Where do prices go from here? Will prices decline, remain stable or increase in the fall and winter months?
There are many factors which are likely to contribute to driving down prices in most metropolitan areas during the fall and winter months. Here is a list:
- Higher Mortgage Rates
- Possible Expiration of 8,000 Home Buyer Tax Credit
- Continued Job Losses
- High Foreclosures
- Seasonal Price Declines
Mortgage rates for buyers with good credit became very low over the summer months. Mortgage Rates Daily has a terrific graph to illustrate this point. Mortgage rates are likely to rise over the coming months towards 5.5% for a 30 year fixed.
Possible Expiration of 8,000 Home Buyer Tax Credit
The Federal Government's 8,000 home buyer tax is set to expire on November 1st 2009. It may be extended, it may not be. If it is not then this will certainly put downward pressure on housing prices.
Job Losses will continue
With the millions of job losses over the past year and the growing number of people falling off of unemployment rolls the downward pressure on housing will increase. Don't expect job gains until at least spring 2010.
Foreclosures
Foreclosures continue to remain at very high levels. Hundreds of thousands of new foreclosure notices arrive each month. Banks have a large backlog of foreclosed houses and condos waiting to be sold, "RealtyTrac, in its August 2009 U.S. Foreclosure Market Report, disclosed that foreclosure filings were reported on 358,471 U.S. properties during the month, representing a decrease of less than 1% from July, but still an increase of nearly 18% from August 2008.The report shows that one in every 357 U.S. housing units received a foreclosure filing in the month." RTT News. These amount of foreclosures per month will continue at a very high rate as we head into the colder months.
Seasonal Price Declines
Housing prices have a seasonal component which is that prices tend to do 'better' in the spring and summer months than the fall and winter months. This has been true during regular market periods as well as during the housing bubble and bust years. Many housing price indices (Realtor's and Case Shiller) are seasonally adjusted because of the strong seasonal component.
SummaryDue to a variety of factors prices in most major metropolitan areas are likely to fall during the fall and winter months. Don't expect spring 2009 to be the bottom.
Posts
Here is what will happen (with regard to Case Shiller - DC):
ReplyDelete1. Housing prices will rise this month, and possibly next month after that too.
2. Housing prices will stagnate and start to fall over the winter - slipping back into the 160(s) range possibly breaking into the high 150s
3. The falling will work NonPartisan and Noz into a frenzy, all the while I will be pointing out the YOY rate of decline will continue to shrivel.
4. Prices will rise next spring and the YOY change rate will go positive, showing that the bottom was somewhere in the high 150s low 160s range.
5. Non-Partisan will eat his crow as he admits his 115 prediction is unlikely. Noz will not admit to being wrong and will resort to calling me and everyone else an idiot for reporting the data as it comes out.
6. James or David pulls the plug on this blog as its obvious there is nothing else interesting happening and all of us move on with our lives.
if government intervenes, then the natural order of things will be all screwed up. If the free market is allowed to rule, then partisan will eat a flock of crows
ReplyDeleteI have a hard time believing prices will decrease in this area (the DC Metro area). We have very few foreclosures and jobs are increases. We will see.
ReplyDelete"Partisan said...if government intervenes, then the natural order of things will be all screwed up. If the free market is allowed to rule, then partisan will eat a flock of crows"
ReplyDeleteCould be my man! Could be! But if your ace in the hole is the gubbamint will quit intervening, I wouldnt hold my breath would you?
In all seriousness, even before the gubbamint mumbo jumbo, I noticed that the local DC area inventory was plunging. It was really strange, in most of the rest of the country it was still teasing out a peak, yet in the DC area (especially NOVA) it clearly peaked in 2006 and never looked back.
It was at that point I realized, hey this thing could wrap up much sooner than the intellegencia on this blog realized. Thus, I made a calculated risk to goad people into making predictions based on the assumption they were NOT watchng inventory and other fundamental indicators of supply and demand.
In that regard, you were an easy mark. All you said was "bell curves complete" or some other such nonsense. Maybe you did focus on fundamentals, but your hamfisted comments didnt reflect it. So I chose to see if I could tease out a bet from you and I got a doozy (115 for god sakes)!!!!
Kudos to you though for sticking with that call. Even though you dont pay attention to fundamentals like income, supply and demand, you had the courage of your conviction that "all bell curves complete" ;)
The job market may be relatively stable in the DC area, but the fact still remains that homes were (and to an extent still are) overpriced.
ReplyDeleteWhile a potential buyer may still have a job, they still need to get a loan to buy the house, and lending has tightened up considerably.
And for that matter, people aren't inclined to stretch themselves to the limit in the hopes that they can flip the house in a couple of years.
Well to the extant that prices are seasonal and go down in the Fall and Winter, aren't those less important since they are supporte on fewer transactions? -Jim A
ReplyDeletePARTISAN:
ReplyDeleteOption 7: You're wrong.
Oh and Partisan:
ReplyDeleteYOY RATE may decline..but it's still declining...that's what you don't understand.
Of course, given all that is happening to this superbly rebounding economy and the huge wave of foreclosures still backed up and increasing, I'll let you continue to believe your delusional ways.
By the way, it is quite interesting that some time ago, you didn't even think it'd drop at all...now you're down to 150K to 160K? Wait a minute, isn't that 2000-2001 prices corrected? Indeed it is.
Thanks for playing.
But as I've always said to you, since you you are so sure of yourself, you should be putting your monies on the line and buying up everything you can. Anything short of that and well...I won't call you a name. You can figure that out yourself.
"Noz said...By the way, it is quite interesting that some time ago, you didn't even think it'd drop at all...now you're down to 150K to 160K? Wait a minute, isn't that 2000-2001 prices corrected? Indeed it is."
ReplyDeleteNoz - you retard, that guy was talking about case shiller values of 150-160. It says so clearly at the very beginning of his post. Case shiller 150-160 is 2004 prices.
I actually think prices in DC wont go lower than 2004 prices as well, but I also believe they will stay flat for 50 years minimum.
ReplyDeleteSo when you finally have paid off your $500K row house bought in 2008, you will get to sell it for exactly $500K in 2060.
"So when you finally have paid off your $500K row house bought in 2008, you will get to sell it for exactly $500K in 2060."
ReplyDeleteSame thing for you when you buy it for 500K in 2014 and sell it for 500K in 2060. Too bad you didnt buy it in 2002 for 195K like I did.
"Noz said...By the way, it is quite interesting that some time ago, you didn't even think it'd drop at all...now you're down to 150K to 160K? Wait a minute, isn't that 2000-2001 prices corrected? Indeed it is."
ReplyDeleteNoz - I was talking about case shiller values 150-160 range is well above the 2000 range of 100.
ANON:
ReplyDeleteNoz - you retard, that guy was talking about case shiller values of 150-160. It says so clearly at the very beginning of his post. Case shiller 150-160 is 2004 prices.
September 28, 2009 10:11 AM
I know that you freaking moron...not everyone around here is as clueless as you.
Noz if you knew that, why did you earlier say 150-160 is 2000-2001 prices?
ReplyDeleteBecause that was the projection without CS to begin with.
ReplyDeleteOK now I really am clueless. What do you mean "without CS to begin with"?
ReplyDeleteYou need to put it into perspective with who've I got the argument with...it's not the OP...it's with Partisan. It's not the CS numbers I'm talking about...it's his projections I'm talking about.
ReplyDeleteOK - now I am lost too Noz. Lets try to clear this up. The futures market says Case Shiller for DC will be have the following values
ReplyDeleteAug 09 = 162.0
Nov 09 = 160.0 (*)
Feb 10 = 162.0
May 10 = 163.0
Aug 10 = 167.0
Nov 10 = 160.0
May 11 = 165.0
Nov 11 = 192.0 (I say it bids down)
May 12 = 163.4
Nov 12 = 163.4
*I am saying, we may get even a bit lower than that even down into the high 150s. But again thats just me and maybe im too bearish.
You said we at somepoint bottom at 135. I dont see anyway in the world nominal prices dip down that far.
Note, if you are saying we eventually get to 2000-2001 inflation adjusted Case Shiller values I agree with you. My suspicion is that by the time we get to the year 2013, 2000-2001 inflation adjusted prices will be 160-165.
Thus my point is, we will never see the actual number, the actual 3 digits "135" ever show up in the case shiller DC prices you seem to think we will see.
This comment has been removed by a blog administrator.
ReplyDeleteANON:
ReplyDeleteYou're a real idiot. In case you don't know, people have lives beyond posting crap up on this thread for your fulfillment. I hope that clears that part of things up for you at least.
Partisan:
If we are in agreement, I'm not sure what we have to clear up. What I should add though is that if inflation increases rapidly...which I believe it will...that will effectively decrease the value of properties even more. So 135 is not unrealistic and completely plausible.
Whether CS shows 135 or not is irrelevant. CS is a moving target by which they revise numbers all the time.
Given the current condition of our economy, the fact that we are printing money like there's no tomorrow, and unemployment rates are getting worse, we have yet to see the worst of it all. It takes time for such negative forces to steer this sinking ship even further into the wrong direction.
So far, all rosy pictures and outlooks economists, banks, Realtors, etc have talked about have been farces and lies. What would possibly make me believe CS's numbers are even plausible when their numbers are based on a moving target that so far is going nowhere but down.
This comment has been removed by a blog administrator.
ReplyDeleteIf we are in agreement, I'm not sure what we have to clear up. What I should add though is that if inflation increases rapidly...which I believe it will...that will effectively decrease the value of properties even more. So 135 is not unrealistic and completely plausible.
ReplyDeleteWhether CS shows 135 or not is irrelevant. CS is a moving target by which they revise numbers all the time.
Whoa! That's some entertaining tap-dancing!
Tippity-tap-tappity-tip-tap-tap!
But the winning comment of the thread goes to 'nonpartisan' with this gem:
If government intervenes, then the natural order of things will be all screwed up. If the free market is allowed to rule, then partisan will eat a flock of crows...
Now *that's* entertainment!
oboe:
ReplyDeleteIt's too bad you're not as entertaining now isn't it.
"Same thing for you when you buy it for 500K in 2014 and sell it for 500K in 2060."
ReplyDeleteExactly! Even if you buy in 2045 at $500K, you will have to wait 20 years or so before you see appreciation. The difference is that your salary in 2045 will be about $250K as well. Its just not worth it to buy right now.
Its funny how you prove my point by trying to argue it.
"Too bad you didnt buy it in 2002 for 195K like I did."
Dont feel bad for me, I just moved here in 2006 just for a gig, like most people. I dont mind renting a house while I work here for the next 3 or 4 years and going back to where I came from. The cheesecake factory and starbucks here taste the same as the one back home.