Top markets for a downturn (according to the CME trading)
Interesting article in the WSJ tonight: http://online.wsj.com/article/SB1191466 ... whats_news
A few excerpts:
"The outlook for house prices is getting even gloomier as traders on the Chicago Mercantile Exchange bet on steep price declines and the number of homes for sale grows."
Which cities make the list for highest depreciation you may be asking?
"The current contract prices show that traders expect prices in the Miami metro area in November 2011 to be down 28% from the mid-2007 level. (The indexes cover metro areas as defined by the U.S. Census Bureau.) The expected drops in other metro areas for the same period are 18% for Las Vegas, 12% for New York, 19% for San Diego, 26% for San Francisco and 13% for Washington, D.C."
Seattle didn't even make the list. Just in case you're wondering, the city with the least amount of expected depreciation is Chicago at 6.6%.
I realize this doesn't say much but it does show that yet again on a nationwide level Seattle isn't seen as an overheated market.
A few excerpts:
"The outlook for house prices is getting even gloomier as traders on the Chicago Mercantile Exchange bet on steep price declines and the number of homes for sale grows."
Which cities make the list for highest depreciation you may be asking?
"The current contract prices show that traders expect prices in the Miami metro area in November 2011 to be down 28% from the mid-2007 level. (The indexes cover metro areas as defined by the U.S. Census Bureau.) The expected drops in other metro areas for the same period are 18% for Las Vegas, 12% for New York, 19% for San Diego, 26% for San Francisco and 13% for Washington, D.C."
Seattle didn't even make the list. Just in case you're wondering, the city with the least amount of expected depreciation is Chicago at 6.6%.
I realize this doesn't say much but it does show that yet again on a nationwide level Seattle isn't seen as an overheated market.
Comments
Good point.
1) The bubble-deniars at the National Association of Realtors are choking down another heaping helping of crow. Yum!
2) We'll continue to hear these same voices of sanity and rationality quoted in the Seattle Times as if they were objective experts.
3) Looks like shorting CME housing futures in the biggest bubble markets would have made you more money than buying (or holding) Seattle real estate this year...and that's before the bubble starts to deflate in the PNW.
"Decrease? I don't see no stinkin' decrease! If I don't seeee a decrease, I sure as heck ain't gonna predict one!"
Most established RE experts are still predicting an continued single-digit percent nominal increase in the Seattle median, similar to other markets before they actually started to decline.
My prediction that, with slight modifications, I've been making since right after I bought my house is:
20-40% decline over the span of the next 4-8 years, 5-10% decrease a year, on average.
Condos, town-homes and high-end, will see a larger decline, maybe 50-60%.
New construction will decline more than existing construction.
Modest, existing homes in good, established neighborhoods will weather the storm best, losing near the 20% end of things.
This prediction and 2 bucks will get you a single-shot americano with room.
I am curious if you have at all factored in how the declining value of the US dollar might affect the housing market.
Government is reporting CPI numbers at 2% (inflation). Recreated M3 reports are showing inflation is at 14% and rising. GDP is around 2% at best, with some likelihood that it's actually below 1%.
Sustained 14% inflation means that the value of the US dollar may decline by as much as 53% (assuming 0% GDP) in just five years. If war escalates in any fashion, or the Federal Reserve continues to bailout corporations from financial failure, the inflation numbers could increase. Since we're looking at a looming $60 trillion shortfall due to Medicare and social security, I may as well mention that, too.
Here is the recreated M3 report --
http://www.shadowstats.com/cgi-bin/sgs/data
The US government decided in March 2006 to remove the M3 report from public view. The M3 report is traditionally what is used by foreign governments that have their currency pegged to the US dollar to determine the value of their own currency.
Thanks.
Hmmm, that just can't be right. Seattle is THE world class city right? My mother used to always explain how all world economic activity passed through Pike's Place, that the Space Needle is a beacon of light and hope for billions starving in forsaken corners of the globe, and that a future world peace will begin in Seattle where lions and sheep sleep together.
Maybe they are just using the code name "New York City" when referring to Seattle (both have been called The Big Apple).
I am certainly not saying that Seattle or other markets are not overpriced, but I think a prediction of 40-50% decrease is ridiculous.
If that's the case, EVERYONE who purchase in the last 5 years would be WALKING on their house, and returning the keys. So whats the next prediction when that happens?
A 100% decrease in the next 7 years? So banks will be giving away homes?
What amazes me is how many people actually have a TON of money in Seattle. That's not to say there are not people just scraping by, but it is amazing how much some young people have to spend, and how many high paying jobs Seattle continues to create and has to offer.
I predict a 100% decrease in the value of homes...Let me know where the line is when banks start giving away homes for free. With what I pay now I will gladly wait for that 50+% decrease and I will purchase 2-3 homes that now sell for 600k. Bring it on.
How many people on this blog were students in 2000-2001? If I had an income, I would have probably bit then and bought.
Besides, bubbles by their very nature are irrational. The correct of a bubble is always (within reason) a rational correction. Those statements are true practically by definition.
Your question is like saying "you people predicting Mel Gibson will apologize for his use of racial slurs are such hypocrites. If you knew he was going to apologize, then why didn't you follow him around with a video camera so you could sell the tape."
Sorry, but your argument that people here not cashing in 6 years ago does not prove anything about the future. It's a fallacious argument.
I could tell you that when interest rates hit 1% I thought it would be a good time to buy a house. Except at that time I already owned a condo and at that time I did not know you could get some of the crazy loans that caused this bubble. Because when I bought that condo in late '90s the bank required you to put money down, checked your income, verified your credit, verified your savings, and even then you were not guranteed to get a loan approval; that was the way it had always worked.
Moreover, the 1% rate was in the aftermath of 911 which no one was very sure what was going to happen next, not even the gov't.
That's just not true and the later part of your post is the reason--there are a lot of people with money here, and they won't lose their houses, even if they bought at the peak.
But if anything goes wrong--anything--to cause consumer confidence to drop (another 9/11, stock market crashes, massive earthquake hits seattle, and these are only the biggies), the demand for housing could easily drop, causing prices to fall significantly (over time). Just look at California real estate from 1988 to 1996. It was ugly, prolonged, and unanticipated. Sure things eventually recovered, but for you to say that something like this can't happen is just as silly as you thinking somebody who says it can drop 50% is silly.
Let's see, No Job, No Income. Any assets? Cause I've got a nice NJNIA loan I could have put you into. :P