to get your wishes.

May - Thanks for the comments.

Don - Good advice for all of us.

J. Stephen - You'll have to vote in a new bunch, because the ones we have aren't about to cut their political throats.

 

 

 

 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Bob - You could be right.

Pat - Hope to visit your fair city this fall--one of my favorite spots in the country.  Just wish we still had Reardons.

Royce - But we have to get involved politically to bring about the changes we need.  While we have seen more involvement in the past couple of years, most seem unwilling to do so.

 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

And to all those who missed my replies.  I know that George Soros isn't Greek. 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

You are spot on in your observations about the current state of RE in America. The bottom line, and this has always been my concern as a devloper and contractor, is affordablility! When less than 30% of the citizenry in any geographic area cannot afford to purchas a home there is a very pervasive problem. I've always held that values will have to decline as much as another 10 to 25 percent, depending on the market, before long term buyers and holders will pull the trigger.

I'm not being cavalier when I say this either. My own home has gone from 1.7 to 800k in the past two years so I have a vested interest in the overall market's outcome and future. But unless we get LTV and Comps in sinc in a realistic market there won't be a quick fix.

Posted by John DL Arendsen, Crest Backyard Homes "ADU" dealer & Contractor (CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS) almost 8 years ago

Thank you for your post. It is about time someone addressed these issues. The problem I have is that I keep hearing different speakers and reading posts by a number of people that say the problem is the current government and their policies. Then when people go to vote, and put the same people back in office. The special interests put so much money into the elections that they make the new office seekers look like the second coming of Hitler or worse and scare the ignorant populous and they wind up voting for the incumbents and nothing changes. I have been trying to point out the special interest groups that have been doing this, and no one wants to pay attention. I am afraid we are going to get just what we deserve again. This goes for state as well as national elections. No wonder retirees are looking at moving to foreign countries and taking their money and wisdom with them. Ok, I am off of my soapbox now.

Posted by Jim Crews almost 8 years ago

Realtors and homeowners wishing for a return to the 2005 level real estate prices is a big is IMO a huge part of the problem.

Posted by Gerry almost 8 years ago

You made some great points, thanks for sharing

Posted by Rob Rosa, Personal Real Estate Expert (Berkshire Hathaway) almost 8 years ago

Great info to bring some into reality

Posted by Francisco Garcia, Jr., 480-277-2922 http://franciscogarciajr.com (FG Real Estate) almost 8 years ago

I agree 100% with what you said and what is going on here in Portland, Or?  We were slow going into the recession and will be slow coming out. Our sales last month were off 30% from last July and even buyers looking are down 30% from last year.  Next September 2011 is the date that most 5 yr adjustables will be come due so we have at least 1 -2 more years of the market like it is or worse in the foreclosures of homes.  This is just the market so we can still sell homes but until we get everyone back to work we will be on the very slow old way of homes appreciating or being flat or 1-2 % which we did for 40 years. We have some pocket areas with great locations with $300-$400,000 homes that are doing great but 20 miles from town $650,000 new never sold homes are asking $400,000 and not selling and there are many of them.  These homes hurt the house that is 10 years older and the owners thought their home went up in value as the home owner watched the neighobrs house sell in 2005. In Portland we are at 2005 and some places 2004 prices.  We just follow the leader up and down 1-2 years late.  We are trying to go green in building but it really has not caught on but it might make a few more homes sell with utility rates going up and buyers looking how to get that edge as they will now live in their home for many years instead of flipping the family home.

Tom Inglesby, Broker, Portland, Or Re/MAx Equity Group

Posted by Tom Inglesby, Matching peope, properties and life styles. (RE/MAX equity group ) almost 8 years ago

There is a solution to dramatically speed up the recovery of housing prices. The banks need to stop dumping properties at ridiculously low prices, and implement the TACT Program to fix their balance sheets so they can lend again. Private lenders have been doing it successfully for the last few years.

Posted by Ron "The Ronald" Nawrocki (B.I.Solutions Corp.) almost 8 years ago

"Monetary policy seems confused at best".  This is a total failure we are in such trouble.

Posted by Tim Lorenz, 949 874-2247 (TIM LORENZ - Elite Home Sales Team) almost 8 years ago

We cannot continue to destroy the economy and state we are helping it.  Congress needs to wake up.

Posted by Elite Home Sales Team, A Tenacious and Skilled Real Estate Team (Elite Home Sales Team OC) almost 8 years ago

First, Mr Knox (#60) is completely correct. Anyone else remember in 2005 when President Bush and some other GOPs started to question the loan programs that finally did us in? I do, but no one wanted to stop the "Gravey Train" that was fueling the economy, (Wall Street w/ their MBS, the NAR and all the big builders).

Second, for So. Cal, it feels like 1981 or 1992, take your choice. Five more years of sideways zig-zaging before a slow, slow pull up, my opinion for So. Cal only.

Posted by Steve Sandoval almost 8 years ago

Florida has it's Primary this Tuesday. We will have the chance to bring in new blood or keep the same old, same old. I am becoming increasingly anti establishment (and no I wasn't a hippie in the 60's) but look where it has gotten us. Trusting in government is the wrong road. Less government, less taxes, less bureaucracy and honesty. Is that too much to ask?  The sales in Naples FL have been really good for me this year but I'm afraid once B of A starts dumping their pent up inventory they held onto until the lawsuit with Countywide was over is going to ruin what was a good thing. As a homeowner I see what was a small appreciation starting to happen going downhill.

The Housing Guru nails it. Unless you are willing to be a hammer at the polls on Tuesday the 24th, then shame on you! the Primaries are the most important vote. It either gives the populace the power to change or it gives the entrenched parties the will to continue this charade.

Posted by Lynn M. Bower, PA, ABR, GRI, RSPS, AHWD, PMN, CNE (John R Wood Realtors) almost 8 years ago

John, your blog is of interest to us here in Canada as well as our economy depends on the U.S. market and usually we seem to follow U.S. trends.

Ty

Posted by Ty Lacroix (Envelope Real Estate Brokerage Inc) almost 8 years ago

We have to try and keep a positive outlook on the Real Estate Market as things always change, it will be difficult, however, you have to plug along and keep focused

Posted by Deborah Grimaldi, (401) 837-9633 (Albert Realtors) almost 8 years ago

Go back and read the media reports from the late 80's and the early 90's. Many of them sound just like the ones we are reading today.

We recovered then and we will recover now. It may take a while, but betting against past experience will cost you money and opportunity.

"It is always the darkest before the dawn".

When everyone else is heading for the exits, it is time to stop and look around. Herd mentality, etc.

Posted by Thomas McCombs (Century 21 HomeStar) almost 8 years ago
As always you provide great insight and analysis. I agree that the overall economy is in dire straits and it will be a very long road to recovery.
Posted by Kathie Burby, REALTOR, SFR, Tuolumne County Real Estate Guide (Coldwell Banker Mother Lode Real Estate) almost 8 years ago

John,

Unfortunately, you're spot on.  Until buyers start buying, prices will decline, even if they appear to be stabilizing in some locales.  Without addressing consumer fears, they won't buy at the levels the market needs for prices to really stabilize or go up.  I hear Greece is nice, but I wouldn't want to live there.  We are in the deep darks right now and we don't have a clear way out.

Posted by Mark Kastner almost 8 years ago

John, an accurate picture was portrayed. Just don't know what do to about it. There are sellers out there that still feel (or hold an inkling of hope) that prices will rebound by next year.  I just don't see it happening anytime soon!  They are hallucinating.

Posted by Lyn Sims, Schaumburg IL Area Real Estate (RE/MAX Suburban) almost 8 years ago

John & Janis - I agree.

Jim - Good points. (And BTW I'm looking at Central America)

Gerry - It's just not going to happen without inflation--and that only masks the problem.

Rob - Thanks for stopping by.

Francisco - Sometimes we do need to consider other options.

Tom - There are no quick solutions; we're in this for the long haul.

Ron - Banks, like consumers, often take a short-term view.

Tim - It is reminiscent of the "Keystone Cops."

Elite - Congress will have to be awakened by the loud voices of the people, something that has yet to  happen.

 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Steve - Lots of "sideways" movement around the country too.

Lynn - I don't yet believe the people have awakened--at least not in sufficient numbers to make much difference.

Ty - And I've been reading that real estate in Canada has lost some of its luster.

Deborah - And we have to look for new and creative ways to generate business.

Thomas - I was building and selling homes in the 80s and 90s; it was never this severe.  We're entering a different era, one that will be molded by current events and trends.

Kathie - The road is long; but it does have the potential to take us to a better place.  It's up to us.

Mark - And our "leaders" have failed us--they're still in bed with Wall Street.

Lyn - I'd be a seller too, but I'm unwilling to accept what I know my home will bring.  I'll just wait it out--or be here indefinitely.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

In support of your blog without being technical, this is exactly why I never put money back into the stock market again after the crash in, was it 87?  I was there as an investment banker and I even have to take my share of the blame for helping to develop derivatives.  So much smoke and mirrors that if people really understood how bad our economy is, they would be in shock, because in reality, its much worse than even you have alluded to. 

However, I also helped save some of the largest S&L's during the S&L crisis, another time when a house of cards came tumbling down.  So there is still hope.  It will take some smart people who can override their natural tendency to greed for the greatest good of all.

Posted by Jim Ed Brown (Brown Land & Timber Company) almost 8 years ago

Jim - I do have an opinion of the depth of our problems, but when I post them, many complain that I'm being too negative, so I stick to the easily understood and verifiable facts.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Great post!   Yes, the crash of 87 is a big reminder why we have to be wary of what to do with our funds.  I still remember those headlines!  So, last November I sold my home, put the remaining equity in the bank and am currently renting because I don't need the tax deduction, don't have to pay property taxes or an HOA fee.   I downsized everything I could and am focusing on the lower end of the marketplace.  All sales this year on my books are cash from investors and 2nd home buyers.  Oh I'll buy another home, but I'm looking at January.  Will take advantage of NACA financing www.Naca.com for zero down, below market rates. And purchase price will be what my first home cost in 1984!  My mission is to rebuild the equity I lost and the value of my remaining funds.  In my opinion this is a huge lesson for most Americans that we don't need the gas guzzling machines, dining out as much, extravagant vacations or extra frills.  It's been back to the basics for the last 2 years! 

Posted by Jan Green, HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN (Value Added Service, 602-620-2699) almost 8 years ago

Goodness, too many of the posts above indicate too many agents are believing disinformation and simplistic explanations. My first suggestion is to turn off your TV for 2 weeks and read some books written by authors with extensive knowledge of the field complete with footnotes.

 

Do you want a simple explanation for what got us here? Greed and a quest for profits rather than value creation. 

 

Start by reading "Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis" by Paul Muolo and Mark Padilla, executive editor of National Mortgage News and business reporter for the Orange County Star (California) respectively.  It's an easy read and thoroughly researched by people who were on a first name basis with the sub prime lenders for up to 30 years.

 

The authors relate years of discussions with Anthony Mozillo, founder of Countrywide, as well as other thrift and lender CEOs, who literally abandoned their own well-established business models and cautious lending principles to satisfy the voracious bond market and personally make millions.  I'm an entrepreneur, too, so I can understand the motivation to make a pile of money quickly. 

 

To paraphrase a line from "King Kong,"  it wasn't CRA that killed the beast, it was greed chasing higher bond returns.

 

In 2008 the estimate was that $2-3 TRILLION of "mortgage-backed securities" was worthless. A surprising amount of MBS had no real estate component and a large tranche was found to have never been properly underwritten. (read the book for details) Much of those trillions in debt has yet to be liquidated, representing as many as 8 million homes. 

 

Next, read "The Big Short" by Michael Lewis. If you think CRA doomed the housing market you don't comprehend that a CDO is.  Lewis will explain it in a most entertaining way. A reviewer wrote, " ... they provided the fuel which kept the subprime mortgage furnace burning even when the country was running out of new junk mortgages to write."

 

Many of us recognize that Wall Street and the financiers have benefited, but few of us (from the posts above) grasp the complexity of unraveling an over-leveraged society without literally falling into deeper recession. If we're lucky it will be a long, painful process.

 

As real estate agents we need to provide value to our clients and truly become their fiduciary in these challenging times. We each need to analyze our local market conditions starting with job trends, and act accordingly.  We may be called upon to liquidate overleveraged SFRs, find apartment buildings with positive cash flow, increase the value of underperforming commercial property, or help new households seeking a home with great schools in a stable community. 

 

Acknowledge you can't expect to consistently make commissions on flim-flam, special promotions, and tax cuts. Fewer of us will be in business next year, and fewer still the year after that. In short, you have to add value, not take value, and work for referrals and repeat business.

 

Good luck.

Posted by Kirk Knight (Gallagher & Lindsey, Inc. REALTORS) almost 8 years ago
We have never been down the road we are traveling down now. Until consumer confidence returns, there is no recovery. Until we have jobs a plenty recovery will not happen.
Posted by Vicky almost 8 years ago

Jan - Sounds like a good financial plan!

Kirk - I agree.  The issue is much too complex for a simple blog post, but if it causes others to think and research, then it will have served its purpose.

Vicky - And that may be a very long time.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Hi John - I believe you've hit the nails on the head making your points in this article. What we are facing today in our local markets and economies did not happen overnight. Nor will the recovery.

Posted by Karen Cooper, Helping Homeowners w/Home Loans in 27 US States (Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas) almost 8 years ago

Excellently stated   Thank you.

Posted by Rich Levin almost 8 years ago

John,

You are right on the money in your observations and I couldn't agree with you more.

Read my article on Facebook.com/philipraices ( I am in the process of putting the final touches on it, should be there by monday) that compliments yours, and is critical but is a bit more positive in providing some clear and accurate solutions.  Otherwise, if our country does not wake up and smell the coffee and gets their act in gear, we might go down as one of the greatest powers in the history of mankind with the shortest life span.  But it will be a long arduous road with a lot of sacrifices to be made and accepted by the govenment and the consuming public!!!

Posted by Philip A. Raices almost 8 years ago

Karen - Exactly!

Rich - Thanks for stopping by.

Phillip - From what I observe, we're not yet ready to make the difficult choices that could turn the economy around.

 

 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Nobody ,unless I missed it in the earlier 182 replies ,no one mentions the effect of the stock market.

I believe that in most areas in tye USA the lower end of the market is still reasonnable active while  the prices might have come down 15 % of their highs,(in my area).

In contrast the high end of the market is really suffering, and I believe that this is largely caused by the poor results in the stock market. Most of the high income earners are financially still in a good position, but do not want to sell stocks or use their cash now to buy real estate, and the uncertainty about future taxes and the choosen path to socialisme does not help either.

I think the government incentives should go to the rich to buy more of all we can make in the USA.

That could be USA made cars, houses, boats, airplanes, etc. Incentives to the poor go straight to China via Walmart.Kmart, the Dollar Store ,etc.

Every one with an income over $ 250,000 should have at least one vacation home!

 

Posted by everard korthals almost 8 years ago

Hi John, As always, good post.

Can I get a prediction from you?  Regionally, where do you think the hotspots are and where do you think is worst off?

Posted by Chris Richter (Wintrust Mortgage) almost 8 years ago

Everard - I think the stock market is just another symptom of our illness.  Until we begin to create jobs, all sectors will continue to struggle.

Chris - I'm working on my 2011 predictions post, and will have it in the next couple of weeks.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

REO inventor pressure on moderate priced housing is beating us up terribly.  Investors have bought many but the stock market woes and continued low employment have kept our buyer pool small.  The home buyer credit did it's part to keep us even w/ last year on a # of units comparison.  It's going to take good old fashion hard work to move us forward. Hang in there everyone!!

Posted by Jim Staschiak II (Preferred Brokers Inc.) almost 8 years ago

Great posts lead to many thought provoking responses.  I agree with the agents saying "be positive and make your  own market".  That does not change the overall market and how it is affecting people.  And were the agents not listening when you said it will reach the midwest?  I sure hope the government realizes that the way we are going is.....still down!

Posted by Dawnita Griffith, It does matter who you hire. (Meadow Lake Real Estate, LLC) almost 8 years ago

Tough times will be with us for a while but like Dawnita #188 points out "be positive and make your own market."  If we sit in doom and gloom that is what we will become.

Posted by Monica Atherton, Your Temecula Real Estate Gal (The Associates Realty Group) almost 8 years ago

Jim - Lots of work and lots of time.

Dawnita - DC isn't focused yet.

Monica - I agree with the need to remain positive, but I also believe we must be aware of the facts to avoid making costly mistakes.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

John,

Prices will likely remain rather weak in many of the hard-hit areas for years. Cities with relatively decent economies, Washington, D.C. metro comes to mind, will experience more stable real estate values, perhaps even some gains in select neighborhoods.

Posted by Esko Kiuru almost 8 years ago

Esko - As long as we have a continually growing bureaucracy, DC and the surrounding area will do fine.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

The Fed controls the fiat money supply.
- The Fed controls the interest rates.
- The Fed protects the fractional reserve banking system
- The Fed influences stock markets.
- The Fed influences the value of the dollar by loaning to foreign central banks.
- The Fed is responsible for about 80% of the loss in value of the dollar since 1913.
- The Fed's lack of proper oversight, along with keeping the interest rates too low for too long, was the main cause of the financial meltdown.
- The Fed is responsible for the "boom/bust" cycle.
- The Fed does all of this in almost complete secrecy.

End the welfare /warfare state

END the FED

Ron Paul For Pres. 2012

Posted by Kevin McAllister, Mister Mc Lister (Century 21 Select Real Estate) almost 8 years ago

Kevin, you need to broaden your reading.

Try "House of Cards: A Tale of Hubris and Wreteched Excess on Wall Street" by William D Cohan.  It's the story of Bear Stearns and the collapse and should give you an idea how precarious the global banking system is positioned as a network of trusted relationships. 

The rapid collapse of the investment banks that were dependent upon revolving lines of credit. At best the Fed can provide confidence in our currency so people will make emotional decisions to hold our bonds.

The current global economy is too large for the US Federal Reserve to control, merely to influence.  Global electronic funds flows are massive, instantaneous, unstoppable, often automated and generally invisible, even via SWIFT and the FedWire. Money hops among currencies as traders seek the highest return for as little as fractions of a second. The Fed has neither the resources nor the levers to do all you suggest - because if it did we would be out of the mess we're in.  

Posted by Kirk Knight (Gallagher & Lindsey, Inc. REALTORS) almost 8 years ago

I will read that book, but the Fed and or central banks have been a problem since the beginning of our Republic. A thoughtful study of history will show the true enemies of the Republic.The speed of transactions has little to do with it. It  was the volume of money the Greenspan and the FED created that fueled the phony expanstion.

The Creature from Jekyll Island : A Second Look at the Federal Reserve by G edward Griffin is a good place to start.

"Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by the deluge of bank paper. It is cruel that such revolutions in private fortunes should be at the mercy of avaricious adventurers, who, instead of employing their capital, if any they have, in manufactures, commerce, and other useful pursuits, make it an instrument to burden all the interchanges of property with their swindling profits, profits which are the price of no useful industry of theirs."Thomas Jefferson" 1800

 President James A. Garfield (The 20th President of the United States who lasted only 100 Days) states two weeks before he was assassinated,

· "Whoever controls the volume of money in our country is absolute master of all industry and commerce...and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate."

By the way I was a Commodities Trader for 21 years.

Posted by Kevin almost 8 years ago

John, saw your great post vai a reblog. I recently moved from N.GA and the price I had to list at was guttural but it was relo. Luckily it sold fast. I see no prices increases from that area happening, in fact it has gotten worse.

I was heartbroken to see the small business I frequented closed their doors., no bail outs for them!

Posted by Cynthia Bartch, Redesigned Spaces; All Round Nice Gal (Home Stager/Property Stylist & more! Granville, Ohio) almost 8 years ago

Cynthia - I know. We've lost several small businesses lately.  I feel for the owners.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) almost 8 years ago

Participate