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Housing market in 2010
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JAP
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PostPosted: Wed Jan 06, 2010 7:30 pm GMT    Post subject: Housing market in 2010 Reply with quote

Why is it the sellers don't see the light yet? The small window of opportunity they had to sell in 2009 is now gone if you listen to the vast majority of "experts" and use common sense and logic to predict real estate market trends. Here are my main reasons I feel the market will fall in 2010:
1) Interest rates will start to creep up by mid 2010
2) Very high unemployment continues throughout the year
3) Foreclosures to hit market in 2010 will be 2.4 million up from 2 million in 08 and up from 1.7 million in 07. This will be on top of the already significant number of foreclosures on the market.
4) No extension to the 8k home buyer credit (although we may see another wasteful initiative to artificially inflate prices)
5) Many potential buyers who were possibly looking to buy in 2010 already purchased in 2009 using the first 8K tax credit this year and that took away some of the buyers that would be buying in 2010
6) Home asking prices are still too high and not within market conditions (look at number of homes purchased 600K and higher over the last 6 months!!)
7) Many "experts" are predicting another market drop up to 15% in 2010 (do the research for yourself and see)
Cool More buyers are becoming market savvy and have more real estate market knowledge as well as information to compare price per sq/ft etc.
9) Many buyers are waiting for "deals" and will not purchase without them leaving homes on the market longer and longer
10) I'm sure there is a #10 but I just can't think of one right now.

Here are a few links that support my opinion that the market is poised for yet another decent dip starting in early 2010. I have about 10 more with similar perspectives that support a declining market in 2010 but cannot find any credible ones that support a market increase in 2010. If anyone has some that support a market increases please post the link(s). Thanks.

http://www.boston.com/realestate/news/blogs/renow/2010/01/get_ready_for_a.html

http://paper-money.blogspot.com/2009/12/beantown-bust-boston-csi-and-rpx.html?ref=bostonbubble.com

http://www.calculatedriskblog.com/2009/12/government-housing-support-update.html
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melonrightcoast



Joined: 22 Feb 2009
Posts: 236
Location: metrowest

PostPosted: Wed Jan 06, 2010 7:56 pm GMT    Post subject: Reply with quote

What aren't sellers lowering prices? Well, I have a few reasons why I think so:

-Too many sellers are underwater and cannot afford to sell.
-Too many sellers do not want to lose money by selling for less than what they paid, even if they could afford it.
-Too many sellers have the high prices of a few years ago stuck in their heads, and do not want to sell now because prices are lower.
-Too many houses are listed on the market where the buyers do not have to sell, but think it would be nice, IF they can get the price they want.
-Presently, the economy is not bad enough around here.

MA is a recourse state, so if sellers have other money, their banks likely won't let them do a short sale and will expect the seller to pay the rest of the mortgage balance when it is sold. I believe this is why so many sellers would rather rent out their homes, even at a loss, than to take a large loss right away.

What amazes me are the homes that are put on in the spring, every spring for the past few years, at slightly lower prices, and then are taken off the market in the summer/fall. And they often have a tiny mortgage!
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Hard Rain
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PostPosted: Wed Jan 06, 2010 8:25 pm GMT    Post subject: Reply with quote

Where did you get the idea that sellers are not lowering prices?
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melonrightcoast



Joined: 22 Feb 2009
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PostPosted: Wed Jan 06, 2010 10:27 pm GMT    Post subject: Reply with quote

true, Hard Rain, some sellers are lowering prices. but too many are not.
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JP
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PostPosted: Thu Jan 07, 2010 12:38 am GMT    Post subject: N6NOJB Reply with quote

Hard Rain wrote:
Where did you get the idea that sellers are not lowering prices?


Ok let me rephrase my statement about sellers and home prices. Sellers are not lowering prices that are bringing their homes into an appropriate dollar range based on market conditions. If a house is truely worth 500K and the seller has it listed at 600K and they lower the asking price to 575K it doesn't really do anyone any good. Sorry but I thought this logic was understood in my post above.

It is going to be a long stressful year for many home sellers in 2010. Since my last post I have come across several more articles supporting home price drops in 2010. This is getting scarey. Anyone have any recent articles where credible people are saying the market will increase in 2010? If so, please post the link.
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melonrightcoast



Joined: 22 Feb 2009
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Location: metrowest

PostPosted: Thu Jan 07, 2010 3:32 am GMT    Post subject: Reply with quote

Quote:
It is going to be a long stressful year for many home sellers in 2010. Since my last post I have come across several more articles supporting home price drops in 2010.


Well, remember all the MSM hyping the market as it started to turn here in 2005? Just sayin' Wink. I also think it is likely that 2010 will be painful for home sellers, but there are just too many variables (i.e. gov. intervention) to accurately predict what is going to happen in 2010.

As for home sellers: i think they are broken into two groups, which are people that HAVE to sell (divorce, death, illness, job loss, decreased income, increased expenses) and people that WANT to sell (everyone else). Just as the boom years in the real estate market "borrowed" buyers from the future, i think the boom years also "borrowed" sellers from the future. Now that prices are lower and sellers will be making only a modest pile of cash for their non-updated cape, guess what? They aren't selling. They are essentially waiting until they HAVE to sell. If this poor economy drags on, then you'll be seeing more people that HAVE to sell. And that is who you want to buy from, not the delusional seller that is offended by an offer that is 5% below their over-priced asking price.

My advice is to know EXACTLY what you want to buy and own for the next 10+ years, know EXACTLY how much you can afford for the next 10+ years, and be VERY patient. Or, try a non-traditional approach and find a neighborhood that you like and put very nice letters in the mailboxes of houses that you like (and can potentially afford).

Or, if you do not want to own a house, then just sit back and enjoy the show Very Happy!
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balor123



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PostPosted: Thu Jan 07, 2010 4:44 am GMT    Post subject: Reply with quote

Or go house by house dropping offers that are 50% off comparables just to have fun. You all remember that "Art of Lowballing" article? For more fun deliver the offers in person so you can see their response. Worst case, you end up with a house that isn't grossly overpriced.
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CL
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PostPosted: Thu Jan 07, 2010 1:10 pm GMT    Post subject: Reply with quote

JAP - just my 2 cents
1) Interest rates will start to creep up by mid 2010
- may as well be, as Fed will likely to signal their willingness to fight inflation to save their credibility. My bet is however the interest rate rise is due to economy recovering (which means unemployment will drop)though.

2) Very high unemployment continues throughout the year
- I do not agree. Unemployment is a lagging indicator and if you focus on leading indicators (PMI, purhasing index, etc), economy is turning around. I expect unemployment to drop this year. Slightly or significantly, I do not know.

3) Foreclosures to hit market in 2010 will be 2.4 million up from 2 million in 08 and up from 1.7 million in 07. This will be on top of the already significant number of foreclosures on the market.
- The wild card is HARP. If Obama administration succeeds in forcing bank to modify loans (something they did not do in 2009 but started to focus a lot more now that healthcare is out of the way), then foreclosure hitting the market will be smaller than estimated. I suggest you track mortgage insurer (MTG, PMI, etc) to get a clear forward picture

4) No extension to the 8k home buyer credit (although we may see another wasteful initiative to artificially inflate prices)
- Never say never. If the market is indeed having a decent drop, there is no politician out there who will stop the extension and risk his/her political career should the market continue to drop

5) Many potential buyers who were possibly looking to buy in 2010 already purchased in 2009 using the first 8K tax credit this year and that took away some of the buyers that would be buying in 2010
- Agree.

6) Home asking prices are still too high and not within market conditions (look at number of homes purchased 600K and higher over the last 6 months!!)
- Market conditions can be strange, and too high/too low is really subjective opinion. For every seller, you only need one buyer to agree with you. If you can afford to wait (ie still have income), there is no way you change your view and drop the price.

7) Many "experts" are predicting another market drop up to 15% in 2010 (do the research for yourself and see)
- Not focusing you, JAP, but that's what I don't like about people using expert advice. On one hand, we laughed at expert when they are wrong in 2005, on the other hand, we use their prediction when it matches my view?

Cool More buyers are becoming market savvy and have more real estate market knowledge as well as information to compare price per sq/ft etc.
- Agreed with information, not sure about savvy. Market savvy comes from transactional experience, not redfin/real estate blog.

9) Many buyers are waiting for "deals" and will not purchase without them leaving homes on the market longer and longer
- It's all market dynamics. If buyer waiting for deals, that means they think they can afford to wait. Which means either the public in general thinks the house is overpriced or there are plenty of subsitutes. The seller can then wait for buyer to change their view, or change his (chances are seller will wait). But for a lot of high quality houses (those that have mass appeal in good area), there were tons of bidding wars even in last 2 years. So depending on what kind of house you are looking at.

10) I'm sure there is a #10 but I just can't think of one right now.
- Fair enough.

By the way, I am not a realtor and I don't have an opinion whether the market will go up or down.
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PostPosted: Fri Jan 08, 2010 2:13 pm GMT    Post subject: Reply with quote

Not sure how you can come up with some of the very pro market thoughts you did unless you have some skin in the game of the market increasing in 2010. 95% of every piece of informaiton over the last two months are calling for a dip in the real estate market in 2010. This information is coming from such experts as Case and Schiller. Maybe you are not a realtor but more likely a broker, frustrated seller, etc. The post doesn't passs the smell test.
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balor123



Joined: 08 Mar 2008
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PostPosted: Fri Jan 08, 2010 4:44 pm GMT    Post subject: Reply with quote

I have yet to find a homeowner who isn't bullish on housing. The more leveraged they are the more bullish they tend to be. Mostly they just believe that the government won't let the housing down, and by down I don't mean a nominal drop but for them to stop increasing due to the effect it would have on new construction. I would say that recent government actions support the notion that the government won't let housing fall too much and perhaps even that it is trying to force another housing bubble but I don't see why people want to leverage on both the government's ability and willingness to fight the market in a "capitalist" economy. I suspect it's a matter of placing your bet and expecting it to win because you have a vested interest in it winning and I likely share the opposite negative bias for the same reason.

I've also noticed that homeowners tend to prefer low government debt to to the burden it places on our children while simultaneously preferring high housing prices, as if the two are really all that different. I guess people feel more attached to their homes than their government and are willing to consider the implications on our children so long as they don't have to make the sacrifice.
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melonrightcoast



Joined: 22 Feb 2009
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PostPosted: Fri Jan 08, 2010 9:15 pm GMT    Post subject: Reply with quote

Quote:
I have yet to find a homeowner who isn't bullish on housing.


except me Wink
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mpr



Joined: 06 Jun 2009
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PostPosted: Fri Jan 08, 2010 10:35 pm GMT    Post subject: Reply with quote

Anonymous wrote:
Not sure how you can come up with some of the very pro market thoughts you did unless you have some skin in the game of the market increasing in 2010. 95% of every piece of informaiton over the last two months are calling for a dip in the real estate market in 2010. This information is coming from such experts as Case and Schiller. Maybe you are not a realtor but more likely a broker, frustrated seller, etc. The post doesn't passs the smell test.


Actually I found it perfectly reasonable. One could just as well criticize
most of the permabears on this site as frustrated buyers.
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mpr



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PostPosted: Fri Jan 08, 2010 10:38 pm GMT    Post subject: Re: N6NOJB Reply with quote

JP wrote:
Hard Rain wrote:
Where did you get the idea that sellers are not lowering prices?


Ok let me rephrase my statement about sellers and home prices. Sellers are not lowering prices that are bringing their homes into an appropriate dollar range based on market conditions. If a house is truely worth 500K and the seller has it listed at 600K and they lower the asking price to 575K it doesn't really do anyone any good. Sorry but I thought this logic was understood in my post above.

It is going to be a long stressful year for many home sellers in 2010. Since my last post I have come across several more articles supporting home price drops in 2010. This is getting scarey. Anyone have any recent articles where credible people are saying the market will increase in 2010? If so, please post the link.


Do you have any recent statistics on months of inventory ?
Without it all these claims about the "real value" are pretty meaningless.
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JP
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PostPosted: Fri Jan 08, 2010 11:14 pm GMT    Post subject: Reply with quote

If you go to Redfin you can look up the statistics all day long that show homes in the higher end are sitting longer and longer as well as seeing how much sellers bought their homes for and what they are now asking. Many of the houses I have been looking at were purchased back in 2003, 04, 05, and many of them are asking significantly more than what they paid back then with minor, if any, improvements to the house. Sorry don't have the time to run the stats but they are easily available on Redfin.com
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JP
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PostPosted: Fri Jan 08, 2010 11:22 pm GMT    Post subject: Reply with quote

balor123 wrote:
I have yet to find a homeowner who isn't bullish on housing. The more leveraged they are the more bullish they tend to be. Mostly they just believe that the government won't let the housing down, and by down I don't mean a nominal drop but for them to stop increasing due to the effect it would have on new construction. I would say that recent government actions support the notion that the government won't let housing fall too much and perhaps even that it is trying to force another housing bubble but I don't see why people want to leverage on both the government's ability and willingness to fight the market in a "capitalist" economy. I suspect it's a matter of placing your bet and expecting it to win because you have a vested interest in it winning and I likely share the opposite negative bias for the same reason.

I've also noticed that homeowners tend to prefer low government debt to to the burden it places on our children while simultaneously preferring high housing prices, as if the two are really all that different. I guess people feel more attached to their homes than their government and are willing to consider the implications on our children so long as they don't have to make the sacrifice.


Good thoughts however one point you cannot argue is that interest rates WILL rise in the very near future and that will cause homes prices to drop. Unemployment will continue to rise(IMO) which will add more pressure. UPS announced today 1800 job cuts, Merck announced 500 sales people cut in addition to hundres more in R&D and Pfizer annound approximately 1000 job cuts in the near future due to its merger with Scheuring Plough. Did everyone see the Dec unemploment numbers today? Not a good way to go into the new year. I haven't heard a single company who has hired a mass amount of people has anyone else? One good sign is Obama is preparing to throw away some more money for small business for green jobs. That is a compeltely different post so I'll stop there Smile.
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