What I Think Will Happen to the Housing Market

I read an article on Money Central last week that included a summary of exactly what I believe will happen to the housing market over the next few months. The quote:

Eventually enough sellers -- led by those who have to sell -- will decide to cut prices enough so that enough buyers who have been waiting for bargains will decide that bargain prices have arrived. Sales volumes will start to pick up. Price declines will gradually slow and finally vanish. The housing market won't bottom until prices have declined enough to match buyer expectations.

Now, the big question is how low will prices go before sales volumes start to pick up? Will they drop 5%? 10%? 20%? More?

Of course, no one knows. Personally, I'm hopeful for a good-sized drop so I can take advantage of my real estate investing plan for the housing decline.

What do you think is going to happen? Is there any action you're planning to take as a result of those feelings?

Comments

[RJ]

Can't predict the future, but you can look at the past... Look at the Japan real estate bubble...

Look at any past bubble.

They usually take years to play out, on both the up and down sides. Prices usually climb, and then decline much more than anyone anticipates.

Looking back, I bought into nasdaq QQQ around 3000 on the way down. How much lower can it go, I thought? Yeah... I should have known better.

But housing is different, right? They're not making any more land, and everyone needs a place to live. We'll see..... we'll see.

[MrAtoZ]

The frothiest markets have the furthest to fall, and the bottom is still a ways off.

[Rhea]

I agree that we have a long way to go. I live in Boston, where prices are astronomically high. We have a long way to go. I think 30 percent or more is not an unrealistic drop, when you consider how high the prices have risen over the last 10 years.

[Lord]

It typically takes 3-7 years for prices to stablize, far longer than impatient buyers can wait. Prices fall in nominal terms initially but only in real terms eventually. Currently more homes are being withdrawn from the market than are selling so we are only at the initial stages.

[Foobarista]

These things are hard to predict. In California, San Diego is already taking a bath, and LA is starting to. Norcal is holding up better, particularly in SF and Silicon Valley where the economy has firmed up after the dotbomb, as well as lots of Google money frothing about, but I expect prices to drop some here, especially in the high end above $1M which is always more volatile than the midrange and lower. The Central Valley will get ugly - no local jobs and lots of barely-afforded houses will make for ugliness when option ARMs mutate into real mortgages.

There was an interesting "savings" survey floating about the web a few days ago; I'd guess that places that have better savings numbers will do better than those with worse ones.