Real Estate Slump
Yes, this is terrible news indeed. These plummeting home prices are going to ruin the economy. What can we do?
Sure it’s nice that first-time home buyers are getting such a steal. Some of them are actually getting a one-room condo for only $750,000 instead of $895,000. But let’s not be so short-sighted. What will this do to the housing industry? What about those poor real estate agents with their shrinking commissions?
An economist said “Things seem to be snowballing very quickly. It’s going to be a weak spring” (for home sales). And it gets even worse. A Yale economics professor said “This isn’t going to be over in a year. Housing prices could be declining for years and years.”
NOOOO!!!!! If this awful trend continues, people earning entry-level wages might be able to share their one-room apartment with only five or six roommates instead of ten. Some boomerang children might actually be able to move out of their parents’ house and get their own place — before their 35th birthday! What?!?!?!?
Labels: home prices, home sales, housing, real estate
posted by Tom Harper @ 11:07 AM
18 Comments:
PANIC!!!
This has been a while coming. And it's going to be tough for lots of folks. Thanks for picking up on this.
this whole bubble and bust can be laid right at Greenspan's feet.
his tacit approval of shaky lending and the devaluation of the dollar (though the artificial lowering of interest rates) was his way of sucking up to his buddy Bush to prop up a shit economy.
trillions of debt dollars worth of propping up.
the second largest "sub prime" lender in the nation filed for bankruptcy today.
part of me sez: "fuck them, that's what they get."
but also it's 3000 jobs lost in their race to the bottom.
it also shows what happens when ONLY greed drives your business.
meanwhile...
Average Seattle worker can't afford to live here
Anonymous: Yup, this is pretty scary.
I.M. Dedd: Yeah, things will be tough. Hope there's a little more equality and sanity when the dust finally settles.
Mike: I sure don't have any sympathy for these lenders who declare bankruptcy, but like you said it sucks for the laid-off employees. The whole housing market is just out of control. It's insane that rents and mortgages eat up such a huge percentage of most people's income. I hope this "housing slump" will improve things a little.
Spaceneedl: Yup, I saw that same story in today's P.I. I think people getting priced out of their own community is a lot more serious than some poor real estate agent who's wondering when he'll sell his next $900,000 condo.
In Detroit, 300 four bedroom homes recently went for $7000 because of the faltering economy and job losses.
It doesn't matter what Bush and the media say, the economy is in the tank.
www.lydiacornell.com
Larry: Damn, that's incredible. I guess more people should move to the midwest. I think almost every town -- on both coasts -- is out of reach; it doesn't matter whether it's a "wealthy" town or not. $7,000 for a 4-bedroom -- unreal. Too bad there isn't a middle ground somewhere between $7,000 and $700,000.
Where I live a subprime lender just filed for bankruptcy.
I know someone who worked for that co.
He was living large on over 200K a year. Bought a nice big house with a $5000 a month mortgage payment.
Well, lucky for him he was not one of the ones laid off but he did take a substantial pay cut.
This has the potential to get very, very ugly over the next couple of years.
PoliShifter: I feel sorry for employees who get downsized. But the housing market is so twisted and lopsided, some changes are bound to happen. It's ironic that these banks can declare bankruptcy, but an individual doesn't have that option any more. And it was the banking industry who pushed for that law.
While I was in the States, I talked to several friends and family members who had taken their property off the market. They got cought up in the greed a bit as well, but not so late as to be a catastrophy. Now they have to hang on for the long haul (which is what I thought real estate was all about: silly me).
The value of my apartment in Prague has tripled in 6 years in dollar terms, but that is mostly due to the exchange rate. Still, at $200,00 for a 1,100 sq. ft. apartment near the center of Prague, I wouldn't call it over-valued. I'd call it a steal at the $70,000 I paid for it. :)
Also, thanks for pointing out what a burden this housing market is for the young. While the old owners all pat themselves on the back and bask in their equity, the young are faced with ever shrinking opportunities to join the party. Maybe that is about to change.
Prague Twin: Me too, I also thought real estate was supposed to be a long-haul kind of investment. Speculators are responsible for the worst of the up and down cycles. I personally did pretty well from the real estate boom, but it was pure luck. We bought a house in N. California in 1994, back when it was still do-able. Ten years later we sold our house for 3 times what we'd paid and moved to rural Washington.
But this housing boom has fucked over a lot of people. I have no idea how low or middle income people can afford to even rent a small apartment, let alone buy a house. Prices here in Washington have skyrocketed in the past 2 years; it’s all because of those damn Californians moving in :)
If there's a long-term housing slump it'll probably lead to lots of layoffs and downsizing, but these changes need to happen. Housing prices have gone up way out of proportion to inflation in general. It’s absurd and it can't last.
An apartment right near central Prague — that sounds great.
Hahahaha! Those damn Californians. We really do suck.
Rents apparently haven't gotten nearly as out of control as the house prices. That is one reason why speculators are getting killed. They can't even pay the mortgage with the rent, or even the lion's share of it. So now, even if prices just stagnate, they sit there and take a pounding.
Let's just hope for a slow easing of prices over the next 5 years or so so that only the most speculative of all get hammered. Anyone with a shred of sense should be okay.
Oh, and yeah, I do like living in the center of Prague. It must be nice up where you are as well: near the ocean I gather.
Prague Twin: Yup, Californians are hated all over the West, sort of the same way New Yorkers and Bostonians are hated all over the Northeast. (And not without reason.)
A slow easing of prices over the next 5 years would be nice, that's for sure.
I live right on the Strait of Juan de Fuca which separates Washington from Vancouver Island (British Columbia). I'm about 60 miles from the Pacific. It's beautiful here.
Nice. My Sister's In-laws have a house on Orcas island. I hope to get up there someday. I did tour Olympic once many years ago so I do have an idea of how beautiful it is up there.
I've never been to Orcas Island but I've heard it's a really beautiful place.
Certainly, anybody with half a brain knew real estate was overpriced. There was no question about it.
Unfortunately, the subprime defaults will lead, inevitably, to the rest of the market being dragged down. And while what Tom says is true, it also means that a hell of a lot of American families with solid credit and many years of house payments already made are going to find themselves paying for a house that is no longer worth what they still have to pay off in principal.
Across the street from me, a new subdivision is being built-3 and 4 bedroom luxury houses. I have seriously started thinking about approaching them and asking if they'd like to buy me and my acre of land out-I have 4 building lots right here, after all. Once bought out, I could snatch up one of the many land-contract deals being offered by desperate sellers and wait for the bottom to drop the rest of the way out.
Jolly Roger: Yup, this is gonna screw over a lot of people, no doubt about it. But with housing prices way out of whack like this, these changes have to happen. When the dust settles, I hope it'll be less of a roller coaster.
Good luck with your property venture, if you decide to go through with it.
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