38% Decline? Housing Down 43%-57%: Have We Arrived?

[World Traveler]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

In the Houston housing bust of the 1980's, the inner city areas closest to downtown never hit the extremes of the suburbs and recovered first. (what we call "inside the 610 Loop" the freeway that circles downtown from about 6 miles). Also people who bought in the inner city areas during Houston housing bust did very well when they went to re-sell a few years later. Not so with the people who bought further out in the city or in the suburbs.

The suburban areas took the biggest hit and took the longest to recover, the further out and newer, the longer to recover.

EJ did an article with a series of concentric rings, from outer burbs to inner city areas, explaining how a housing bust starts at the suburban edges of a city and works it way inward. Article pretty much describes what I saw in Houston.

[Guest]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

Jimmygu3 - as World Traveler notes, the outer burbs get hit hard. The inner city poorer neighborhoods come next. The outrageously priced very highest quality neighborhoods in the city take a hit also. What you did is correct. The 'sweet spot' to hold value are the better inner city neighborhoods - aka the historic neighborhoods. If you bought value in one of those areas, you have a much stronger floor under valuation than all the other areas above.

Example: Within three miles of the two properties I mentioned for instance, our office bookkeeper bought a house in one of San Diego's old historic neighborhoods from the 1920's. She got a below market deal years ago, so she bought much earlier than you - but the point is, valuations in that neighborhood have held up like a rock so far. They have barely budged. Further, as you note, you are in a city which saw extremely modest appreciation throughout this bubble. Frankly from the combination you've described, I doubt you'll see any depreciation at all. I've stood aside from the extreme housing doom on this website for a good long while, although I have to admit that in San Diego most of iTulip's predictions are occurring like clockwork.

I have to say it - Peter Schiff saved my butt. He talked me out of buying a second property in December 2003 wile the market was taking off like a Saturn Booster, and as a consequence I sold my first home as well close to a year later, right at the top of the market at the tail end of 2004. I suppose I have not expressed enough sincere gratitude to the guy here. He doesn't really need any gratitude from me anyway, as his stock brokerage is a cash cow, and he's made millions holding South African gold stocks through thick and thin the past eight years. Definitely shepherds his own investments with a certain amount of 'vision'. :rolleyes:

[Ann]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

Jimmygu3 - as World Traveler notes, the outer burbs get hit hard. The inner city poorer neighborhoods come next. The outrageously priced very highest quality neighborhoods in the city take a hit also. What you did is correct. The 'sweet spot' to hold value are the better inner city neighborhoods - aka the historic neighborhoods. If you bought value in one of those areas, you have a much stronger floor under valuation than all the other areas above.

Example: Within three miles of the two properties I mentioned for instance, our office bookkeeper bought a house in one of San Diego's old historic neighborhoods from the 1920's. She got a below market deal years ago, so she bought much earlier than you - but the point is, valuations in that neighborhood have held up like a rock so far. They have barely budged. Further, as you note, you are in a city which saw extremely modest appreciation throughout this bubble. Frankly from the combination you've described, I doubt you'll see any depreciation at all. I've stood aside from the extreme housing doom on this website for a good long while, although I have to admit that in San Diego most of iTulip's predictions are occurring like clockwork.

I have to say it - Peter Schiff saved my butt. He talked me out of buying a second property in December 2003 wile the market was taking off like a Saturn Booster, and as a consequence I sold my first home as well close to a year later, right at the top of the market at the tail end of 2004. I suppose I have not expressed enough sincere gratitude to the guy here. He doesn't really need any gratitude from me anyway, as his stock brokerage is a cash cow, and he's made millions holding South African gold stocks through thick and thin the past eight years. Definitely shepherds his own investments with a certain amount of 'vision'. :rolleyes:

Schiff SPAM. Delete?

[jimmygu3]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

Jimmygu3 - as World Traveler notes, the outer burbs get hit hard. The inner city poorer neighborhoods come next. The outrageously priced very highest quality neighborhoods in the city take a hit also. What you did is correct. The 'sweet spot' to hold value are the better inner city neighborhoods - aka the historic neighborhoods. If you bought value in one of those areas, you have a much stronger floor under valuation than all the other areas above.

Example: Within three miles of the two properties I mentioned for instance, our office bookkeeper bought a house in one of San Diego's old historic neighborhoods from the 1920's. She got a below market deal years ago, so she bought much earlier than you - but the point is, valuations in that neighborhood have held up like a rock so far. They have barely budged. Further, as you note, you are in a city which saw extremely modest appreciation throughout this bubble. Frankly from the combination you've described, I doubt you'll see any depreciation at all. I've stood aside from the extreme housing doom on this website for a good long while, although I have to admit that in San Diego most of iTulip's predictions are occurring like clockwork.

I have to say it - Peter Schiff saved my butt. He talked me out of buying a second property in December 2003 wile the market was taking off like a Saturn Booster, and as a consequence I sold my first home as well close to a year later, right at the top of the market at the tail end of 2004. I suppose I have not expressed enough sincere gratitude to the guy here. He doesn't really need any gratitude from me anyway, as his stock brokerage is a cash cow, and he's made millions holding South African gold stocks through thick and thin the past eight years. Definitely shepherds his own investments with a certain amount of 'vision'. :rolleyes:

Thanks for the info, Luke and WT.

I just saw a Money magazine article on CNN that's relevant to this discussion. "The housing implosion is nowhere near over." Yes, even McMoney is on the housing bust band wagon now. It features a city-by-city forecaster that peers into the crystal ball and tells us what will happen in '08 and '09. Last year's drop was -14.7% for SD and -1% for ATL. It says SD will lose 14% this year and remain flat in '09, while ATL will shed another 3%, most of that in '08.

I found it interesting that median family income is roughly the same in the two cities, but the median house price in SD is 150% higher. I have relatives in Lexington, KY, where median income is 10% less than in SD or ATL, but median housing prices are a further 30% below ATL. The forecast for Lexington is for no price decline at all (+1.3% through '09).

Please, everyone, don't bother telling me that these MSM forecasts are a bunch of BS. I know that already. :p

[zenith191]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

Here is some anecdotal evidence for you.

I have been buying residential real estate here in Dallas throughout this decade while we were getting a measly 2-4% annual appreciation.

Now I am finding it difficult to BUY. Yes we have a lot of foreclosures but the good ones are getting snapped up within days. Just last weekend I got outbid in an auction by several investors bidding over the asking price!

I have also begun to notice a lot more out of state (read California) investors moving into our market.

As we like to say down here; the good news is that there was no RE bubble in Texas and the bad news is that there was no RE bubble in Texas.

[raja]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

I have to say it - Peter Schiff saved my butt.

And I have to say, Peter "Black Monday" Schiff cost me $30,000 . . . so he's permanently on my black list.
I suppose his followers will soon forget his foolish "Black Monday" call . . . but I won't.

Not that I've actually lost the money . . . I'll just have to wait a few months to get back to zero . . . hopefully.

[lb]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

Here is some anecdotal evidence for you.

I have been buying residential real estate here in Dallas throughout this decade while we were getting a measly 2-4% annual appreciation.

Now I am finding it difficult to BUY. Yes we have a lot of foreclosures but the good ones are getting snapped up within days. Just last weekend I got outbid in an auction by several investors bidding over the asking price!

I have also begun to notice a lot more out of state (read California) investors moving into our market.

As we like to say down here; the good news is that there was no RE bubble in Texas and the bad news is that there was no RE bubble in Texas.

If there is no RE bubble in Texas, how come Houston home sales are on the exact same trajectory that California and Florida had, just lagging by one year?

Lets see, those markets peaked in summer 2005, but the real collapse wasn't until summer 2007. Houston peaked in summer 2006, so there would logically be a collapse... Let's see it's the first day of summer 2008, so I would say, now?

That is of course unless you think the bottom is in...

I can't imagine Dallas being so different from Houston, but I don't have a source for numbers.

EDIT: you know i haven't been posting and reading the boards much. I didn't realize how old some of the stuff on the first page was, sorry.

[World Traveler]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

I can't agree with you on Houston. We did not have a major real estate boom here in the 2000's, so we are not having a major estate bust. Also, prices never skyrocketed here like they did in other parts of U.S.

Most importantly, the local economy is healthy right now, due to energy industry concentration.

Real estate market has slowed down lately and there are some foreclosures due to faulty loans, but foreclosures I have seen are turning over pretty quickly.

Houston housing prices have been on a much slower track than rest of U.S., since the Houston real estate bust/ oil bust of 1980's, when house prices went down 30-50% (depending on area) from 1984 to 1988.

Houston gradually recovered, but since then houses in Houston have been a place to live, not to speculate or use to get richer with. And THAT is the future of the U.S.

I'll throw out a few numbers. Per Houston Chronicle article in 2001, it took till 2000 for home prices to get back to 1981 levels, on an inflation-adjusted basis.

Plus Houston housing is still very affordable for the average local family.

I live in an upscale neighborhood, beautiful, broad, tree-lined streets and well-maintained homes. There's a custom, 2800 sq ft home built in 1976, on my block, listed for $179,000 - it will never sell for that price - maybe $165,000 to $170,000, but that's it. How do I know - because that's what the typical home in sub-division sells for.

Only brand new homes can command a premium price in Houston area, maybe $75k over a similar used home. But the prices are still very reasonable. A friend just bought a brand new suburban home, lots of fancy custom detail, 3200 sq ft, for $275,000.

[jimmygu3]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

I can't agree with you on Houston. We did not have a major real estate boom here in the 2000's, so we are not having a major estate bust. Also, prices never skyrocketed here like they did in other parts of U.S.

Most importantly, the local economy is healthy right now, due to energy industry concentration.

Real estate market has slowed down lately and there are some foreclosures due to faulty loans, but foreclosures I have seen are turning over pretty quickly.

Houston housing prices have been on a much slower track than rest of U.S., since the Houston real estate bust/ oil bust of 1980's, when house prices went down 30-50% (depending on area) from 1984 to 1988.

Houston gradually recovered, but since then houses in Houston have been a place to live, not to speculate or use to get richer with. And THAT is the future of the U.S.

I'll throw out a few numbers. Per Houston Chronicle article in 2001, it took till 2000 for home prices to get back to 1981 levels, on an inflation-adjusted basis.

Plus Houston housing is still very affordable for the average local family.

I live in an upscale neighborhood, beautiful, broad, tree-lined streets and well-maintained homes. There's a custom, 2800 sq ft home built in 1976, on my block, listed for $179,000 - it will never sell for that price - maybe $165,000 to $170,000, but that's it. How do I know - because that's what the typical home in sub-division sells for.

Only brand new homes can command a premium price in Houston area, maybe $75k over a similar used home. But the prices are still very reasonable. A friend just bought a brand new suburban home, lots of fancy custom detail, 3200 sq ft, for $275,000.

Wow, Houston sounds affordable. Too bad Case-Schiller doesn't keep data on Houston, but they have for Dallas since 2000. Here's a chart comparing two bubble cities to two non-bubble cities. Can you guess which is which?

[zoog]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

Wow, Houston sounds affordable. Too bad Case-Schiller doesn't keep data on Houston, but they have for Dallas since 2000. Here's a chart comparing two bubble cities to two non-bubble cities. Can you guess which is which?

The most unusual, "wildcard" aspect of this current housing bubble is that it is part of a larger credit bubble collapse. The realtors keep saying "real estate is local"... yeah but the financial industry is national, even global. Even in cities where home prices did not shoot up astronomically, as credit standards tighten and some mortgage products are taken off the shelves altogether, there will be limits to how much people can borrow to buy a house. If they can't borrow enough to buy at current prices, eventually the prices must drop to meet the available credit, even if otherwise prices would have likely remained stable or even slowly increased.

Obviously, cities that are still "cheap" have less downward pressure from the credit crunch. But who can say what will ultimately happen with mortgage lending? What if at some point, the only way you can get a mortgage is to put 20% down? How many people in Houston have $35,000 for a downpayment?

[jimmygu3]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

The most unusual, "wildcard" aspect of this current housing bubble is that it is part of a larger credit bubble collapse. The realtors keep saying "real estate is local"... yeah but the financial industry is national, even global. Even in cities where home prices did not shoot up astronomically, as credit standards tighten and some mortgage products are taken off the shelves altogether, there will be limits to how much people can borrow to buy a house. If they can't borrow enough to buy at current prices, eventually the prices must drop to meet the available credit, even if otherwise prices would have likely remained stable or even slowly increased.

Obviously, cities that are still "cheap" have less downward pressure from the credit crunch. But who can say what will ultimately happen with mortgage lending? What if at some point, the only way you can get a mortgage is to put 20% down? How many people in Houston have $35,000 for a downpayment?

Excellent point, zoog. I actually think a lot of people could come up with $35k if they got resourceful, selling holdings in the lackluster stock & bond markets. As we see in the chart below, the median American household has a net worth of $96k, $42k of which is housing equity. With median home prices at $220k, our median homeowner is only $2k shy of 20% equity.

But if the national market drops 20%, their equity is wiped out and the question becomes "can the median family find $35k for a downpayment on their NEXT house?" With remaining net worth of $54k, I think many could. Looking at the 75th and above percentiles, they certainly could find 20% to put down, even if present equity were eroded.

It will just require a shift in worldview, from 'maximize your mortgage, drain your equity and put your money to work in the market while your house climbs in value', back to the traditional 'use your savings to put a downpayment on an affordable home instead of paying rent'.

A better question might be "how many people in California have $150k for a downpayment?" Tightening lending standards hit high-flying markets the hardest.

[World Traveler]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

I probably need to clarify my post a little. I live in NW corner of Houston area, in a sub-division of homes built in the mid to late 1970's. Our mailing address is Houston, but we're outside actual city limits, in Harris County, about 26 miles from downtown Houston.

The homes in my sub-division and many, many sub-divisions in N/ NW area were built in 1970's through very early 1980's. All very nice, from 2200 to about 2800 sq ft, with a lot of custom detail popular at that time. Also very well-maintained, since Homeowner Associations have a lot of power under Texas law and these Associations go after homeowners who do not maintain their property.

The prices I quoted are real. My house and house next door are 2500 sq ft, 1 story, we just had our tax assessments, I challenged mine to be more in line with house next door, and Harris County has just agreed to an assessment of $150,000 on my house. And I live in a nice neighborhood - my out of town relatives are always impressed when they visit.

A big issue around here is that there has been a lot of new homes built a little further out N/ NW in past 10 years, the common wisdom here is that people prefer and buy new homes when they can, and so prices of existing homes have only tracked inflation, if that.

Inside the Loop 610 (6 mile freeway looping downtown Houston), it's a very different story. Housing prices there have gone up significantly, at an annual rate way above inflation, as older neighborhoods are torn down and gentrified.

With price of gas where it is, I think this trend continues, close-in Houston homes continue to appreciate significantly and further out homes not so much.

[Jayhawk]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

I'm scratching my head out here, having been fully bought into the doom and gloom of the housing market.

1. Friends of ours in our neighborhood (North of Colorado Springs) sold their house in under 3 weeks for asking price. It really was not that nice of a place either. This went down a month ago.

2. My in laws are back in the Chicago suburbs as I type. The bought a small condo on a pretty lame lake in a town called Wauconda (near Lake Zurich) about 5 years ago for around 260's. It's about 1200 square feet. The put a for sale by owner sign in the window and have had 5 offers within a few weeks. One was for 335K or just slightly under the 342 asking price. :confused:

I've been preaching the housing bubble crash to both parties and I'm looking pretty dumb right about now.

[jimmygu3]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

I'm scratching my head out here, having been fully bought into the doom and gloom of the housing market.

1. Friends of ours in our neighborhood (North of Colorado Springs) sold their house in under 3 weeks for asking price. It really was not that nice of a place either. This went down a month ago.

2. My in laws are back in the Chicago suburbs as I type. The bought a small condo on a pretty lame lake in a town called Wauconda (near Lake Zurich) about 5 years ago for around 260's. It's about 1200 square feet. The put a for sale by owner sign in the window and have had 5 offers within a few weeks. One was for 335K or just slightly under the 342 asking price. :confused:

I've been preaching the housing bubble crash to both parties and I'm looking pretty dumb right about now.

Actually, your in-laws' experience is right in line with the Case-Shiller data for Chicago. In fact, if they bought a house for $260k in Oct. '03, it would have topped in July '06 at $450k, and go for- you guessed it- $335k as of March '08. Annualized appreciation of 5% despite a 25% drop over the last 2 years. They did well to sell quickly.

[c1ue]

Re: 38% Decline? Housing Down 43%-57%: Have We Arrived?

Easy way to win back brownie points:

Bet them money if they hold it a year longer, that they'll make less money than selling now.

Double or nothing