|
Edited on Wed Feb-24-10 02:52 PM by Kurt_and_Hunter
QUESTION ONE: Will home prices and sales continue to decline in 2010?
QUESTION TWO: Since the answer to question one is a glaring and inescapable "yes" the second question is, What kind of recovery is possible in an environment where homes prices continue to decline?
We are in a bubble-collapse in real estate pricing. As long as real estate continues to decline it is pointless to talk about being in a systemic recovery. Reaching some kind of a bottom in the bubble asset has to be a precondition for recovery from a collapsed bubble. And my questions referred to residential real estate which is probably much closer to a bottom than commercial real estate. The CRE defaults are barely getting started.
And to everyone who picked a bottom in housing last year, take another hit of whatever you're ingesting. It wasn't an economic thought, it was an emotion-based assumption that we had obviously suffered enough so hey, things ought to turn around.
It was impossible for housing to bottom last year unless real estate prices went off an even bigger cliff or rents sky-rocketed. One way or another, the (total) costs of renting and buying must be roughly comparable. They always have been except in a freak-storm like a housing bubble. (Total cost. The deductability of interest allows mortgages to be higher than rents even with not investment value built into pricing.)
Until it is at LEAST as smart to buy as it is to rent there will be no durable price appreciation. (There is always a regional componant. There are a few neighborhoods where it might make sense to buy today but they are a tiny fraction of the national real estate picture.)
(And to those who think knowing what fucking time it is is a recreation for malcontents... I promise you this thing has hit me as hard, cruelly and permanently as anyone here. This is not fun, it is just reality.)
|