Will the downfall of homes in us continue and for how long?

Asked by Raj, South San Jose, San Jose, CA Mon Feb 22, 2010

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Dan Chase, Home Buyer, Texas City, TX
Mon Feb 22, 2010
A house price prediction site is below. Look to see what it says.

San Jose is expected to drop prices by 8.9% according to this site.

How long will it last? We have serious foreclosures coming until 2012. It could be a year or more to clear them all. That says 2013. Government interventions could slow things more. Maybe 2014. That is really the first year I would expect real estate prices could go up on a nationwide basis.

Do not forget, as long as high unemployment exists house prices will be affected.
1 unemployed people do not get mortgages.
2 unemployed people often do not pay their mortgages. That leads to even more than expected foreclosures.

Consider, if you wait to buy interest rates will go up by april. The free $8k will go away on april 30.
Higher interest rates are almost certain to lower house prices. Going from 5% to 7% interest rates buying power drops by 23.9%. House prices must drop to meet that buying ability unless incomes go up.

I hope this helps some.
3 votes
Dan Chase, Home Buyer, Texas City, TX
Thu Mar 4, 2010
Below is a heat map showing foreclosures for January 2010. See what you think should be the answer.
0 votes
K, Home Buyer, Palo Alto, CA
Thu Mar 4, 2010
I believe that we really cannot predict what will happen. And I will be curious to see what effect the expiration of the first time home buyer tax credit and higher interest rates will have on the market. If you are trying to figure out when it would be a good idea to buy - then I say that is more about when it is the right time for you to buy not what the market is doing. Can you foresee holding on to the property for the next 5 to10 years? Or will your family expand and outgrow the property? I used to say 5 years, but nowadays, I am more conservative and say between 5 and 10 years. If you just focus on the property as an investment, you are ignoring something important, which is the quality of life for you and your family.

I have had clients that have not been sure or their lives not really stable, and their realtor and I have told them to hold off and wait. A fellow loan officer said it best, "You should not buy to get the low interest rate or tax savings. Otherwise you could be sitting at your kitchen table, saying - Boy, I really love my low interest rate loan - but sure hate my house".
0 votes
Terri Vellios, Agent, Campbell, CA
Mon Mar 1, 2010
Let me get my crystal ball... hmmm murkey.

We can not predict the future. We can only really look at what is right in front of us. So to look at the downfall of homes in the U.S. is not an indicator of our local market. So let's look at what is going on right now.

> Interest rates are at their all time lowest, about 5%. For every 1% interest increase that is a 10%
decrease in buying power.
> There is stimulus money the $8,000 tax credit and $6,500 tax credit. Yet the people using those credits
were considering buying anyway, it's just helping them to do it sooner. So although that will go away as
of 4/30/10 it just means buyers won't be inventiveness to act now.
> Unemployment and local commerce needs improvement.
> More banks are working on Short Sales and Loan Modifications, so even though there are still distressed homes they may not all hit the market and the flood of foreclosure homes may not happen.
> Commercial properties are the next to hit, and that is a factor to the other real estate sector.
> There are several private and non profit programs still available for first time home buyers, these include down payment assistance, no payment 2nds, equity share, and closing cost assistance.

These are just a few. In our area we are experiencing what looks and feels like the bottom, the indicator is multiple offers on certain priced properties. Not all properties, but the first time home buyer properties. This should help the "trickle up" ... seller's looking to move up once they sell their other property.
Web Reference:  http://www.terrivellios.com
0 votes
Gilbert Rich…, , Santa Clara County, CA
Fri Feb 26, 2010
I agree with you Richard, the economic factor is the biggest indicator.
0 votes
Richard Leci…, , Tucson, AZ
Fri Feb 26, 2010
I really this Jobs is the real answer. People can't buy if they aren't working. The tax credit is nice but once the government stops paying people to buy the real market will show.
0 votes
Gilbert Rich…, , Santa Clara County, CA
Fri Feb 26, 2010
Ironically a report came out this week that for the first time in years the South Bay experienced a 1% appreciation in value.
0 votes
Barbara Q., , Bergen County, NJ
Mon Feb 22, 2010
Raj- We will not know how sick the housing market truly is until the government pulls the plug on artificial life support..ie tax credits, suppressed interest rates. When this hapens we may see another downward spiral or in some markets, values may stay flat at best. You ask, "HOW LONG?" Based on what I am reading - Flat ...at best... through 2012+
0 votes
Leasing To O…, , Dallas, TX
Mon Feb 22, 2010
Hey there Raj...

Dan did a really good job answering the question. It all boils down to supply - demand - and capacity to pay. The unemployment rate should be directly related to the improving of the housing market.

Many people think the housing market will be a "V" shaped rebound. I personally think it will look more like a "bathtub" shaped rebound which will take a while. Now...that being said. Real Estate is local in nature. There are some areas of the country that are already experiencing improvement. The longer the government keeps trying to prop up the housing market...the longer it will probably take.

0 votes
Gerard Dunn, Agent, Chevy Chase, MD
Mon Feb 22, 2010
I am not sure about San Jose - but we saw the market bottom here in Maryland in August of 2009. The available inventory has gone from 8 months to about 2 months in the new year. This will ultimately equate to prices rising - albeit slowly - for this year.

If you are waiting to buy - don't wait too long. Those who try to time the market ultimately get burned.

If your time horizon is 5-7 years - it makes sense to buy now.

Good Luck!
0 votes
Anna M Brocco, Agent, Williston Park, NY
Mon Feb 22, 2010
None of us knows for sure where the market will head--if you are looking to buy, pay attention to the interest rates, if you are looking to sell, marketing and price are paramount.
0 votes
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