This just happened in my development (suburban Philadelphia, PA): A new house asking $800K 3 years ago just sold for $535K.

Yeah I bought my house at the peak, I lost a ton so far. This is not great news...::cries::.

I cannot wait to sell it.

@tobedetermined: I'm going to guess... Lansdale, PA?

I can't wait to buy a house. Just after I get my car paid off and save up enough for a down payment and closing costs (and a bit for the eventual repairs, fencing, etc).

So many hidden ongoing costs that you find out after you own that was just part of the rent payment before.

This morning, on my way to work, I listened to the March 30 podcast of This American Life...it was "scenes from the recession" and it was extremely depressing. It was about a condo development in Chicago that had been abandoned by the developer when he began to lose money, and he moved back to Bosnia and no one could get ahold of him...and it turned out that the condo building had been built on absolutely no foundation at all (no concrete, only dirt) so the ground level condos had sewage problems..and the roof was supposed to be new, but it was leaking. And the walls had begun to separate from the ceilings because there was no foundation, so the building had started to sink.

And the pipes would burst and ruin condos because the units that weren't sold didn't have their heat turned on, because the developer had stopped paying the bill. It was very, very sad to hear the stories of people who were responsible, and are now being punished because of a greedy developer and the economy.

@pecan 3.14159265: Sounds like something from a 3rd world country, stuff like that shouldn't happen here. I feel like in situations like this, the government should also go after the workers that built the house, as they knew it had no foundation but didn't say anything to authorities about it.

This is awesome. FINALLY, housing might be affordable again?

Sorry guys, if you bought at over-inflated prices, I am sorry for you. BUT you're a small minority compared to the people that will come behind you and need their first house. over-inflated values deter that. Reasonable prices are a must, and between 1999-2006 prices were not tied to anything reasonable.

You expect that middle-class housing is within reach of middle-class incomes. When it's not, that's, um, BAD. homes being used as an investment vehicle is not good. Homes need to be homes, and the people need to be able to afford them. A nation of renters is a nation of people who won't care.

When it gets to 75% of their 2006 peaks, we'll be doing good (at least in CA; I saw housing costs literally TRIPLE in that time).

I'm sure this varies by area, but I don't think the housing market in my area will get much lower. Maybe it's because I just got a great deal on a house? I've been checking listings and comparing them to the county records. I just think that here the floor has been hit.

We're nowhere near the bottom... Most banks are still holding back on their foreclosure sales... .And there are serious amounts of them... I think housing prices are leveling, but we're in a buyers market, so take the value of the house and drop it like 5-10% since the askers are requesting even more discounts...

not out the woods yet my friends... It'll take another 5-10 years before the next housing scheme kicks in and prices go back up...

@pb5000: Some areas are less affected by the market price flux - namely those in areas that didn't see huge price increases over the last several years. We bought our house last year and prices were not dropping, nor have they really dropped since then - areas like mine (particularly smaller towns, rural areas, etc.) have seen little of the effects of the housing boom/bust cycle.

That said, I may have to sell my house next year and move, and I'm not looking forward to that, as I doubt we'll get much/any more than we paid for it, and we'll lose out on the realtor's commission and all of our up front purchase costs, so we will probably walk away from the house with less cash than we had before we bought it. Such is life - it can always be worse.

@randombob: "Reasonable prices are a must, and between 1999-2006 prices were not tied to anything reasonable."

Great points. I just want to add that the posts' "down 30%" numbers have nothing to do with determining the bottom. It's like saying a 20% off coupon at BB&B means it's the best deal ever.

Like your comment, prices have to be tied to something reasonable: incomes and rent. Both incomes and rent (in many areas, at least) are decreasing, so the bottom in the distance is just getting farther away.

@pb5000: I'm not trying to be a jerk, but it's also possible you think this because if prices go much lower you no longer got a great deal on a house. And that would suck. Cognitive dissonance.

How do the prices compare with rents and incomes in your area? Factor in more foreclosures in the future (there will be some; many houses in hard-hit areas are being foreclosed on now a second time in 5 years plus all of the houses in default now), job losses in your area etc. Then look at Florida, AZ and Detroit to see that it's absolutely possible for a house to have no value.

I think most places will drop a lot farther unless there is an abundance of high-paying jobs with lots of job security and prices already match historical levels compared to incomes.

@Radi0logy: Agreed but the government is the one who does the "inspections". The government is at as much fault as the contractors, workers, and scam artists who participated in this.

@pecan 3.14159265: Some government official, maybe more than one, issued a building permit for this property. And government was also supposed to do inspections during construction. What happened here?

I bought my home in Tennessee for $401,000 in February. A smaller home down the street is on the market for $485,000. I told my wife if it sells for 485k, we're putting ours on the market.

I've heard that the Dallas housing market never had that bad of a hit, but prices are coming down a bit now. I bought in Keller in July 08 @ $130k. I've got 2086 sq ft and they raised my floorplan's price by $10k over the next few months after closing. I hit at the right time. Thankfully everything is ok here, otherwise my family and I would be in a shitty apartment.

@Barrister76: As explained in the podcast of the show, the development was purchased and started during the housing boom and the city of Chicago was flooded with permit requests and the like, and there weren't enough inspectors to go around to do their job 110% to make sure the properties were fit. So I guess some slipped through.

But also, the developers were extremely shady people. Residents reported that on days of inspections, the developers would make cosmetic changes and rip them out after the inspection was done.

Let's try to figure out how prices will move based on fiscal/monetary policy, isolating out the impact of normal market flux and regional factors.

You have to unwind price increases created by irresponsible borrowing. Call the resulting (lower) price Rational Price Point 1. We're past this.

You have to unwind price increases created by ridiculous credit creation in the private sector. That's a drop to Rational Price Point 2. This is arguably complete.

Then you have to deal with capital requirements at banks to create the lending capital necessary. Prices will continue to fall until those banks shore up their sheets. Then you sink to Rational Price Point 3. We've got a ways to go, and this point is lower than everyone wants to believe.

At this point the nation's excess inventory will start to return to normal levels, bringing things UP a bit to Rational Price Point 4.

But the big whopper, the true crazy factor, is when the government stops pumping billions of dollars into stimulus - both cash and interest rates through Fannie/Freddie and the state-owned banking system. We know the former subsidy doesn't end until December, and the latter subsidy may never end. That's a huge collapse in prices one stroke of the pen away at all times. Rational Price Point 5. It will be a very long time until we get here, if we ever do.

My townhouse has been on the market for almost 12 months now. I was relocated for work and am stuck with a 126 mile commute. People want to buy my house but can't sell theirs. Sucks hard.

@LegoMan322: Don't worry about it. Your not really losing any cash. The Market Value of your house is always going to fluctuate. The Appraised value of house and LAND will remain steady.

Your home is going through a cycle, the value will appreciate again over the next cycle. After all, Houses are rival goods that are privately owned and once it's your it's yours.

The bright side is that your property tax will be lower so to speak. Chin up, it will get better.

three words: Summer Buying Season.

It's a blip.

Important words of warning: the prices at the peak were the result of a bubble. That is, they were detached from the fundamentals. They were not rational. Therefore, it is impossible to make a rational guess at the bottom based on declines from the peak. All we can look at is the fundamentals. And those tell us that at $300,000-$400,000, one or two median incomes (50-100 grand per year) and the current mortgage rates (4.5-5% APR), people are finally becoming able to purchase houses again. And they. Cathartically. *BUT* we also must pay attention to at leat two other very important factors: unemployment and lending sources.

We are still in a period of increasing unemployment. This is a downward pressure on prices. If you don't know whether you'll have a job in 6-12 months, it's stupid to enter a long-term contract unless you can reasonably predict the length of you unemployment and have emergency funds available to cover that period. That's unlikely.

Next, the risk of mortgage lending is currently so heavily offset by federal money that mortgage rates are one of the deepest lows most of us have or ever will see. Considering that current prices are on the high end of affordability in the current market conditions, as soon as that source of federal money dries up and the mortgage lenders have to re-assume the risk of lending, rates will rise. Assuming rates double, that $300,000 home that's just barely reachable to a single person making about $50,000/year at 4.5% with a 20% down payment would have to be priced about $80,000 less to remain affordable to the same income with a 10% mortgage.

@tobedetermined: Same in my area, but not as bad (Fairfax, VA). Under contract on my first house. It sold in 2007 for 520K and we bought it for 455K. Glad to be a first-time home buyer right now :)

I am amazed that things are selling at all. My neighborhood, south of Toledo, OH, just does not have buyers anymore.
Price it high, price it low, nothing matters--there are no buyers! Traffic is at a standstill. 4BR 2.5Bath homes ranging from 155 to 210 all get the same treatment...no one can buy. We have resigned to losing 20k in payments on the thing for each of the next 2 years. Got a great deal in 2005 (lowest in neighborhood)--now we have a house without value at all (won't sell even 20% lower than 2005 prices--won't sell at all without anyone being in the market!).

Prices still aren't low enough. Proper lending standards dictate you should buy a home with a mortgage of no more than 3.5x your net income. Your down payment should be 25% of the sale price.

The average home in my city is now about 4 - 5x the average total family income here, after the down payment. They aren't low enough yet.

Personally, even though my family has an average income, the only houses that are "affordable" according to the traditional lending formula are so low on the price pole that on a given day, it'll be less than about 5% of the total homes on the market.

I'll be holding on for a while longer, probably until interest rates start to peak again (Which will be the final factor in reducing home prices, perhaps we'll get "lucky" and hit 18% again like in 1980? That should shave another 30 - 50% off home prices.)

@Scuba Steve: I heard you should save 1% of your home's value a year for repairs. Anyone know if that's a good rule of thumb?

@randombob:

I couldn't agree with you more. Here in Chicago middle-class housing has all but vanished. What's left is fairly scant compared to the endless sub-standard dumps that aren't fit for a opossum to build a nest in and swank granite and marble adorned condos that seem to be marketed to people who left for the suburbs ten years ago, or until the collapse, anyone who could get a loan.

@JeanStork: I certainly agree with the first part. I'm under contract right now and as we were looking, there were 1-2 new foreclosures added in our area an price range a week (and the others were sold in under a week). The banks apparently have a backlog that they are releasing slowly. Also, in my area, they are severely underpricing the foreclosures to start a bidding war. One that we bid on went for $30 over asking (the final price was in market).

I wish I had the money to buy a house right now. A co-worker of mine bought a 4 bed, 3 bath house in a very nice suburb near my city for less than $100k, when it was originally listed for $300k. There are lots of great properties in my area right now for insane prices. I'd love to get in on those deals.

"We will certainly need a few more months of data before we can determine if home prices are finally turning around,"

I hope not! As soon as I finish whacking out my student loans, I need to save up my down payment in the next year or two! argh. I'll be a year or two behind the curve. :-p The last year has been a flop.

@tobedetermined: That is still probably too high.

The way I calculate is that houses historically appreciate with inflation(2-5%). Look at pre-boom values on Zillow.com with the 10 year tracker, multiply that value(Jan 2000) by 1.05(overestimate) to get 2001's projected value. Do that for every year until 2009/2010 (Excel is good for that) to see what it really SHOULD cost.

Unless there have been some major renovations of a house in the last 10 years, they should be pretty close to that estimate. I was looking at houses in Fairfax, VA and they were all about 15-20% higher than they should be. My own house is about 20% lower than Zillow's "Z-estimate" but if I ever sell, I hope my buyer doesn't realize that.

@squinko: wtf? where do you people live? I'm totally jealous! we got a 3 bd, 2.5 bath townhouse for $455K. and that's a good price! It IS in a reasonably nice area and we have a 2 car garage. It's not super swank or anything though - we're putting $5-$10K into the house as soon as we move in.

@sleze69: I've heard from several people that the Z-estimate is typically lower than it is in reality. It seems they base it on the tax assessment, which is historically lower. How much lower than reality though? I don't know that.

Just did a quick computation, and my house is down 31.4% from its highest valuation -- so the headline on this story is dead on for me.

Instead of 60+K in equity, I now have about 3K. At least I'm not upside-down. Can't get a new place without a down payment, though, so unless I quickly save a boatload of cash I'm stuck where I'm at. I was planning to upgrade (with an expected addition to the family), but we'll make do.

@Onion_Volcano: Rent it out and brake even.

@TEW: Being a landlord sucks.

@pecan 3.14159265: For those interested, episode 3/27/2009

[www.thisamericanlife.org]

Free online.

They don't ring a bell at the bottom.

@randombob: Reasonable is whatever the market will pay for a home. There is no set "reasonable" level for prices on anything.

@PunditGuy: I hear you. There are a lot of us in that boat. There are even more people who "have to sell before they can buy." That phrase is killing prices. It is crazy.
We are 31 and have to save for downpayment again (we had to move)--assuming we can even sell our old place. It seems wrong because we were responsible and did all of the right things. If only we would have put nothing down! We could have walked away under foreclosure like all of our neighbors.

@statgrad: Awesome, I didn't know it was still available. I had it already on my iPod but I was under the impression that on iTunes it archived itself after a week and made you pay for it. Good to know that if I miss the free podcast I can listen to it online.

@LegoMan322: Yeah, it could be so much worse. Your landlord could be the local shopkeeper, who renovates your house and charges you an arm and a leg for it every time you pay off your mortgage, keeping you in debt for all eternity.

BURN IN HELL, TOM NOOK!!!

Plus, like the guy above me said, you're gonna pay less in taxes and I'm pretty sure the IRS will let you write off part of your home's lost value.

@kwsventures: Exactly! That's what makes it so ridiculously obvious!

All the way down, you'll hear the bells a ringing. "Now is the best time to buy!" "Buy now or be priced out forever!"

But you know you're at the bottom when it gets eerily quiet and people move on, don't think of their houses as investments and treat them like any other expense.

@JeanStork: You got it . Everybody has to remember 2006 might have been the peak but they were artificially inflated prices to begin with.

@qwickone: I know! For $100k I can get a shed with a leaky roof.

@qwickone: I bought my first home last spring. The house is about 25 years old and I estimate that my wife and I will be putting in about 2% of the purchase price (5-6k) each year into the house for the next several years for remodeling, upgrades, and repairs. We could probably get by on 1% if we just limited ourselves to the most needy projects.

Yeah...I live in the Detroit area. I don't think housing prices are anywhere near the bottom--especially if GM and/or Chrysler go bankrupt.

We bought our house in 2002 and are now probably $30K underwater on our mortgage. 3 of the 4 neighbors directly next to us, behind us and across the street from us have been foreclosed.

*weeps*

My brother had a meltdown recently when he learned that a comp home 3 doors down from him in Phoenix sold for 45% less than he paid for his home 4 yrs ago ($160k vs $290k). His neighborhood is full of for sale signs and a fair number of empty homes. I think this spring/summer will bring a new national wave of attempted home sales and eventual foreclosures. I am not at all interested in home ownership at this point.

@karmaghost: I grew up in Lansdale, PA - I didn't think we ever had $800k homes there to begin with...

If the housing bubble was 30% over, then that means we're now just at the point we should have been in 2006. In theory, 2009 should be a little above 2006. But it does seem to me that this isn't the bottom, yet, though it clearly is starting to level out.

Sorry you homeowners. I see this as a discount :-) You're not going to see 2006 prices (plus norm year-to-year increases) again, unless we enter another bubble (which shouldn't happen until 2014 or so).