housing: a bottom is emerging

[Seraphim]

http://www.zerohedge.com/sites/defau...for%20Sale.jpg

I'm NOT saying that housing won't go lower (it probably will)....


But American real estate is going to hit a bottom relatively soon. Solid down payment, fixed rate, a house you can AFFORD.

I think the end is near for the housing crash.

Commercial real estate? The blood bath is right around the corner....

[Pennsylvania]

Wouldn't interest rates have to rise drastically for an actual bottom to occur?

[Seraphim]

Rates won't rise drastically without triggering hyperinflation.

Bond "vigilantes" may or may not force rates up in the short term...but The Fed will simply continue QE type bond programs.

Interest rates CANNOT reach double digits without BANKRUPTING the US Government. They WILL not let it happen. They WILL obliterate the currency before an outright default occurs.

This is why I'm saying a bottom is NEARING.

Once this $#@! storm of inflation/hyperinflation occurs, hard assets - real estate included....will be the saving grace of the working class who THINK.

It's a matter of MATH.

The Fed CANNOT raise rates to 21% (or whatever) like 1980 to save the currency. It will bankrupt their own government (AND BANKS). 11% rates (plus or minus a bit, and that number is LOWERING) would bankrupt the GOVT.

Wouldn't interest rates have to rise drastically for an actual bottom to occur?

[Zippyjuan]

Wouldn't interest rates have to rise drastically for an actual bottom to occur?

Rising interest rates would be a negative as far as housing prices go- higher interest rates means that a buyer with a certain income level could only afford a less expensive house if rates rise becasuse higher rates mean higher payments. High interest rates will not signal a bottom but would send prices even lower again probably.

[airborne373]

Wouldn't interest rates have to rise drastically for an actual bottom to occur?

Good point.

I was involved in real estate, mostly as a large production builder. Those days are over. There is room for residential real estate to fall. Particularly in states like California, Texas and Florida which I believe to be 10 to 25% overvalued as of today. The poster is correct the commercial real estate market went over the cliff this Winter and will be sliding down all summer and beyond.

This is neither good or bad. But an opportunity for those who are awake imho.

P.S. The residential market may get a dead cat bounce plus the next few months is tax return time and housing sales will increase as a result, for a time.

[tremendoustie]

Wouldn't interest rates have to rise drastically for an actual bottom to occur?

Actually, higher interest rates would mean lower prices on properties. Think about it -- higher interest rates means people are less likely to buy.

However, I don't believe interest rates will go up significantly until inflation forces them up -- and inflation means rising prices.

So, I do think now is a good time to buy.

[Original_Intent]

And wouldn't all the banks foreclosures have to be put on the market and drive prices to reality to get rid of the months and months of inventory out there?

[Seraphim]

Silver, for example, is still a MUCH better investment...BUT...if you are a budding family and need a home...As long as you have a real downpayment (20+ %)...Find a steal of a deal somewhere...Buy LESS than your creditors say you can afford, fix the rate..and you'll be fine.

[xFiFtyOnE]

Silver, for example, is still a MUCH better investment...BUT...if you are a budding family and need a home...As long as you have a real downpayment (20+ %)...Find a steal of a deal somewhere...Buy LESS than your creditors say you can afford, fix the rate..and you'll be fine.

Might I add ALOT LESS to that statement. I bought my first house a few years ago and could not believe what they approved me for...I'm allready struggling with cash now, I can't imagine what it would be like if I spent all the cash the nice banks were trying to get me to spend!

[Sullivan*]

Anybody really good at this kind of stuff have any guidance on refinancing?

[Zippyjuan]

Anybody really good at this kind of stuff have any guidance on refinancing?

Find out how much the refinance will cost you (a lender may try to say you will have no out of pocket costs but that means that they are adding the costs of the refi to your new loan balance). Next, calculate how much you will be saving on your monthly payment for the new loan vs the current one. Divide the costs by the savings per month and this gets you your "break even" time frame (how long it will take you to get back in savings what it cost you to refi). The lower, the better. How long is good for that would be up to you. A couple of other things to consider. One- how long have you had your present loan already? The longer you have a loan, the higher percent of your payment going to reducing the principle. The longer you have had the loan, the less sense it makes to refi. This also references the second- do you want to do a shorter term on the refi? Taking a 15% loan instead of another 30 year would mean the loan gets paid off in a shorter time frame which reduces the total interest you end up paying over the life of the loan. If there is enough of a difference between current rates and what you are paying, you could end up with a shorter term loan at lower payments. You will have to run the numbers yourself to see what will be best for you.

The last time I did a refi I could have afforded a 15 year but went with a 30 to keep my payments lower- the 15 would have made my financial situation tighter. Keeping them lower gives me more flexiblity in the event of some financial crisis. That was useful when my company went on strike for five long months and I was able to keep up on my payments and not put my home in jeopardy. I am still able (and have been taking advantage of) to make extra payments towards principle to reduce my balance and the time to pay off the loan.

[ctiger2]

Housing will have hit bottom when prices are at 1995 levels or LOWER.

But in reality, no one knows anything. : )

[psi2941]

no wait it has hit rock bottom.

3.5% down payment is still going on (FHA loan)

interest rates are lowest has been in decades. I just saw a commercial for 3.85%

most of the new loans are still government secured loans.

however yea in terms of dollars it may go up but in terms of real $#@! like corn, gold, oil it got too much way to go down.

Housing will have hit bottom when prices are at 1995 levels or LOWER.

i agree with you but peter schiff would argue in a market nothing swings one way and stop at the dead middle. it usually swings to the other way before it settles in the middle.

[Lafayette]

Housing will not hit bottom until the millions of properties that are in or will be going into foreclosure are settled, the FED, banks and GSE's clear their books of the trillions worth of crap loans, and housing prices return to normal levels. In other words, not anytime soon.

Wait till the commercial property defaults start to hit...

[Acala]

Housing will not hit bottom until the millions of properties that are in or will be going into foreclosure are settled, the FED, banks and GSE's clear their books of the trillions worth of crap loans, and housing prices return to normal levels. In other words, not anytime soon.

Wait till the commercial property defaults start to hit...

Agreed. Unless what is meant is that inflation-driven price increases that say nothing about actual value start to happen. That is possible, but certainly not an indicator to buy.

[Brian4Liberty]

And wouldn't all the banks foreclosures have to be put on the market and drive prices to reality to get rid of the months and months of inventory out there?

Housing will not hit bottom until the millions of properties that are in or will be going into foreclosure are settled, the FED, banks and GSE's clear their books of the trillions worth of crap loans, and housing prices return to normal levels. In other words, not anytime soon.

Wait till the commercial property defaults start to hit...

All true.

But they have constrained inventory to a point where houses are getting difficult to buy in some areas. There are bidding wars going on right now, mostly investors (and investment groups) taking advantage of cheap money and cheap houses. Houses are getting multiple bids above asking price within hours of listing the house.

Goldman Sachs wants all of those government owned foreclosures, and they will continue to pretend that the houses can't be sold.

[LibForestPaul]

It is hard to even define what a bottom is.

I will use cost of median home ownership vs median household income.
This is where the trick lies.

So a home is purchased for 300k at 3.5% with 60k down (no pmi).
1) interests rate stagnate. So what would cause home prices to spike?
2) interests rate go up slowly. Home prices will?
3) interests rate spike up. Home prices will plummet as principal + interest is out of reach for mundane (what actually happens to fiat money is at best a guess. i.e. Just because mundanes can not purchase does not mean well connected REIT can not purchase?)
4) property tax rates are on assessed value. New purchases as well as improvements usually trigger re-assement no? This factors into total cost of home ownership,no ?
5)regional employment market. i.e. Will San Fran always be tech hub? What happens if tech crashes to home prices?
6)occupational outlook.

too many variables, and too much pieces which have and will continue to be manipulated.
Best bet...self-assessment.
i.e. % of tcho (total cost of home ownership) vs actual median household income including risks (i.e. Dual earnings becoming single, tax rates, regional employment outlook, occupation outlook) being kept to a minimum. When that number does not appear to be going lower, and the appropriate risks have been identified and analysed as best as possible (perhaps a GOOD CFP may help) than a bottom has been reached.

Good luck! If anyone knows how to go about to analyse and quantify these data facets, let me know, curious myself.

[Liberty74]

Housing will not hit bottom until the millions of properties that are in or will be going into foreclosure are settled, the FED, banks and GSE's clear their books of the trillions worth of crap loans, and housing prices return to normal levels. In other words, not anytime soon.

Wait till the commercial property defaults start to hit...

I would also add ending the IRS which adds about 20% to the value of a home through the tax code. Basically meaning, you paid too much and your interest being paid is too much - wealth stealing going on by the government. Most people really don't benefit from the write off their mortgage today anyways. Rather, the biggest beneficiaries are those that mainly itemize - 80% of home owner deductions goes to top 20% of income earners.

Right now the government has done everything possible to prop up home values from keeping the free market bottom from actually being reached.

[Seraphim]

As stated in the OP...I do NOT think US housing has hit it's absolute bottom. But it is getting relatively close. If you play your cards right there are a TON of fantastic opportunities to be had.

[Indy Vidual]

Housing will not hit bottom until the millions of properties that are in or will be going into foreclosure are settled, the FED, banks and GSE's clear their books of the trillions worth of crap loans, and housing prices return to normal levels. In other words, not anytime soon.

Wait till the commercial property defaults start to hit...

True, but...
Property prices could bottom and head higher if the Dollar continues to fall, while Real Estate/Gold or Real Estate/Silver continues to favor PM's.

[anaconda]

Wait till the commercial property defaults start to hit...

I thought this was supposed to happen in 2011?

[Carson]

I calculated out housing prices once like they were a commodity like silver or gasoline. I then adjusted it against those prices. It was tough to tell a bottom because of such a wide range in fluctuation on the rise up because of location. I don't think it is anywhere near there yet though.

I suppose I could try it again. I was very crude in my estimates and also very limited in the other resource commodities I used.

Here is another crude estimate for a $13,000 house in San Diego. I'm thinking that was the price in the fifties or sixties. When the bubble was in full tilt I remember seeing them running about $550,000 (Plus it's now fifty years old)( A lot of a house price is the value of the land. That should also be considered in a real estimate).

This time, just because the math is simple, lets multiply the price by about the number of times they have counterfeited the entire money supply to dictate their way with us.

$13,000 times 26 equals $338,000.00



P.S. Actually I can't really tell how many times they have counterfeited the money supply. I reality if you double the amount of stuff the supply represents you could, I would imagine, double the supply and have no inflation or deflation showing against the currency.

Still 26 times is okay for me right now. It seems as good as any other numbers coming out. Probably better.


P.S. P.S. With more stuff it would be much higher than 26 times.

[Zippyjuan]

A couple of ways to look at it:

Existing housing prices in terms of gold: ( should be noted that after the bubble the price of gold rose while the prices of houses fell- the price of gold was falling from 1980 through about 2002 while housing prices were rising)

http://goldnews.bullionvault.com/hou...atio_050220093

Nominal and Inflation adjusted housing prices- looks like we are crossing the trend line (over- correction is not uncommon for prices):
http://www.jparsons.net/housingbubble/

[oyarde]

I do not think we are anywhere near the bottom , I would not let that stop me from buying one to livein , but not anything else

[oyarde]

I do not think we are anywhere near the bottom , I would not let that stop me from buying one to live in , but not anything else.

[Zippyjuan]

Interest rates are pretty incredible now. If I did not already own, I would be looking - and definately not do anything with an adjustable loan (not usually a good idea in any times). Lock it in! Anybody "waiting for the bottom" will end up missing it. Bottoms are only known after they have passed though housing prices move much more slowly than other commodities like say precious metals.

[wgadget]

I heard on Bloomberg radio yesterday that by 2023, home prices will be at the same levels they were before the housing crash.

Not sure if that will be due to inflation or what. Hmm.

[seapilot]

Housing is going to go up not because its more valuable but because its measured against a falling dollar value. The value of a house in 2005-2006 when the dollar was stronger currency is going to be a lot less valued in the same amount of that same currency today. The people that invested in housing in those years will never fully recoup the original value and that is not even taking into consideration interest owed to banks and maintenance costs for material is higher. Its a double whammy of deflation of housing while the inflation of the currency. The inflation of the currency is masking the full deflation the housing bubble has taken. If a bottom is now it is because deflation of the housing market is overtaken by the inflation of the currency.

[Zippyjuan]

I would make it simpler. If you find a home you like and can afford (include interest payments, property tax, upkeep, any homeowners fees) and intend to stay in it for several years, go for it.

If you wait, you risk prices going up (or down though we may be nearing a bottom) or interest rates going up (cost of borrowing which will raise what it costs you to borrow- rates are at record lows so most likely direction will be up). If you wait until the economy is better, you will be facing more competition for purchase as well.

I live in California where my property taxes depend on what I paid for my property- not what my neighbor paid for his this year so rising property values in my area will not raise my property taxes.

And buying now vs a couple years from now means that it will be paid for a couple of years earlier than if you wait (and stay in it long enough to pay off).

With more people becoming renters, rents have been rising so the chances that you can find a place to own for perhaps not much more than you currently pay to rent may be pretty good (will depend on where you live).

[psi2941]

I would make it simpler. If you find a home you like and can afford (include interest payments, property tax, upkeep, any homeowners fees) and intend to stay in it for several years, go for it.

If you wait, you risk prices going up (or down though we may be nearing a bottom) or interest rates going up (cost of borrowing which will raise what it costs you to borrow- rates are at record lows so most likely direction will be up). If you wait until the economy is better, you will be facing more competition for purchase as well.

I live in California where my property taxes depend on what I paid for my property- not what my neighbor paid for his this year so rising property values in my area will not raise my property taxes.

And buying now vs a couple years from now means that it will be paid for a couple of years earlier than if you wait (and stay in it long enough to pay off).

With more people becoming renters, rents have been rising so the chances that you can find a place to own for perhaps not much more than you currently pay to rent may be pretty good (will depend on where you live).

Zippyjuan u make great points, that is usually/always enough for me to not logging and post something.

+1

anyways zippyjuan hit the nail in the head, however i do feel home prices in terms of real money will continue to decline until it fully swings to the other end of the spectrum.