Since many people suggest we start the part 3 of this thread, here we go.

Harvard guys made such a report, heard it's useless though.

Harvard housing report

And since RE prices in NYC and Seattle are still going up crazily, many people believe this biggest housing bubble in history is not topping out yet.

link to part 2

asharerin said:The unsustainable rise in housing prices in the USA was an unintended consequence of Greenspan's artificially low interest rate policy. It was not driven by market fundamentals. If we look back through history we find that market forces always correct artificial market manipulation.

The only question is will the market whipsaw in a quick, violent fashion or will housing prices simply remain flat until the next cyclical boom in 15-20 years? With real incomes falling and the cost of borrowing rising i'd say a whipsaw would be the natural way to go but the government is already stepping in trying to patch the holes in real estate's foundation with sub-prime bailouts.

But I think the much more inetersting story at the moment is inflation. Bernanke will nuke the stock and RE markets before he lets that beast out again....and the beast seems to be getting a stronger grip.

In my opinion, there won't be a whiplash but steady periods of purchasing and stagnation.

There are a lot of people like my wife and I who have decided to sit the market out and given themselves certain 'points' at which they will buy. Right now a lot of people who have been sitting the market out for 2 years are finding homes with enough of a price reduction that they are willing to buy. Once those people have run out, prices will drop further. The cycle will continue until pricing is at its low point when most people who can buy a house are buying, and prices will probably jump a few % points, and might even boom again as the 'everyone is buying!' fad hits.

Here's my question: Most folks on this forum will argue that it's pointless to try to time the stock market, since even professionals
cant do it consistently. So one should just buy into an index fund and wait long term.

But is the same true of the housing market? If, for whatever reason, you want to own a home, does it make sense to try to find the bottom? Should you just buy and hold regardless of the current market? Is there an optimum strategy, or even a reasonable one?


Edit: I posted before seeing Little Nicky's comment. He may be right, I'm not sure.

Real estate agents expect a summer of markdowns in Twin Cities
While some experts say the sector may have hit bottom, they predict a slow recovery
BY JENNIFER BJORHUS
Pioneer Press
Article Last Updated: 06/12/2007 11:46:06 PM CDT

The Twin Cities housing market continues to trudge through a serious correction, with would-be buyers largely shrugging as rising foreclosures add to record for-sale inventories. Tougher lending standards and rising mortgage interest rates threaten to dampen activity further.

With less than a month to July 4, the sluggish activity spells trouble for the summer dog days ahead. Conventional wisdom holds that spring offers the highest prices and that homes not sold by the holiday face an uphill battle as sales activity wanes until fall.

"It will be a summer of more markdowns," predicts Steve Shea, owner of Sunset Realty in Maplewood. "It's going to take this market a couple of years to clean out."

Buyers seem indifferent to the deals; sellers sweat out a market flooded with a record 33,898 active listings. Those listings do not include all of the 9,300 newly built homes (excluding condos) either already built and sitting empty or under construction, said Ryan Jones, who manages the Plymouth office of MetroStudy, a Houston-based company that researches residential construction.

The market is at the bottom of a "U-shaped" correction, awaiting the bounce back up, said Deb Greene, president of the Minneapolis Area Association of Realtors, or MAAR. Greene said she had no idea how long the market will remain in the bottom bowl of the "U."

"It's going to be a slow recovery," she said.

The National Association of Realtors last week cut its forecast. It's now calling for existing-home sales nationally to drop 4.6 percent in 2007 and the median sales price to decline 1.3 percent to $219,000 this year, the first such price decline since the national association started keeping the statistics in 1968.

MAAR, too, has pared its forecast for 2007. It previously called for the Twin Cities median sale price to rise as much as 1 percent this year. But the group now says it could slip as much as 1 percent.

An annual metrowide decline would be the first since the group started tracking the 13-county median or average sale price since the 1980s.

To be sure, homes have continued to sell in the Twin Cities. Closed sales, pending sales and the median sales price for May in the metro area were up from April. But they were all down year over year. And the area's prime spring selling season was flat-out disappointing.

The May snapshot:

# 4,298 closings, down 14.7 percent from May a year ago.

# 4,781 pending sales, down 16.8 percent from a year ago.

# $227,495 median sales price, down 1.1 percent from a year ago.

# 33,898 total active single-family listings, up 12.3 percent from a year ago and a local record as far as MAAR knows.

Buyers simply didn't return to the market as hoped. Agents and brokers tick down lists of possible reasons. Some suspect would-be buyers simply feel squeezed financially and are skeptical of the economy in general - and of the housing market in particular because of negative media coverage of problems in the subprime mortgage industry. People may be shifting investments to stocks instead. Tightened lending standards since the subprime mortgage market caved are cutting off some buyers from financing.

Karen Wilson, broker for Buyer's Services Wilson Realty in St. Paul, said move-up buyers simply cannot sell their current houses given all the competition. First-time buyers now make up most of her business, Wilson said.

Whatever the exact reason, buyers lack urgency.

"They think they have all the time in the world," Greene said.

Greene said she hopes rising interest rates might motivate people holding back to strike. The national average interest rate on a 30-year fixed mortgage is about 6.33 percent, up from about 5.7 percent in March, according to Bankrate.com.

Sellers, of course, feel urgent. They organize condo crawls, online foreclosure auctions, progressive open houses that stage appetizers through desserts at different houses. E-flyers abound. Bloomfield, Mich.-based Pulte Homes Inc., a major home builder in the metro area, announced Tuesday that from June 22 to June 24, buyers using Pulte Mortgage will get 10 percent off all homes plus $10,000 toward closing costs.

Intrepid agents wave off the market's sour messages as so much noise.

Paige Hamernick, a Realtor at Counselor Realty's White Bear Lake office, knows she's up against a mountain of inventory. But business goes on. Hamernick stuck out a for-sale sign Tuesday in front of a two-bedroom town home in Shoreview she just listed for $199,900. There are some five other units in the "Cherrywood Hills" complex for sale, too, Hamernick said, so maybe she'll coordinate with the agents and do a cooperative open house.

"It's not like the bottom has dropped out," Hamernick said. "It is slow, but it has been picking up."

revheck said:Here's my question: Most folks on this forum will argue that it's pointless to try to time the stock market, since even professionals
cant do it consistently. So one should just buy into an index fund and wait long term.

But is the same true of the housing market? If, for whatever reason, you want to own a home, does it make sense to try to find the bottom? Should you just buy and hold regardless of the current market? Is there an optimum strategy, or even a reasonable one?


Edit: I posted before seeing Little Nicky's comment. He may be right, I'm not sure.

It all depends on what you consider "timing the market". If you are looking at macro trends, then timing the equity or housing market is pretty easy. Granted, timing it perfectly is nearly impossible, but timing it to a reasonable degree is not too hard. I am not talking about day-trading, or even inter-month trading, I am talking about 6+ month periods where you can make reasonable assumptions on whether a market is about tapped out. This is doubly so for housing, since it doesn't move nearly as fast as equities.

I think that too many people are counting on sideline waiters. There is already massive overhang in inventory, more than a year's worth using pre-boom numbers. This doesn't even include the massive amount of foreclosures yet to happen, or the amount of people who took their houses off the market in fall/winter to sell them in spring/summer, or when they think the market will "level out".

No, I think we are in for a sustained decline in prices, I wouldn't doubt that it'll take another 1-2 years before we see the bottom, with another 5-10 years of relatively stable prices. I think on an inflation included basis we'll see prices come down by 30-40% in most areas.

I just love how people are calling bottom when there isn't one iota of information to even catch a whiff of the bottom. Foreclosures aren't declining, borrowing costs aren't declining, personal debt isn't declining (increased again to record levels), the hump of ARM resets hasn't been passed, prices are still declining for almost every major MSA (except Portland and Seattle), GDP growth isn't increasing (decreased 75% Q4-06 ->Q1-07), there is still a lot of inventory coming onto the market from the builders, and many yank-backs from fall/winter aren't on the market again yet. There is nothing to indicate a bottom.

Wow, 176,000 homes were foreclosed last month. I smell the cookie crumbling...

http://www.boston.com/business/globe/articles/2007/06/13/may_foreclosure_filings_soar_90_more_housing_woes_likely/

Any of these Krap can bring down California home prices would be ideal. We will get a chance of the lifetime to move there.
California home prices are up just because investors put more money there hoping 100% returns.
If investors feel their is no much appreciation they start selling homes because California rent is not in par with home prices. Rent is cheaper and investors take the loss on rent to gain from the appreciation. If no appreciation then we have more homes in the market.

asharerin said:The unsustainable rise in housing prices in the USA was an unintended consequence of Greenspan's artificially low interest rate policy. It was not driven by market fundamentals.


It was a combination of many things, of which the above was only the final ingredient. Creation of MBS, dot.com dumping on the average Joe, Japan's excess of dollars, sudden trade imbalance with China, little to no regulation at Fannie and Freddy, regular consumers becoming numb to larger debt over the last 25 years and only caring what the monthly payments are, etc. Disasters never happen from just a single mistake but rather a stack up of errors.

You won't see a nationwide bottom, some areas will get smacked down hard and others may not even be affected.