Why U.S. house prices won’t recover

[Meetzos]

The good old days are gone, if you buy a house you better like it and want to stay.



http://www.marketwatch.com/story/why...=MW_GoogleNews


May 1, 2012, 12:26 p.m. EDT
By Jack Hough


Why U.S. house prices won’t recover

When will U.S. house prices recover? Likely never. But that’s no reason not to buy.


Taking inflation into account, home prices are down to 1895 levels

The latest S&P/Case-Shiller numbers, reported last week, show that prices in 20 major markets declined 3.5% over the year through February. They’re now back to 2002 levels. If we subtract for inflation, they’re back to 1998 levels.

But consider: After subtracting for inflation, prices are also back to 1986 levels. And 1955 levels. And 1895 levels.
That’s because the natural rate of price appreciation for houses is zero after inflation. Prices will eventually stop falling. They’ll resume rising. But over the long term, they’re unlikely to resume rising faster than inflation.

That’s why prospective buyers should stop focusing on the vague hope that house prices will jump from here and focus instead on the functional value houses provide for the money. In most markets, they provide enough of that to make buying a good deal.

Snip

[Treasure Searcher]

Another factor is location. If the unemployment level is high in your neighborhood, you are stuck with your house or face a haircut, if you want to sell it.

I do know of some retirees going to Arizona and buying houses for retirement. They are getting some good deals.

Its a buyers market in alot of locations. Sucks if you want to sell a house, though.

[hammerhead]

I think they were unrealistcally high. Do you? Now that there is no more free or easy money to be had, it gets back to reality.

[Irons]

Yearly income is going to be around $18,000 for those that bother to work and the parasites will take 1/2 of that.

The majority of kiddo's will never get to make payments on anything near as nice as they grew up in.

[hammerhead]

Yearly income is going to be around $18,000 for those that bother to work and the parasites will take 1/2 of that.

The majority of kiddo's will never get to make payments on anything near as nice as they grew up in.

Start small and build on it is what I have been telling my kids. One has been looking with her husband for over a year. Pre-approved financing only gets them so much. But hey, it's realistic. Glad I didn't ride the refi wave. I'd be out on the street or even better, in the woods.

Now to work on my retirement plan. Sell what I have, buy a fixer upper with cash, no financing, sell, repeat. Don't have many more years to put this into play. Wish me luck, or talk me out of it.

[REO 54]

...thats why I'm waiting for the inflation machine to turn on! My location is about as good as I can get; 5 acers rual,farm/ag on an island.
We don't even have stop lights. I re-fied in 10' to 4.5% 30yr....so I'm not going anywhere.Thus,come on inflation!

http://danielamerman.com/articles/2012/GoldHisC.html ......Been reading some this.

[stewie]

I hear paychecks are ready to inflate to facilitate all those expensive home purchases.

Think it through...

[WillieTheKid]

O.K., for arguments sake, let's say housing will only keep up with inflation.

So a new home buyer ponies up 20% for a 200K house (40K) and takes a loan out for the rest (currently about 3.75%, isn't it). If inflation stays at about 3% that isn't a good scenario (but not a horribly bad one either, since you now own your castle), but if inflationclimbs to say 8%, then the appreciation on the house is 8% and he is paying about 4% on the borrowed money so he/she nets about 4% on the $160K owed due to inflation depreciation. That's $6,400 in profit every year, which isn't bad. (You also have the opportunity to put in a bit of sweat equity, etc.)

The question is: is inflation going to go up. I think it is at a very low rate historically, isn't it?

But--as Dorothy said......"I don't think were in Kansas, any longer."..........using hisorical measures doesn't cut it anymore.

WTSHTF can take on many different forms. The question is which form do you think it will take. Inflation? Deflation?

What if inflation hits 100%? I think homeowners will be pretty happy--as long as they have a business or job to pay for the house.

I don't chide anyone for owning a home or not owning one.

I think it is a personal choice. (We do own our home by the way.)

--Willie

[silver solution]

I saw on the tv that people are making really big bucks flipping homes again in California. Do you not know thing are great in many places:-)

[stewie]

Yes homeowners will be very happy, if they can still afford their 25 dollar lunches, the 1200 dollar a month electric bill and 12 dollar a gallon gas.

The buyers won't factor any of these new expenses into their purchase decisions and we'll all get raises every month.

Businesses will have to hire $100 dollar an hour men with sticks to keep all the rich customers away.

[edsl48]

I buy houses, fix them up and rent them out. Now last Janurary I purchased a 3 bedroom 1700 sq foot 1950ish ranch for 53,000. To be fair I had a new furnace put in, new wall to wall, did a few electrical upgrades, new windows and a new bathtub. I now have lets say close to 60 in it. Now one block over a similarly built 1000sq ft two bedroom ranch sells the other day for 137,000. So, to me quite frankly I don't think some people don't even realize that the bubble has popped. Consider too that there had to be an apraiser in that sale and just how could they ignore my comparable transaction that was just a few hundred feet away?
In this situation prices have apparently recovered for some people.
What a joke and a warning; never trust a Realtor or an appraiser to do the due dilligence that you should be doing

[hammerhead]

I buy houses, fix them up and rent them out. Now last Janurary I purchased a 3 bedroom 1700 sq foot 1950ish ranch for 53,000. To be fair I had a new furnace put in, new wall to wall, did a few electrical upgrades, new windows and a new bathtub. I now have lets say close to 60 in it. Now one block over a similarly built 1000sq ft two bedroom ranch sells the other day for 137,000. So, to me quite frankly I don't think some people don't even realize that the bubble has popped. Consider too that there had to be an apraiser in that sale and just how could they ignore my comparable transaction that was just a few hundred feet away?
In this situation prices have apparently recovered for some people.
What a joke and a warning; never trust a Realtor or an appraiser to do the due dilligence that you should be doing

Guess you are someone who knows what to look for. I know a lot about buildings, but would probably pay too much for a vehicle.
How does the landlord business treat you? Have thought about doing that too, but don't want to deal with non-payers and destructive people.

[bemac]

I think they were unrealistcally high. Do you? Now that there is no more free or easy money to be had, it gets back to reality.

You kiddin'? Looked at long term interest rates lately? Money isn't going back into housing for the same reason it didn't go back into tech stocks. Once a bubble pops, the money doesn't flow back into it.

[hammerhead]

You kiddin'? Looked at long term interest rates lately? Money isn't going back into housing for the same reason it didn't go back into tech stocks. Once a bubble pops, the money doesn't flow back into it.

Thanks Bemac,
Interesting way to look at it. I look at housing more as a necessity than an investment vehichle although it can be used both ways. We need places to live more than we need Silicone Valley. Like to see things for what they are really worth.

[shades]

Some markets will recover, many will not. It depends on the location and employment opportunities as others have pointed out.

[hoarder]

Consider too that there had to be an apraiser in that sale and just how could they ignore my comparable transaction that was just a few hundred feet away?

This is how appraisors work:
Step one: Look at loan amount on home being purchased.
Step two: Find data to support that amount.

[hoarder]

Guess you are someone who knows what to look for. I know a lot about buildings, but would probably pay too much for a vehicle.
How does the landlord business treat you? Have thought about doing that too, but don't want to deal with non-payers and destructive people.

I used to have rent houses. Remember this: If a tenant declared bankruptcy, you might have to allow him to live rent free for a year while you make payments. Since they can only declare bankruptcy every 7 years, the lowest risk prospective temant is one who had a recent bankruptcy.

I found that there is much more money to be made in non-income producing property than income producing property.

[bemac]

Thanks Bemac,
Interesting way to look at it. I look at housing more as a necessity than an investment vehichle although it can be used both ways. We need places to live more than we need Silicone Valley. Like to see things for what they are really worth.

Yup. People need a place to live, like they need food and clothing.

[edsl48]

Its difficult,, but what business isnt? The biggest problem is when one actually is in an eviction ituation it is always the evil landlord that is targeted.
Instead of saying the evil landlord is throwing the children out how about saying its the evil parents that dont pay the rent?
These baby popping families know the system and milk it to the finest
Landlords after all have to pay the expenses and taxes to keep afloat. I wouldn't recommend this business to anyone. Im already in it so I keep rolling around. By the way if you think I am wrong I would be glad to sell you some rent houses. All are in a College town rehabbed in full compliance with the various assorted codes thrown at you by taxing bodies these days and my best wishes.

[hammerhead]

Its difficult,, but what business isnt? The biggest problem is when one actually is in an eviction ituation it is always the evil landlord that is targeted.
Instead of saying the evil landlord is throwing the children out how about saying its the evil parents that dont pay the rent?
These baby popping families know the system and milk it to the finest
Landlords after all have to pay the expenses and taxes to keep afloat. I wouldn't recommend this business to anyone. Im already in it so I keep rolling around. By the way if you think I am wrong I would be glad to sell you some rent houses. All are in a College town rehabbed in full compliance with the various assorted codes thrown at you by taxing bodies these days and my best wishes.

Thanks for the offer, but I think I'll have to agree with your assessment and will pass on it. Why rent when you can get the place for free? First, last and security is all you need to live in a place for half a year or so. Then move on to the next one.

[Concours14]

The glory for our parents was, they BRED their housing market that bought their homes and took them into retirement. Problem for the baby-boomers is, they bred at less than replacement rate, that is, fewer than 2 kids per couple, averaged out. You can quote all the high-fallootin' financial circumstance you learned at MBA-training all you want, interest rates, bubbles, bubble-heads, talk about all the circumstances you THINK caused the current trouble, the only factor that mattered the last 15-20 years was baby-boomers were too lazy to breed, manufacture and save. And the "replacements" for the children boomers didn't create were down-south illegal immigrants. Everything else, flowed from that.

And that's it. The MBA/financial wizards avoid that simple little fact because it tells the truth of the matter--that all of this is FOREVER. Go ahead, brilliant financial-ones, dispute that. You do not get around demographics. Ever. And you ignore them at your long-term peril.

[shades]

The people at the top are not in "peril". They can afford the large homes in safe, secure communities that you can't afford to go to. (All around the world).

You're just one of their many cattle. To be used until the grave, and beyond if possible.

So when you wonder why there is no sense of community, sick, disfunctional societies, etc. It is because those at the top don't give a sh**. They just want
to see dollars on the bottom line, and they don't care about your personal story at all. They're only interested in enriching themselves and building spires to
greed and ego. Perhaps I speak in generalities, but on the whole I'm right.

[Meetzos]

The people at the top are not in "peril". They can afford the large homes in safe, secure communities that you can't afford to go to. (All around the world).

You're just one of their many cattle. To be used until the grave, and beyond if possible.

So when you wonder why there is no sense of community, sick, disfunctional societies, etc. It is because those at the top don't give a sh**. They just want
to see dollars on the bottom line, and they don't care about your personal story at all. They're only interested in enriching themselves and building spires to
greed and ego. Perhaps I speak in generalities, but on the whole I'm right.

If one looks at how society is set up, nine months before you are born someone somewhere is starting to make money off you, from the first doctor your mom goes to the money generator starts. Then when you cough up your last silver dollar, the perpetual care at the cemetary kicks in. $$$$$ thats what society is about. $$$$$

[anotherdave]

When you measure value with something as manipulated as the FRN, there are going to be distortions. Then add in political corruption, corporate irresponsibility, and social engineering to the equation.

A second factor is those who pay no attention to any of this, and as a consequence get farmed. Add their participation to the forces above, and you have the U.S. economy today.

"Prices" will always be what the buyer and seller agree on. But understanding what that means might just be impossible.

.

[<SLV>]

I'm building my own house right now. It is a 2/1 two-story; 800 square feet plus a basement. I'm estimating I'll have $50,000 into it total, and that is only contracting out a few specialty jobs -- doing everything else myself with some help from friends. Houses aren't cheap no matter what way you look at it. Around these parts of Wisconsin (poorest county in the state) you can buy a house this same size (in "used" condition) for about $50,000. I don't think they are overpriced around here at all.

[hammerhead]

Way to go <SLV>,

Thats the kind of housing that I feel we actually need. Ofcourse some peoples wants are actually their needs in a round about way. A place to live is all I ask. Have fun with building it.

Where I live, we lost alot of jobs that were manufacturing. Paper mills, GE. We don't have much of an income producing economy other than catering to visitors. We are what is known as a Cultural Destination. Our area has always had it's summer "cottages" that are actually estates. But now it seems the place is just set up for out of towners. Housing prices are high, in my opinion, because of this.

Not ungrateful for the people that like to come and visit. We do have a beautiful area and I don't mind sharing it. Just wish there was more local money generated.