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May 30, 2007


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No way things have hit bottom. In my area alone (Boston), the inventory of houses for sale is sky high, the spring selling season stunk, and foreclosures are growing exponentially. With all this available property, there is only one place for prices to go. We have a looooonng way to go.

What will hit bottom first is volume. The new home sales bounce could be the start but I would wait for an existing home sales bounce. Only then will prices start to firm. I would venture a year of nominal price declines followed by several years of real price declines (flat prices) in the areas that boomed the most.

There is so much fluctuation from area to area that I think you have to take national numbers like this with a grain of salt. Here, there was a never a bubble, and the "slump" was very minor-- prices never went down, they just didn't go up as quickly. It may be over at this point. Meanwhile there are still some places, larger markets, with a rough road ahead. Keep in mind also that NAR has motivation to make everyone think it's over too, so I wouldn't put too much stock in their president's comments.

People always sound overly optimistic.

Remember the last bear market for stocks? At first they talk of a soft landing. Then they keep saying "the worst may be behind us" for two years.

It's the same story for the real estate market. At first they speak of a mild correction. I have been hearing "the worst is probably behind us" for half a year now!

These people want to encourage others to buy. It's in their best interest to do so.

Housing inventory is at a very high point. They are making more new houses faster than selling houses.

Check your local inventory statistics to gauge whether or not the prices will stabilize soon.

Home builders are giving out a lot of incentives for people to buy a new house. This is masking a much sharper drop in prices.

Have you seen the video on

It is based on a graph from the NYT. We are way above the historical value. Many people are priced out. It will be a long time before things get back to normal.

As a side note, I never get why people want a soft landing. The Japanese real estate market managed a soft landing. It kept going down for 13 years!

It's going to have to get back to its fair value sooner or later. We are nowhere near that point.

My wife had a patient who's a construction worker in the Chicago area say that the housing slump was going to last 10 more years. I hardly believe him. I do believe that the worse is over and although prices may decline a bit more, they won't be as sharp has the last few months. Hurray! I'll be buying a house in a year or two.

Can the median household income in your area support the median house price on a 20% down, 30-year fixed? Traditional rule of thumb is 2-3x annual income, except in California where it's a bit higher. If the number don't work, there's a good chance things are going to get a lot worse before they get better. Most of the ARM resets have yet to occur, and as housing prices fall fewer people are able to re-fi into more favorable loan terms. There's a lot of data out there, but you won't find it being touted by the NAR; the main stream media is getting better, but there are still far behind. Robert Schiller is responsible for the graph that is used by the NYT and also has the Case-Schiller index and is author of Irrational Exuberance (which is where the graph comes from).

Dy, it would seem that the construction worker, though he may be off on the time table is in the field and has a good sense of what's truly happening on the ground, no?

I think ARM resetting is probably something to keep an eye on.

These ARM loans were not taken out all at the same time. They are resetting for people at different time periods. The good news is that it's not going to occur all at once. The bad news is that things may not quickly turn around after "the worst" is behind us.

wow. you're quoting the NAR. wow.

I agree with cami, somewhere floating around cyberspace was a graph showing the ARMs resetting over the 2015-2011 period. I'd suggest looking it up. QUITE amazing!

From the way things are reading, this stage in the R.E. cycle is kinda like the pause in the 3rd round of a heavyweight fight: it's wonderful that the pounding has stopped, but there's a LOT more ahead!

That guy is from the National Association of Realtors. That's the trade group representing the people who get paid a commission if you decide to buy. For the last year, after every quarter's disappointing sales numbers, they've said that they think things are just about to get brighter...

Here's a quote from you. It's from the National Association of Homebuilders. (They are the trade group for homebuilders, so they might have some financial incentive, but I'm not sure what the angle is... getting some gov't bailout?)

Home Construction Bust May Last Until 2011:

Also, here's the graph people are alluding to -- it shows the schedule for when various adjustable rate mortgages' interest rates reset:

The NAR???? Well, you did say you were just getting ramped up with the housing information...but anything you ever read from the NAR is housing DISinformation. Go back and read what they've been saying every month since the decline began.

....and keep in mind that the NAR's DISinformation is primarily targeted to potential home buyer's such as yourself. You are now in their cross-hairs. Duck!

Only people like you will determine when housing bottoms and recovers because you're the's your money. And contrary to what the spin-doctors would have people believe, buyers are ALWAYS in charge. There is no such thing as a SELLER'S market....only markets that at times have the insane buyers outnumbering the intelligent buyers. (Same thing with stocks.)

Just so we're all straight on this, the post isn't about whether we've hit bottom or not, but asks if the WORST of the declines is past us. You may think the worst is still ahead, and that's fine, but some of the comments seem to imply that I was saying all the declines are over. Not so.

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