Record Decline In U.S. Home Prices
Home prices fell 6.7% in October, a record decline according to CNNMoney.
It was the largest drop in more than 16 years and marked the 10th consecutive month of price depreciation and 23 months of decelerating returns.The shocking, revelation that housing prices were being artificially inflated by speculators who are now now off speculating on something else is finally hitting people:"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert J. Shiller, chief economist at MacroMarkets, in a statement.
According to Schiff, one factor that will drive prices lower is a change in buyer psychology. "The prices that existed were completely artificial, a function of speculators who are no longer in the market," he said. "Some buyers thought they were going to get rich."What? Buying a home to actually live in? People do that? We're going to plug our ears and go watch Flip That House.Today, however, that demand has all but disappeared. "More people want - or have - to sell," said Schiff, "because prices aren't going up, so buyers have to look at the actual cost of owning a home."
Home prices post record decline [CNNMoney]
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Comments:
sucks for people like me who bought a house earlier this year!
Condos are still not worth what people are asking. With the bubble housing prices went up 90% and are predicted to fall at worst 30%. That means its still 54% overpriced. 90%-30%-(2%x8 years inflation)= 54%. So houses still went up 50% in 8 years and people are bitching.
@theblackdog: careful in DC, a friend of mine bought a house that had been completely re-done inside from an empty shell. There are all kinds of problems and DC can't even find the documentation and drawings that proves its was the builder had the permits or that the city did the inspection. Richard Cohen in yesterday's Post called DC government the most corrupt in the United States now.
Call me when the decline in housing prices hits NYC.
Just the beginning folks. Much more to go on the way down. I think you'll see an acceleration to the downside come the spring. Right now, I think people are hoping all the problems disappear by spring, so they can list their homes for sale when the weather turns warm.
When this doesn't happen, the crap will really start hitting the fan.
I got word from this new development I've been eyeing here in LA that they are lowering their prices by at least $100K. Yay!
Too bad the neighborhoods that I want to buy in are not declining one penny.
Your math is a little wrong there, doctormd. Let me explain.
Here's your scenario:
1. The bubble lasted eight years.
2. Inflation was around 2% each of those years.
3. Your house gained 90% more nominal value total during those eight years, and will 30% of its total value over the course of a year.
I'm going to make one change to it: inflation was actually around 2.6% on average, not 2%.
Let's say your house's price is 1, for simplicity's sake. Your house's current value after eight years is 1.9. Judging just by inflation, your house's value should be (1.026)^8 = 1.22 (roughly). That's about .68 of a difference.
Now, prices drop over a year. Your house's nominal value "should be" (1.026)^9 = 1.26. Assuming your 30% drop, 1.9*.7=1.33.
1.26 and 1.33 are not _that_ far off from each other. In fact, if you were to assume slightly higher inflation (which is unlikely) or a 15% drop per year for two years (not completely crazy), those numbers would be the same, more or less.
"will lose 30%" - wish they had an edit function.
You should read the background on Robert "the markets are grim" Shillers report. That made me want to kick him in the teeth a little... remember he has $$$ riding on the report for paying companies.
CrazyTree, JimH: Thats one thing about these doom and gloom stories that drive me nuts. The decline is not universal in all markets or classes. My Loft in downtown Boston is not comparable to a McMansion outside of Cleveland or a row house in Buffalo. It would be nice to read if there are sectors that are holding their own....
@choinski: I think the reality is that certain markets really did appreciate in value, while 95% of the country experienced unsustainable growth.
Choinski- I agreed that are vastly different impacts in different markets. For example, here in Chicago, its relatively stable. Then again, our "boom" was a bit more muted (sp?).
However, some of it is a self-fulfilling prophecy. If buyers think the market is worse than it is and they hold out for a better deal, eventually the market will respond. Sure, it won't be like the craters in CA, NV, AZ, etc. but it will surpress prices a bit.
A reporter/pseudo-journalist tells me it's raining fire and brimstone and the apocalypse is upon us.
Should I off myself now or wait. Maybe he won't be 100% right?
On second thought, why don't I wait, maybe the world won't end.
Remember folks: If it's not sensational, then it's just not news.
@choinski:
There are plenty of places holding their own. Non-bubble markets. Which make up substantially more than 5% of the market. Its no coincidence that doom-and-gloom stories come from writers in bubble markets.
@mconfoy: I hear you there, there were some awful horror stores a few months back in the Washington City Paper about remodelings gone bad.
@ajadoniz: Maybe I should have rephrased that to DC/MD/NoVA, and it would be likely MD since I already live and work in PG County. However, it's insane that 1 bdrm condos cost as much as my parents 3 bdrm house in Phoenix, so I hope those go back down to a more normal price.
Sweet, maybe I can finally afford a house in DC