Return to peak pricing when?!?

E

EvaLSeraphim_IHB

New member
From <a href="http://www.ritholtz.com/blog/2009/09/when-will-real-estate-recover-its-losses/">The Big Picture:</a>



Moody's suggests that real estate prices in California will not return to peak pricing until after 2023, more specifically 2030 (from the article, not the chart).



<img src="http://www.ritholtz.com/blog/wp-content/uploads/2009/09/moodys-RE.png" alt="" />
 
This estimate sounds accurate to me, in fact, my own sense was that it would be more like 30 years from now for some of the hardest hit areas. This is why it makes absolutely no sense for some people to continue to try to pay their mortgage. I think I struggled with the moral issue for about two minutes. Indentured servitude to a bank for a home that should never have been valued at the price you paid just isn't a moral issue to me. The concept of being underwater for decades isn't an idea that Americans are familiar with, so trying to convince them that this is reality is another story. I've tried to tell a friend that her house will never be worth what she paid in her lifetime (she's 50 years old, paid 545K for a dump that is maybe worth 200K, if she could sell it).
 
[quote author="tmare" date=1253396630]This estimate sounds accurate to me, in fact, my own sense was that it would be more like 30 years from now for some of the hardest hit areas. This is why it makes absolutely no sense for some people to continue to try to pay their mortgage. I think I struggled with the moral issue for about two minutes. Indentured servitude to a bank for a home that should never have been valued at the price you paid just isn't a moral issue to me. The concept of being underwater for decades isn't an idea that Americans are familiar with, so trying to convince them that this is reality is another story. I've tried to tell a friend that her house will never be worth what she paid in her lifetime (she's 50 years old, paid 545K for a dump that is maybe worth 200K, if she could sell it).</blockquote>


It's 'wrong' but a no brainer for exactly the reason you site above. IMHO, if you're smart, you'll admit a mistake, take the credit hit and move on.



I wonder though if the harder hit areas will recover first and not last. The areas that have avoided the price pummel are potentially paying a steeper but different price, illiquidity and immobility. In the hammered zones, you can sell and enough turn-over is occuring that a normal move-up market can be established in them. In the lightly hit zones, they may find themselves turning anaerobic. Nothing breads contempt like being stuck with something.
 
Sweet! We'll be fully recovered up here in Seattle just in time for us to sell here for bubble prices and buy some boomer's dream house in Carmel.



Now, if you could just do something about the State government ;)
 
[quote author="Nude" date=1253405615]Sweet! We'll be fully recovered up here in Seattle just in time for us to sell here for bubble prices and buy some boomer's dream house in Carmel.



Now, if you could just do something about the State government ;)</blockquote>


Agreed, economy will recover but lending will still be conservative and normalizing interest rates will reduce affordability.
 
^ Moved Thread Title: "2011 thread is so 2009. Try 2030."



(Sorry, Soylent. I attempted to merge your thread with Eva's but lost the place-marker of your original post. I hope this will do.)
 
From <a href="http://www.doctorhousingbubble.com/californias-financial-depression-unemployment-and-underemployment-rate-at-great-depression-levels-23-percent-unemployment-for-biggest-state-in-the-nation-california-will-not-see-housing/">Dr. Housing Bubble:</a>









<em>"And we are already seeing some gas running out of the California buying spree. Here is recent California sales data:



July 2009 Sales: 45,079



August 2009 Sales: 39,811



This includes resale homes and condos. This is a drop of 11.7 percent. This is incredible especially the amount of homes being sold at lower prices. But again, you are selling homes in a state that is in a financial depression. And for perspective on those sales figures, the August peak was reached in 2005 with sales at a stunning 73,285. The average August sales figure for the state going back to 1988 is 49,467. So even with a 50 percent price drop in the state, the $8,000 tax credit, and real estate pundits cheerleading home sales the market still can?t make a 21 year average. Now we enter the fall and winter selling seasons that are slower and exhaustion is creeping into the markets. Add the Alt-A and option ARMs into the mix for 2010 and you can understand why we are starring at a second leg down. For last month, the median price dropped to $249,000 but keep in mind, when you see many of those mid to upper tier markets taking hits you might see the median price creep up even though prices are falling."</em>









<em>"So as California is experiencing its own depression we have a group of people trying to sucker people back into buying homes. The rhetoric seems eerily familiar to the bubble days. ?If you don?t buy you?ll be priced out!? or ?you?ll miss the next move up!? and people jump on this. Many are going to be shocked as 2010 rolls around. Anyone can logically understand that an economy with depression like unemployment is not a good place for a housing market."</em>
 
There seem to be folks who deny that there will be many more mortgage problems, (foreclosures), in the future and that whatever problems there may be, will affect future home prices in a downward direction. And they deny this in the face of all evidence to the contrary.



Granted, the following is only loan data from Coto de Caza, but it is still interesting to see how many ARMs reset in 2010 vs. 2009. To see the ARM reset info you have to go to about half way through the article to the paragraph that starts as <a href="http://www.cotohousingblog.com/?p=1978">"The interest rate reset years vary"</a>.
 
[quote author="tmare" date=1253396630]This estimate sounds accurate to me, in fact, my own sense was that it would be more like 30 years from now for some of the hardest hit areas. This is why it makes absolutely no sense for some people to continue to try to pay their mortgage. I think I struggled with the moral issue for about two minutes. Indentured servitude to a bank for a home that should never have been valued at the price you paid just isn't a moral issue to me. The concept of being underwater for decades isn't an idea that Americans are familiar with, so trying to convince them that this is reality is another story. I've tried to tell a friend that her house will never be worth what she paid in her lifetime (she's 50 years old, paid 545K for a dump that is maybe worth 200K, if she could sell it).</blockquote>


Giant stacks of 100s of 1000s of dollar bills will generally make people shrug the moral issue quite easily. Most of them will even convince themselves in some weird system of ethics that this is right ethically.



I for one, if I buy some commodity for a million dollars, then I fully expect to pay that amount, and if I don't have the money and borrow, I expect to pay it, one hour of my salary at a time. People buy a loan from the bank, and the buy a house from the seller. But in a great magical trick, everybody now bundles them together.



If I buy something and I overpay, that's between me and the seller, NOT between me and my older brother I borrowed money from. Pretty simple concept really. Blaming the banks here is like the fat guy who blames McDonald's for his fat appearance. Sorry, it was still a personal choice to borrow the money.



Morality doesn't exist for the benefit of individuals, but for the benefit of the collectivity. It's quite obvious walking away from debt benefits the individual to the detriment of the the collectivity. The very reason for morality to exist is to prevent that kind of behavior.
 
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