The two-year housing decline is worsening

[Stabu 0]

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.

Do you happen to know if that chart is inflation or M3 creation adjusted or not?

And btw. yes we are going to see similar house price rises, but unlikely anytime soon. It all has to do with this (economist minded will think it's funny, others won't likely get it, but I refuse to explain a joke since then all the fun is gone from it ).

[w¡n9Nµ7 §£@¥€r 123]

18. Is OFHEO's HPI adjusted for inflation?

No, the HPI is not adjusted for inflation. You can use the CPI less shelter to adjust the HPI for inflation. You may also impose your own seasonal adjustments if you want to do so.

And btw. yes we are going to see similar house price rises, but unlikely anytime soon.

I agree. If past performance repeats itself (all disclaimers apply), then the NYC metro area could see about a decade of stagnant nominal prices.

[Jasman0717 9]

Maybe this is good it is happening now so that by the time I get ready to retire the prices will be sky-high

[Fandango 1,439]

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.

Are you kidding me here?

If buying when the market's down is a bad idea....would you rather buy when the market's up?

I've said this before and I'll say it again...if you're looking to stay within the same mkt (ie...sell in NY, buy in NY...not sell in NY and buy in South Carolina, for example)....the ONLY houses that matter are the first one you buy, and the last one you sell. Everything else is simply transferring equity. Naturally, the best time to buy is when prices are low...and the best time to sell is when prices are high.

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.

People in the re industry can make money no matter WHAT kind of market it is. It makes no difference really whether it's a buyer's market, seller's market....sure there's different things to focus on...but no one has a 'vested interest in making the mkt look better than it is'. And REALTORS abide to a code of ethics that would prevent such unscrupulous methods on a whole. I say 'on a whole' because I'm sure there are a few bad apples...but that's not who I'm talking about.

Furthermore....we can't MAKE the mkt look like anything other than what it is. Because the market dictates the activity. I can't say 'oh yeah, that house is worth in the range of ........' if it's not because I didn't just pull those figs out of my backside....there's hard data to prove it. There's no magic wand in my pocket.

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.

You tell me what other investment....one that fills a need that every one of us has....one that you can buy without actually paying for it, one you use daily, one that you could actually draw money from, should you ever need it, and then one that you could sell and GET YOUR MONEY BACK, let alone MAKE money on....tell me ONE other tangible asset that can do that????

Whether the temporary mkt is in a state of flux is irrelevant....hot dogs no longer are a nickel, yanno what I mean????

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

What money do renters save, exactly? Sure, if you want to not have to worry about doing maintenance on the home ie water heater, roof, etc...that's fine. But you can take your rent money and flush it down the toilet. You're at the mercy of your landlord (why does the landlord have an income-generating prop in the first place if RE is not a good investment???), you're bound to landlord/tenant laws...I know in FL, a landlord can keep a key to gain entry. I dunno about you, but I don't want ANYONE having a key to my place. And what if your rent goes up 150 bucks next lease? You either pay up or move. What if the landlord wants to sell and not renew? You move. You're at someone else's say-so & have no control over your own living situation. This fact alone is enough for some people to want to own their own home. To say, yeah this house is mine and no one can tell me what to do.

The ONLY time renting is not a waste of money is in the instance of just moving to a new area, and you're unsure of where you want to be.

I really do want to know what is a better investment than real estate.

I'm not trying to sound testy, so please forgive me if it comes across that way. This is something that I'm obviously quite passionate about! I do think that you're not really seeing the bigger picture here & are paying too much attn to the 'DOOMSDAY!' reports. The mkt is in a state of readjustment...the sky is not actually falling

Editing to add: this is purely my opinion and I am not offering real estate advise here.

Edited September 12, 2007 by LisaD

[w¡n9Nµ7 §£@¥€r 123]

I really do want to know what is a better investment than real estate.

People will say equities outperform RE in the long term. If you go strictly by prices, they do. However, there's the additional emotional component that RE provides that equities can not. RE is "home". You can't live in a stock.

[Nikita2Charles 32]

The key word is LOCATION< LOCATION < LOCATION

The housing market has come down quite a bit but here in the sillicon valley we haven't seen a major drop, but looking at the tri valley, the stockton, Manteca area, price have dropped considerably, the reason also over the past 2-4 years, housing prices have more than double in those areas so it was time for the bubble to bust. IT's a gamble some folks really made off quite well at the office. They bought in the $280,000 range and sold in the +650,000 and up. Then use the equity to move back to the sillicon valley.

Little history: housing prices here was so ridiculous and going up so fast lot of folks couldn't afford to buy anything here in the bay area, a 2 bedroom condo is costing you $350,000 and that's a deal if you can find one so lot of folks had to endure the 2hours + commute just so they can afford a House.

So when their house got double up in prices, most of them a year or so sell off and use the equity to move back out here to be closer to work. nobody enjoys 2hours+ a day driving, no time to see your kids, your family and so on.

Those folks who stayed up there only 1 that i know off didn't sell but put the house for rent hoping MAYBE the price would go higher are taking a hit, so places the house prices have gone down by as much as $200,000

ONE house which was listed at $700,000 now is back down to $530,000, just 2 years ago the same house in the community was sold over $700,000. Out here for the past 2 years things have kinda stabalized no major increased so no Major drop also, so we'll see how long it holds true with all the outsourcing going.

[Fandango 1,439]

I really do want to know what is a better investment than real estate.

People will say equities outperform RE in the long term. If you go strictly by prices, they do. However, there's the additional emotional component that RE provides that equities can not. RE is "home". You can't live in a stock.

But you're missing the fact that paying for housing - whether you buy or rent - is a given for everyone. So any other investing is with additional monies, which makes the comparison a moot one.

Furthermore, the other component of the benefits of owning is not purely 'emotional' either.

Edited September 12, 2007 by LisaD

[w¡n9Nµ7 §£@¥€r 123]

700 to 530? That's surely an outlier?

[w¡n9Nµ7 §£@¥€r 123]

But you're missing the fact that paying for housing - whether you buy or rent - is a given for everyone. So any other investing is with additional monies, which makes the comparison a moot one.

During 2004-2005, average rents in my neighborhood were less than the P+I you'd have to pay if you bought in those years. Reason being, most landlords bought much lower and have lower payments, which kept rents down.

That situation is quickly reverting back to normal now, though.

Disclaimer: local anecdotes only

[Fandango 1,439]

But you're missing the fact that paying for housing - whether you buy or rent - is a given for everyone. So any other investing is with additional monies, which makes the comparison a moot one.

During 2004-2005, average rents in my neighborhood were less than the P+I you'd have to pay if you bought in those years. Reason being, most landlords bought much lower and have lower payments, which kept rents down.

That situation is quickly reverting back to normal now, though.

Disclaimer: local anecdotes only

When the housing went up so much here, the landlords were increasing rents. I'm not saying mid-lease, mind you....but the advertised rents were ridiculous compared to the year before. I spoke to one investor, and he was all 'why not? it now costs more to buy a house'

But on a whole, I see where you're goin with this...and while that might have been true in a wild ride as was 05, I see the reverse today.

[w¡n9Nµ7 §£@¥€r 123]

Yeah, the inversion was only 04-05, mostly in 05. Atleast where I am.

[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.

Are you kidding me here?

If buying when the market's down is a bad idea....would you rather buy when the market's up?

I've said this before and I'll say it again...if you're looking to stay within the same mkt (ie...sell in NY, buy in NY...not sell in NY and buy in South Carolina, for example)....the ONLY houses that matter are the first one you buy, and the last one you sell. Everything else is simply transferring equity. Naturally, the best time to buy is when prices are low...and the best time to sell is when prices are high.

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.

People in the re industry can make money no matter WHAT kind of market it is. It makes no difference really whether it's a buyer's market, seller's market....sure there's different things to focus on...but no one has a 'vested interest in making the mkt look better than it is'. And REALTORS abide to a code of ethics that would prevent such unscrupulous methods on a whole. I say 'on a whole' because I'm sure there are a few bad apples...but that's not who I'm talking about.

Furthermore....we can't MAKE the mkt look like anything other than what it is. Because the market dictates the activity. I can't say 'oh yeah, that house is worth in the range of ........' if it's not because I didn't just pull those figs out of my backside....there's hard data to prove it. There's no magic wand in my pocket.

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.

You tell me what other investment....one that fills a need that every one of us has....one that you can buy without actually paying for it, one you use daily, one that you could actually draw money from, should you ever need it, and then one that you could sell and GET YOUR MONEY BACK, let alone MAKE money on....tell me ONE other tangible asset that can do that????

Whether the temporary mkt is in a state of flux is irrelevant....hot dogs no longer are a nickel, yanno what I mean????

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

What money do renters save, exactly? Sure, if you want to not have to worry about doing maintenance on the home ie water heater, roof, etc...that's fine. But you can take your rent money and flush it down the toilet. You're at the mercy of your landlord (why does the landlord have an income-generating prop in the first place if RE is not a good investment???), you're bound to landlord/tenant laws...I know in FL, a landlord can keep a key to gain entry. I dunno about you, but I don't want ANYONE having a key to my place. And what if your rent goes up 150 bucks next lease? You either pay up or move. What if the landlord wants to sell and not renew? You move. You're at someone else's say-so & have no control over your own living situation. This fact alone is enough for some people to want to own their own home. To say, yeah this house is mine and no one can tell me what to do.

The ONLY time renting is not a waste of money is in the instance of just moving to a new area, and you're unsure of where you want to be.

I really do want to know what is a better investment than real estate.

I'm not trying to sound testy, so please forgive me if it comes across that way. This is something that I'm obviously quite passionate about! I do think that you're not really seeing the bigger picture here & are paying too much attn to the 'DOOMSDAY!' reports. The mkt is in a state of readjustment...the sky is not actually falling

Editing to add: this is purely my opinion and I am not offering real estate advise here.

You miss the point, its poor to buy when the market is going down. You will have to hold the house much longer to come out with a net positive cost. When the market is down and starting to recover is the best time to buy. Not when its going down, and likely to continue that direction for a couple years.

[Dan J 277]

I really do want to know what is a better investment than real estate.

People will say equities outperform RE in the long term. If you go strictly by prices, they do. However, there's the additional emotional component that RE provides that equities can not. RE is "home". You can't live in a stock.

But you're missing the fact that paying for housing - whether you buy or rent - is a given for everyone. So any other investing is with additional monies, which makes the comparison a moot one.

Furthermore, the other component of the benefits of owning is not purely 'emotional' either.

Yes you are, but in many cases, the cost of owning a house is more expensive then to just rent and invest the money you saved. Only if you can own a house for 15 years+ (The average time a person owns a house is only 7 years) is it generally better to do so over renting. Or if you can afford the house without a mortgage, which very few people can.

When owning a house, you have to consider the cost of the mortgage, P&I Insurance if your down payment is less than %20, Annual property taxes, maintenance, Insurance, and utilities that would otherwise not be included in rent. Depending on your market conditions, you can likely rent a very nice place for what it costs you each month to own a house.

[Nikita2Charles 32]

http://www.mercurynews.com/ci_6668123?source=most_viewed

"Homes that two years ago sold at the peak of the market now sell for $200,000 less[/size].

Mountain House community: From boom to bust on Bay Area's edge

REAL ESTATE DOWNTURN SINKS HOMEOWNERS' FORTUNES IN NEW PLANNED COMMUNITY

By Katherine Conrad

Mercury News

Article Launched: 08/20/2007 01:31:55 AM PDT

Click photo to enlarge

Despite a number of existing homes for sale, construction... (Patrick Tehan / Mercury News)«12345»Related Stories

Aug 20:

Master plan for Mountain House

At Mountain House, visionaries carefully planned streets, schools, sewers - everything needed to create a thriving community of 16,000 homes in the middle of San Joaquin County's farmland.

Build it and they will come. And they did.

Starting in 2003, thousands of Silicon Valley residents desperate for a house, two-car garage and back yard made the hour-plus commute from the job-rich Bay Area over the Altamont Pass to Mountain House, where home prices started in the low $300,000s.

But then the real estate boom went bust. Last month, DataQuick reported that San Joaquin County mortgage holders were among the most likely in the state to default on their payments; San Joaquin County has the highest foreclosure rate among the nation's 100 largest metropolitan areas, RealtyTrac recently reported.

Mountain House, where Bay Area transplants are 80 percent of the population, is a dramatic illustration of a development that was built as a solution to Silicon Valley's overpriced housing market. Now, it finds itself hurt by high gas prices, ever-worsening commutes and a growing desire among South Bay residents for housing close to Silicon Valley jobs - even if it's condominiums and townhouses.

The trend of building high-density housing projects in the Bay Area's urban communities has taken off in the past several years, the result of land-use policies that allowed developers to build condos and townhomes on former industrial property. This option

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wasn't widely available when buyers began moving to Mountain House.

It's all taken a toll.

"It is as bad as it looks," said Susan Patteson, an agent with Fox Realty and a Mountain House resident since late 2003. "Homes that two years ago sold at the peak of the market now sell for $200,000 less. We rode the high; now we're suffering the low."

Just four years into the development, about 6,000 residents live in roughly 2,000 homes. Of those, about 60 are in foreclosure, according to Sean O'Toole, founder of ForeclosureRadar.

Yet the major home builders at Mountain House - Pulte, Lennar, Centex and now Shea Homes - say the community is one of their best-performing markets. Given the Central Valley market, where sales are off by more than one-third compared with a year ago, according to the Ryness Report, that's not saying much.

700 to 530? That's surely an outlier?

[Dan J 277]

Taking VJ Trolls a charts a little further, I calculated the gain each year in housing prices and added inflation. This is using the national data that VJ Troll was using. Plus other data for inflation rates and other rates. I would add stock return data if I could find a good source.

Value of a $100,000 Investment in a House, CDs, or Bonds. Relative gain to original value with inflation removed.

Housing Gains vs Inflation

Housing Gains Vs Other Investments

Housing Gains Vs Other Investments - Adjusted for Inflation

Up until about the year 1999, a house kept its value, but it didn't gain anything. A $100,000 was about $100,000 in relative value in 1999. Up until 2006, values went up 50%. But most of that extra value gained, will probably be lost in the next few years. And we will probably be back to a $100,000 being worth in relative terms about $100,000 again in 2010 or so. Though that will vary by market.

If you buy a house now, its likely to drop in price. But it wont rapidly gain value again after the market recovers. It will take a long time for the $250,000 house you buy today, to be worth that much in market correction and inflation is taken into account in the future. If you don't plan on living in that house for 20-30 years, you are much better off not buying it. In the short term it will continue to lose value, only in the long term will it regain that value.