Friday, September 5, 2008

What to do, what to do?

As I sit here in my rental, throwing my money away and not benefiting from the fabulous benefits of home "ownership", I bring you this piece of news to chew a nutshell the housing market crash is just warming up. The person saying this is just Robert Shiller, a Yale economist with a PhD. He's just the guy who pretty much called the .com bubble perfectly and predicted the housing bubble would pop about a year before it did when everyone else was convinced a shitbox 3 bedroom home in Riverside was really worth $450,000.

I know he's not as qualified as a real estate agent or mortgage broker who took a 3 week seminar at the local community college. Still we might want to listen to what he has to say.

  • Home price declines are already approaching those in the Great Depression, when they plunged 30% during the 1930s. With prices already down almost 20%, it's not a stretch to think we might exceed that drop this time around.
  • There are about 10 million homeowners whose debt is higher than their home value, which has broad implications for how Americans feel about their wealth and spending habits (read: more pressure on consumer spending).
  • The current hopeful consensus -- that house prices will bottom soon and then begin to recover -- is most likely a dream. Housing markets don't usually have "V-shaped" recoveries. And even if house prices stabilize in nominal terms, after adjusting for inflation, most homeowners will continue to lose money.
Hmm there's this rationale from a man who created an index of home prices that is publicly traded in Chicago. And then there is the rationale from real estate agents with a "Realtor" designation who keep telling me that

- Now is a great time to buy
- Owning a home is the American Dream
- Real estate never goes down
- Renting is throwing my money away
- If I don't buy now, I will be priced out forever

Hmmm, I wonder whose advice I should take. Let me sleep on it and I'll get back to you with my decision.


Anonymous said...

what about this awesome comment down below in the comment section of that article you linked to, from "Wizard 2009" or whoever:

"What articles like this fail to mention (time and time again) is that Real Estate is very localized. There was no Bubble in Georgia or Texas or North Carolina. These places have been coasting along at 3-5% apreciation a year or less. Places like FL, CA, AZ, NV has seen 200%-300% apreciation over the past 8 years. A correction of 50% in those area's is far from a "Bust".

ha ha

Anonymous said...

p.s. that's why it'd be great if you'd link all your Georgia posts together, you've done a lot of great research and legwork for the rest of us . . . with addresses, dates, and prices which proves there was a bubble in Atlanta GA, and we could use your links for reference in discussions elsewhere on the web, or as a lead for papers, etc.

I saw on one post you had a link

(Anon above)

Ed said...

That is funny. First there was no bubble. Then there was a bubble but it was sustainable. Then it was, maybe there will be a slight pullback. Then it was well, 15% price drop after 100% rise isn't so bad. I see now we have moved on to the delusional thinking that 50% price chop is OK too.


I wonder if that poster realizes that a 100% gain is wiped out by a 50% loss.