Home prices in 2, 5, 10 years?

[Mikeforpaul]

What is everyone's opinion of the housing market? Looking at the CPI vs housing market graphs it seems like the market prices have nearly returned to where they should be. I know the housing market is being propped up by government incentives currently, but realistically where do you think home prices will be in 2,5,10 years from now? (real terms, not nominal)



Thoughts?

[brandon]

Kind of skeptical about this chart. What is an "equivalent standard house?"

I think home prices will be up 5 years from now. Don't know what will happen in the next 2 years.

[ctiger2]

Jim Rickards said home prices are headed to pre 1995 levels on his recent KWN interview. He said the bubble needs to completely deflate before we can really start going back up again on some solid ground. Skip ahead to the last 5 mins. Doesn't mean it will happen though.

[Mike4Freedom]

It will be a down market for homes for at least 5+ years. They keep trying to reinflate the bubble. As long as they are doing that it can't bottom out.

[TheState]

Kind of skeptical about this chart. What is an "equivalent standard house?"

I think home prices will be up 5 years from now. Don't know what will happen in the next 2 years.

I can't comment on the older data, but looking at the Case-Shiller home index data, the run up in prices with the latest boom was over a 100%.

I can't seem to find it right now, but I downloaded their data from their website and used it in a presentation. I'll have to search for it.

Edit: here was the graph I made in April 2009 using their data

[Mikeforpaul]

Thank you for all the responses so far. I'm discussing this on another forum with people who are a little hostile to the idea that home prices wont be returning to the 2006 level anytime soon. Any information / opinions are appreciated.

[Romulus]

Looks like the right half of the chart has been edited.

Take into effect the Alt-A and Option A's arms that are resetting this year.. Its supposed to be bigger than the subprime mess? So its all very up in the air right now.

[Romulus]

check this out

YouTube - 2010 Real Estate Market Collapse - Prime Mortgage / Alt-A / Option ARM / Commerical - Investor Alert

[Mikeforpaul]

I'm working until 6:00PM EST so I'll have to watch the video when I get home. Thanks for taking the time to find that.


These are the reasons I believe prices of homes will be lower in 10 years:
(10 year time frame was brought up by someone else, not me. I would have ideally liked to stay in 2-5 year range but still my logic should apply I think)

-We're still trying to inflate the real estate bubble as I write this.
-We're still losing jobs.
-We're expanding government at record levels.
-The inflation from the bailouts that is coming is still off the radar of the average person.
-We haven't addressed the cause of the real estate bubble, or any bubble yet. We've only treated the symptoms with more credit.

Am I missing anything?

[Zippyjuan]

2006 levels? No- we probably won't see them for a while. My own thoughts are that things will go down nationwide by about ten to fifteen percent more from where they are and then level out for a while. Individual markets of course will vary- my local market is reporting housing price increases each of the last six months now but we were among the leaders on both the upside and downside of the bubble.

[jclay2]

People also thought it was crazy that the Japanese stock and real estate market would enter multi-decade bear markets. Keep to your gut and look at the chart. It's not different this time! Just so you know after 20 years, japanes stocks have still lost 70 percent.

[surf]

not sure about where others live, but near my home there are numerous condominiums (that look to me somewhat like the "projects" of the '60s only in an ugly 2009 architecture and color schemes) that are ready or already have gone on the market.

my point is that i believe there is still a huge over-supply in housing out there that will need to be cleared before prices and values will appreciate. uncertain of the effects of inflation (and the countervalue of high interest rates) on housing values....

just my .02

[cbc58]

Housing should get down to the cost to replace the stucture on the land. Figure out what that is in your area and that's where it's headed ON THE BEST POSSIBLE SCENARIO. Much lower is possible where glut of foreclosures need to get cleaned out and banks will sell them at a loss... Of course the dollar may devalue to give the illusion of prices not going down as far and as fast as they really are.

[Nanerbeet]

Strong dollar, housing prices go up. Weeker dollar, prices go down. Take your pick.

[madengr]

Just refinanced my mortgage and house appraised at 10% over what I paid in 2000, so that first chart is possible spot-on.

[Brian Defferding]

Strong dollar, housing prices go up. Weeker dollar, prices go down. Take your pick.

Either way, there is no way in Hades I can afford one anytime in the near future

[2young2vote]

Well, it depends on where you live. There are some decent starter/fixer-upper houses (2 bedroom, 1 bath, ranch etc..) in some great neighborhoods (no violence at all) and in my city for in the $30,000 range probably because they were foreclosed on. I'm 18 years old..with that first time home buyers thing and the money i have saved up, i could completely own one of those houses within a few years.

[Brian Defferding]

Well, it depends on where you live. There are some decent starter/fixer-upper houses (2 bedroom, 1 bath, ranch etc..) in some great neighborhoods (no violence at all) and in my city for in the $30,000 range probably because they were foreclosed on. I'm 18 years old..with that first time home buyers thing and the money i have saved up, i could completely own one of those houses within a few years.

Unfortunately one can't find a good starter home that low in the seas of cheese up here, it's more around $60,000 for a decent starter home. And I'm of the type that one should have 20% down payment to avoid PMI fees.

[Zippyjuan]

Strong dollar, housing prices go up. Weeker dollar, prices go down. Take your pick.

Houses are not imported or exported. Changes in the value of the dollar do not have any effect on housing prices.

[Brian4Liberty]

http://www.cbsnews.com/stories/2010/...ctionContent.2

CBS News correspondent Ben Tracy report the American Dream is now a nightmare for many of the 75 million Americans who own a home.

The housing report card is ugly. In the past two years, the housing market has lost an estimated $4.9 trillion dollars, as 59 million homes have declined in value.

Nearly 1 in 4 homeowners -- 10.7 million households nationwide -- are underwater on their mortgages. They owe more than their home is now worth.

The housing market is so bad in California, that a bank demolished 16 nearly completed homes - because it was cheaper to knock them down, than to finish them.

Home building across the country is almost non-existent. In 2005, 2 million housing units were built in this country. Last year, that number dropped to nearly a quarter of that.

That's left former boom towns like Las Vegas with a lot of roads to nowhere, as builders ran out of money and buyers for the homes they once planned to build here.

Then, there's foreclosure. Nationwide, nearly 6 million households have been taken back by the bank in just the past three years - pushing down home values, and leaving some neighborhoods looking like warzones.

CBS Reports: Where America Stands

The Problem

People are still losing their homes, preventing a housing market recovery.

"Disaster is not too strong a word and crisis is not too strong a word," said Michelle Johnson of Consumer Credit Counseling Services.

All of those risky loans that banks gave to homeowners are still wreaking havoc.

Jessica and Aaron Jenkins got in way over their heads when they bought their 5-bedroom dream home in Corona, California for over $700,000. They paid $2,800 dollars a month on their interest-only loan -- never touching the principal.

"It's cheaper than a 30-year fixed," Aaron said. "We can afford it so that's why we did it."

But this year, their loan would reset, adding $1,100 dollars to their monthly payment. In the next two years, nearly 361,000 loans will reset nationwide - increasing mortgage payments by an average of $1,000 per month.

That's why a record 3 million more foreclosures are expected in 2010

[Liberty Star]

Very informative article B4L, those numbers are sobering even with all the prevailing gloom about housing crisis.

[jrkotrla]

and I'm gonna keep popping this in these discussions.


you want to show (in these types of graphs) the relative percentage change, not the absolute change. If the price of a home goes from $80 to $100, it is a $20 increase or 25% increase. If the home later goes from $150 to $170, it is still a $20 increase, but only a 13.33% increase.

not showing the results on a a semi-log axis is as dishonest (because it exaggerates relative differences) as the classical hockey-stick graphs of an exponential function. That point on the graph is reached at any point you choose depending on how you scale your axis.

[Nanerbeet]

Houses are not imported or exported.

I knew that.

Changes in the value of the dollar do not have any effect on housing prices.

Interest rates do. And what do you think has an effect on interest rates?

[Zippyjuan]

Changing interest rates can effect the international value of the dollar (what is meant by a strong or a weak dollar) but the value of the dollar abroad does not effect our interest rates here. Not in any direct, significant way. There are other larger factors such as our expected rate of inflation. Last week, the value of the dollar rose against the Euro over concerns about economic problems in Europe. Did our interest rates change because of that? No, they did not. Now if we raise our interest rates, then more invesment money from abroad will flow towards the US and that would raise the demand for and value of the dollar.

Changes in the value of the dollar do effect things we import like oil or other commodities or goods- but not houses.