The two-year housing decline is worsening

[w¡n9Nµ7 §£@¥€r 123]

The two-year housing decline is worsening amid a surge in credit costs and the collapse of more than 100 mortgage companies after defaults by homeowners. Federal Reserve policy makers, who meet next week, said at their last session "tighter'' credit is putting the U.S. economy at risk.

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Seven of the 10 biggest home-price drops during the second quarter were in California, including No. 1 Merced, down 8.7 percent, according to an Aug. 30 government report. Santa Barbara was No. 2, at 8.1 percent, followed by Stockton, with a 7.2 percent decrease. In the prior five years, home values in the largest U.S. state almost doubled, the Office of Federal Housing Enterprise Oversight said.

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The U.S. housing decline may last as long as four years until 2009, Moody's Investors Service said in a report yesterday. That would match the length of the downturn that ended in 1991. Home sales will take a "substantial hit'' in the next several months, Moody's said.

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The median resale price probably will slip 1.7 percent to $218,200 this year, the Realtors' said. That would be the first national decline since the Great Depression in the 1930s...

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Barron expects prices for new and existing homes to drop next year as the glut of unsold homes and foreclosed homes force sellers to lower prices. The difficulty consumers are having obtaining mortgages may also spur sellers to lower prices to make sales.

"Home prices need to come back down to more affordable levels so that people can take that inventory off the market,'' Barron said in an interview. "Everything I see points to lower prices, much lower prices.''

http://www.bloomberg.com/apps/news?pid=206...&refer=home

[GaryC 7]

[peejay 327]

I paid off my house in 1994. It's doubled in price since then. Prices have a long way to fall before I say "ouch".

It's all fake money as far as I'm concerned. It just suckered people into borrowing money with home equity loans to buy ####### they didn't need with money they didn't have. Now some of them owe more than their house is worth and they'll be in debt till they die. The joke's on them and the Fat Cats are laughing.

My house was always just a house to me...not an ATM machine. Prices can fall as they may and I'll still have a roof over my head. Less value = less taxes. So bring it on.

[GaryC 7]

I paid off my house in 1994. It's doubled in price since then. Prices have a long way to fall before I say "ouch".

It's all fake money as far as I'm concerned. It just suckered people into borrowing money with home equity loans to buy ####### they didn't need with money they didn't have. Now some of them owe more than their house is worth and they'll be in debt till they die. The joke's on them and the Fat Cats are laughing.

My house was always just a house to me...not an ATM machine. Prices can fall as they may and I'll still have a roof over my head. Less value = less taxes. So bring it on.

Yep, and those of us that are buying soon will get more house for their money.

[Mr. Big Dog 10,747]

I'm not looking to move nor is my neighborhood plastered with "For Sale" signs much less foreclosure properties. Hence, the short term decline is not all that important to me from an investment and quality of life perspective. I am, however, concerned with the overall economic impact of the bursting bubble. The economy grew solely based on borrowed funds over the last few years - much of which came from overvalued and overly borrowed against properties. The second voodoo economic miracle is rapidly collapsing...

[Hilarious Clinton 452]

I paid off my house in 1994. It's doubled in price since then. Prices have a long way to fall before I say "ouch".

It's all fake money as far as I'm concerned. It just suckered people into borrowing money with home equity loans to buy ####### they didn't need with money they didn't have. Now some of them owe more than their house is worth and they'll be in debt till they die. The joke's on them and the Fat Cats are laughing.

My house was always just a house to me...not an ATM machine. Prices can fall as they may and I'll still have a roof over my head. Less value = less taxes. So bring it on.

Yep, and those of us that are buying soon will get more house for their money.

woot!!! I'm buying next year!!

[SupportOAFJF 0]

Gosh, I was just browsing and as I read ur post I scrolled and ur baby is soooooog= gosh darn cute..my my..fabulous

Kimmy

I'm not looking to move nor is my neighborhood plastered with "For Sale" signs much less foreclosure properties. Hence, the short term decline is not all that important to me from an investment and quality of life perspective. I am, however, concerned with the overall economic impact of the bursting bubble. The economy grew solely based on borrowed funds over the last few years - much of which came from overvalued and overly borrowed against properties. The second voodoo economic miracle is rapidly collapsing...

[Fandango 1,439]

What an incredible oppty for buyers and investors right now!

[Dan J 277]

For most people, your better off renting over buying a home. And buying when the market is going down, without a significant down payment, is an even worse idea. Although you will likely be able to make an offer below list price.

Most people involved in the mortgage real estate industry have a vested interested in making the market look better than it is. Agents get commission on each sale, mortgage brokers get one for each mortgage. Appraisers are hired by the bank, and will provide a value favorable to the bank or they don't get hired again.

But compared to other investments, a house costs to much to be worth it. If you had and sold a house during the housing bubble, you were lucky. We are very unlikely to see that kind of growth again. Its likely you can rent a better plan than you can buy for what the mortgage will cost you each month.

But renting being better assumes that you will actually invest the money you save. Not go on a spending spree.

Before you buy, do the math: http://www.cepr.net/calculators/hb/hcc.html

[Trompe le Monde 1,107]

Still a much, much better deal to rent in LA and probably will be for some time unless the bubble really bursts, unless I were to be thinking long term (I don't plan on being here in 5-10 years time, so no)

I've been plowing my savings into stocks for the past 2 years - much better investment than property would have been, as long as I am careful in these uncertain times

[w¡n9Nµ7 §£@¥€r 123]

If you had and sold a house during the housing bubble, you were lucky. We are very unlikely to see that kind of growth again.

Why do you think we are unlikely to see that kind of growth again?

Here is a quick graph I drew up using 4th quarter price indices from ofheo's hpi data. The data is from 1975 to 2006. The index used is a composite index of the USA. The raw data can be found at http://www.ofheo.gov/media/hpi/2q07_hpi_reg.csv.

Notice the slope of the price data line. The slope markedly steepens 2000-2001 and onwards, but even with 'normal' appreciation, we're talking about an asset that serves well as a hedge against inflation.

The graph:

[Dan J 277]

If you had and sold a house during the housing bubble, you were lucky. We are very unlikely to see that kind of growth again.

Why do you think we are unlikely to see that kind of growth again?

Here is a quick graph I drew up using 4th quarter price indices from ofheo's hpi data. The data is from 1975 to 2006. The index used is a composite index of the USA. The raw data can be found at http://www.ofheo.gov/media/hpi/2q07_hpi_reg.csv.

Notice the slope of the price data line. The slope markedly steepens 2000-2001 and onwards, but even with 'normal' appreciation, we're talking about an asset that serves well as a hedge against inflation.

The graph:

But there are a bunch of ifs. The costs of a mortgage, taxes and other costs don't make sense unless you own the house for 10+ years depending on the market, in some places you wont see a positive return unless you have owned the house for 20 years. The average length of time for owning a house is only 7 years. At which point you would have paid more for the mortgage than the value you gained in the house.

What the rents are in the market also factor into which one is a better choice. Also return on investments as a renter is also a factor. Though in general, you can get about the same or better interest rate on bonds as you can get in house appreciation, and it doesn't cost anything. You don't need to pay for maintenance on bonds.

[BYRON-LEIDY 0]

I think that the dip in real estate depends on where you live....Im in NY and real estate although it has slowed a little is still in ok shape...especially in manhattan NY....

[Dan J 277]

If you had and sold a house during the housing bubble, you were lucky. We are very unlikely to see that kind of growth again.

Why do you think we are unlikely to see that kind of growth again?

Here is a quick graph I drew up using 4th quarter price indices from ofheo's hpi data. The data is from 1975 to 2006. The index used is a composite index of the USA. The raw data can be found at http://www.ofheo.gov/media/hpi/2q07_hpi_reg.csv.

Notice the slope of the price data line. The slope markedly steepens 2000-2001 and onwards, but even with 'normal' appreciation, we're talking about an asset that serves well as a hedge against inflation.

The graph:

Also that data is based on Fannie Mae and Freddie Mac mortgages, which are limited to 417,000 or less.

[w¡n9Nµ7 §£@¥€r 123]

Right, it excludes jumbos.

The only other data source I'm aware of is the case schiller index but that only goes back to 1997 or so.