According to Catherine Reagor of the Arizona Republic today:
Home prices in metropolitan Phoenix took a healthy drop in October.
No one who owns a home wants to hear that, including me. But real-estate analysts say home prices in many parts of the Valley need to come down after climbing too high during the frenzy of 2004-05. The decline will help the market stabilize, they say. More buyers will get off the fence, and many sellers will still make a profit.
The median price of an existing Valley house fell to $242,000 last month, reports the Realty Studies department at Arizona State University’s Polytechnic campus. That’s the lowest median price the market has posted since spring 2005. It’s an almost 10 percent drop from the median resale high of $267,000 the housing market hit in early 2006.
Homeowners may not be happy, but fence sitters are. That does not, however, mean fence sitters are getting off the fence real soon, nor that markets will be stabilizing. Continued high inventory and foreclosures means that 10% is just the beginning.
Reagor quotes Anthony Sanders of ASU Realty Studies who listed his suggestions for fixing the housing market: Sanders said:
Mortgage fraud must be tackled. "Mortgage fraud, by both borrowers and insiders, must be identified and prosecuted in order for faith to be restored in the market," he said.
Other top tips: expand Fannie Mae, Freddie Mac and Federal Housing Administration loans, slow construction and cut prices; and for buyers and sellers to get realistic on prices.
Sanders left out my personal favorite- time. We need to recognize that the housing bubble wasn’t built in a day, and isn’t going to deflate in a day either. Nothing- not a massive reality check on the part of homesellers, nor a pullback by builders, nor interest rate cuts, government bailouts, nor mortgage fraud legislation is going to make the huge inventory of homes or the escalating foreclosures go away. The government can no more legislate a solution to this mess than it can legislate a solution to bad weather.
So grab a comfortable chair, sit back, and watch market forces at work. It will be awhile before the weather clears.
UK House Bubble
Bubble Meter
Northern Virginia Housing Bubble Fallout
Mish's Global Economic Analysis
Ohio Fraudclosure
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
Astoundingly, people are still buying. Just talked to a youngish couple … with a young kid. The guy is a ‘network engineer’, and the mom a former teacher, now has a small import concern that makes ‘laptop cases for women’.
They want to buy an overpriced new home, and think they are getting a deal at 680k … if they buy the home, I’d say they have two years max, before one or both income get greatly reduced, and they have to sell.
It’s incredible to me how stupid people are. Don’t they read ANYthing?
Yossarian-
I talk to some of those same people. They read articles like Reagor’s and focus on how far it’s fallen- not on how far it will go. I’ve had several friends who can’t believe I still haven’t jumped in and taken advantage of this “buyer’s market.”
The market looks more like a “value trap” to me.
I bought my house in 2001 for $134,000. And at the peak, houses in my neighborhood were selling for $315,000. Anyone that can’t do the smallest amount of research must be crazy to buy. Or CRAZED to buy, and not willing to listen to reason.
I tried to talk my sister out of buying an “investment” property to rent out in 2006, so did her accountant, but her mind was made up. She spent $220,000 on a $100,000 house!
When she says it’s necessary “for buyers and sellers to get realistic on prices,” how is it that buyers are being unrealistic? Because we don’t expect sellers to permanently keep gains over the last few years based on speculation, fraud, and financial instruments constructed as time bombs?
Sellers need to get realistic and price homes based on wage increases since 1999 – which is an increase of 30-40%, not 200%. The fundamental value of a home has not increased due to any structural change since then, price changes beyond inflation have only been due to speculation (both in housing directly, and in housing based finance products), so the “realistic” price is that based on (a) returns on capital for a home as a rental, and/or (b) historical prices for the area using conventional mortgage products and adjusted for changes in income. When sellers are pricing houses a for 30-40% increase since 1999, or cash flow positive as a rental, let me know, and I’ll be back at the table.
The latest selling feature in Colorado Springs is this house is selling for X amount of dollars less than in 2005.
JimAtLaw,
Whose wages have gone up 30-40% since 1999? Realtors? I don’t mean to get in your face but this economy has been good for those at the top but not for those at the bottom 80%.
The real problem here is that wages have been relatively stagnant for the middle class and that is what really makes the run-up in prices even more fishy.
Home prices in metropolitan Phoenix took a healthy drop in October.
What?? I thought RE only went up. Ok, maybe not, but we hit a permanently high plateau! And now, all of a sudden, a drop in prices is “healthy”??!?!?!
JimAtLaw: how is it that buyers are being unrealistic?
Simple, they’re still buying! They obviously expect the bust to be short and shallow, which to me is unrealistic.
Your 30-40% figure is accurate for a normal market, but this isn’t normal. I bet we’ll see 10-20% over 1999 prices at the very bottom (if not lower).
Yes, affordability. How can buyers be realistic when the houses are still unaffordable?
There are some who are jumping at the meager price declines, but not many.
Let’s hope things don’t get too bad. We don’t want to become a third world nation just to get a bargain.
No worries metroplexual, I feel your pain.
In seriousness though, I did some reading on this a while ago and recall reading that the median income had gone up 3x% over the past 8 years. When you think about it, this is really only 3-4% per year, which is less than the rate of true inflation over the same period. (Inflation computed the same way it was in 1990 is more than double the currently reported figure, I think almost triple – they’re changing the math to get the number they want to report.)
So real wages have been falling, even though nominal wages have gone up during this period.
This guy’s nuts! Buying high and selling low, even if you don’t see the absolute top or absolute bottom, that’s called cashing in on your winnings.
There are some drawbacks:
I can see where renting wouldn’t be comfortable, and we may be waiting another 1-2 years before buying again. Having sold over 2 years ago, that means the kids will be 4 years older, but there are large apartments and even houses to rent in good neighborhoods in the meantime.
Also, renting is more expensive for us than staying put would have been, but investing the money (even putting it somewhere at 4.5 – 5% interest, you’ll cover yourself.
Ending up with all that cash is definitely worth it. For us our apartment gave us was two years pay before taxes! How can I complain?