Seattle Bubble Forum Archive

So yeah, I'm a "n00b" as I guess they say on the intertron to this website, so I'm sure this topic has been covered. If so, redirect me.

Anyway, I'm just curious as to when people think that house prices will stop declining and level out again? I'm just interested in seeing opinions on this subject.

Two scenarios:

1) Optimist - 2012 they stop falling and level out
2) Pessimist - We do a "Japan" and they keep falling...and falling

So are you feeling lucky today?....

There are two ways you can specify this: predictive, and prescriptive.

Predictive is what SeattleMoose did, with a prediction of 2012 (which is pretty reasonable as a guess IMO).

Prescriptive would be to explain what the market will look like when we do reach a bottom. FWIW, a prescriptive is still a prediction, but it is much easier to be accurate in this mode. That's because we've seen a lot of bubbles, and we know how bubble psychology works. We haven't seen as many real estate bubbles, so it's more difficult to state exactly how long or how low prices will go.

So, what's the prescriptive explanation? We'll reach the bottom once general consensus is that nobody should be in the housing business anymore. Stages you might recognize before that point are(in order): everyone should be in real estate, it can't go down, dropping prices are a minor set back, and most people will not lose money.

Tarzanchuck,
I'm predicting that local prices will continue to decline until somewhere between July and December of 2009, at which point I see flat prices until about 2012 when I see prices rising again.

My opinion is it will all depend on an area.
Outlying areas like Snoq Ridge, SE Renton, Kent, Auburn, Marysville, Arlington etc, will fall and not flatten until 2011-2012.

Areas closer in to job core centers will stabilize whenever lenders, banks will lend money which they do not have right now. When consumers realize that its time to save up the minimum 3.5%-5% down payment and show a well structured personal balance sheet. Guessing time frames on any of these events is like throwing darts at a board blindfolded.

Mukoh, can typical buyers still get loans with 3.5 to 5% down? I had thought that one factor shielding Seattle for so long from a downturn is that compared to many MSAs buyers' typical down payment remained fairly high during the boom (see http://www.zillow.com/quarterlies/Quart ... ellevue+WA -- and boy I'm looking forward to the Q2 report). Isn't part of the recent straitening around here due to a reversion to stricter lending standards and buyer qualification?

I was pondering the signs of hitting a bottom & came up with this list. I'd love to hear thoughts from others...
--Number of home sales increase significantly
--Median prices shows an increase year-over-year for at 6 months.
--Changes in regulations/policies around mortgages in the US. Some emblematic examples include -- guidelines around the eligibility of a mortgage are significantly changed/increased, policies around tax break on the mortgage-interest change, etc, etc
---A couple of major financial institutions vaporize

Read this article:
and this follow-up:

Note that the follow-up is the author actually answering questions that his readers had (it got posted to digg and reddit so there were a lot of readers), so if you have some rational explanation why he could be wrong I'm sure he'd like to hear it as would I.

Well right now the only buyers that can buy are really 3.5% 5% minimum down, there is no bank that will give 100% loans or approve anything with 80/20. From big banks to small it is all across the board unless you have cash in your bank account to the tune of 6+ months interest, 680s score, 2 year job history as well you are not getting a loan. That has been around for over 4 months now, seemingly inventory growth has slowed down even with that tightening. Gift programs are gone as of Sept 30th completely.

I hope lenders do not however loosen up standards, even though there is already talk of lowering credit score requirements if cash reserves are stable and seasoned.

Gaging a bottom there is nobody out there that can make an educated guess on when it will be, anyone who is throwing "thoughts" out there is just guessing trying to impress everyone that they called it a few years from now when in reality it was a shot in the dark. This is a market just like any other with a myriad of factors thrown in, trying to do it on fundamentals of wages, inflations, median home prices vs. median income, is interesting and fun, this is one of the few markets driven by first of all emotions and desire for a basic need, then by peoples desire to achieve income great enough to afford it.

If the prediction in that article (linked by perfectfire) is accurate about the housing bottom, then house prices in Seattle would fall 60-70% from the peak at the bottom. A lot of people think housing will fall, but their situation would be constant and so when prices fall they will be a in a better situation to buy their dream house. However, what really matters is your relative wealth with respect to everyone else in your city, and when the economy goes south the rich get relatively richer and the middle class/poor suffer the most.

Housing is related to the broader economy and if prices dropped so much, the broader economy would have to be in terrible shape. House prices are down probably 6-10% across the country (I don't know the exact number), but the S&P is already down 20%,and people are losing a ton of money in their investments and 401Ks.

When prices fall 60-70%, a large number of banks would fail, credit would be very hard to get, the local economy would be devastated, and a ton of people would be unemployed, and the ranks of the homeless would grow. At the housing bottom, neighborhoods would be devastated with foreclosed/abadoned homes and the crime rate will go up.

There will be great deals in housing, but they will only be for people who were already rich and have cash to pay down, and can get credit at reasonable rates.

I don't know if this will happen or not, but if you believed that situation, then you should probably just think of raising cash, and preserving capital - buying a house or any other high priced item would be silly.