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House prices could fall for two more years

newsdaily.com — Citigroup chairman Win Bischoff has warned that house prices in Britain and the United States are likely to keep falling for another two years. The chairman of one of the world's most powerful banks told the BBC in an interview that he expects it will take two years for the markets to stabilize.

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bixby1, on 07/19/2008, -4/+27This is distressing news. I hate getting bad news from smart people.
- jimmiss, on 07/20/2008, -0/+6You know you're really in trouble when stuff is so bad it actually starts to get complicated.
- b0rna, on 07/20/2008, -0/+6Dude, have you been to Vancouver lately? Sad about house prices dropping? Move to Vancouver! Problem solved. Home to some of the most expensive crappy houses in the whole world. And some really expensive nice ones too.
  
  Problem solved =)
  - stagmire, on 07/20/2008, -0/+1I co-own a condo in Vancouver that I rent and manage remotely and the value has gone up 9% in the past year alone. Even better: I'm paying down the mortgage from a Canadian account I opened years ago before the dollar tanked. The appreciation of the CDN against the USD has more than offset the interest I'm paying.
    
    I think part of Vancouver's success is due to the large amount of oceanfront property. That ***** never really loses value. It's pretty easy to find units that have a view of the ocean on one side and the mountains on the other.
  - Iztikeit, on 07/20/2008, -0/+2You'll get yours soon enough.....We all will.
- pak314, on 07/20/2008, -1/+18Why is housing prices falling considered bad? Do you complain when oil prices or food prices fall? Perhaps if people stop thinking of houses as investments we wouldn't have all these problems.
  - InfiniteNothing, on 07/20/2008, -1/+4Mostly because people who are upside down on their loans will walk away causing general economic distress.
  - stagmire, on 07/20/2008, -6/+3"Perhaps if people stop thinking of houses as investments"
    
    WTF kool aid are you drinking?
  - PaulOwen, on 07/20/2008, -0/+4In the US people can walk away from their loans, in the UK that's not possible - the lender can legally chase you for the upside-down difference between the value of your house and the value of the loan.
    
    The UK government has been far too lenient on mortgage lenders in the UK, with the consequence that housing has been treated as a one-way bet for the banks, making them more reckless.
    
    I resent the UK bailout of mortgage lenders with taxpayers' money for this reason. Far more preferable is to make a few of the banks go bust, and then watch the other banks get really really competetive on their rates, lower their senior staff's pay and get really lean, really really quickly!
    
    ;-D
- thumperings, on 07/20/2008, -0/+3This is great news for me; I plan to be broke for exactly 2 more years.
siszam, on 07/19/2008, -2/+31I'm waiting for the bottom so I can houses for my sons. It's good news for some of us. I hate the others have to suffer though.
- carlosos, on 07/20/2008, -0/+4What suffering? If people sell their house now than they can get the same size of house they were able to get two years ago when they were more expensive. In 2 years they can sell the house and still get the same size of house for that money. It is just trading one thing of the same value for something else of the same value. It is not like only one house loses value while all other ones get more expensive.
  It will be nice when home prices are normal so that the people that can't afford them at the moment will be able to buy them.
  - scaaven2, on 07/20/2008, -1/+2Yeah, except that when you sell something for less than you bought it for, the difference doesn't just magically disappear.
Carbonlord, on 07/19/2008, -4/+12This is not the news I was hoping to hear, I thought we were at the bottom, now!
- chuckDontSurf, on 07/20/2008, -0/+13Just curious--what made you think that?
- Carbonlord, on 07/20/2008, -2/+3I couldn't imagine any lower after it came down to the same value I paid 6 years ago.
  - pault107, on 07/20/2008, -0/+4It's time to wake up then.
- jabberwolf, on 07/20/2008, -0/+2Actually this fall in the market was supposed to happen a couple years earlier then it did now. But because it took so long for it to happen, the bursting bubble is a bit bigger and will last longer now. Some people were surprised by this fall but those in the market are surprised it didnt happen sooner.
  
  Its kinda funny (not in a HAHA way) that the market does go in cycles like this almost like clockwork. Not sure if housing sales are gonna fall any more or as steep but they will more then likely stay stagnant.
  
  The issue is when banks will feel safe enough to offer decent downs for 30 year loans and not require 15 or 20% down for some, basically making it impossible for new buyers to get into the market. The markets will more then likely start to recover end of 2009. And you'll see this buy a sudden purchasing of land by companies rather then people. Basically old adage, to make money, you gotta have it first.
hugolp, on 07/19/2008, -4/+58Good, house's at decent prices finally.
- badtiki, on 07/20/2008, -0/+7I agree! Hopefully prices where I live will actually start to come down by then - The houseing market in CT is still out of control, the local news had a report last month about how all the young people can't afford to live in CT so alot of them are bailing the state.
  - stagmire, on 07/20/2008, -0/+1"all the young people can't afford to live in CT"
    
    This was news to you?
  - badtiki, on 07/20/2008, -0/+1actually it is. I've lived in CT my entire life, CT has (or had) it's affordable areas
- Huzsar, on 07/20/2008, -0/+3Tell me about it, I'm looking for a condo near Hartford right now, so I have a closer ride to work and they are all expensive and if they go down in price its negligible. The good thing is that I see more and more of them on the market so I think the price will start to catch up slowly to the lower demand and higher supply.
  - scamper22, on 07/20/2008, -0/+3ah, finally someone with common sense. Cheap housing is a wonderful for the middle class. You know how much the government's hate us.
    
    The only people to benefit from increasing house prices are investors and the bankers (mortgages)... I would welcome a world where the average person is not spending 30% of their income just on housing.
BornSlacker, on 07/19/2008, -4/+29As someone who's currently unable to get on the property ladder because the prices are so ridiculously high - this is good news. Although as a renter, this sucks as it probably means the rental market is about to go crazy stupid with demand, thus pushing the prices up.

To summarise, screwed either way! :)
- ralphodog, on 07/20/2008, -0/+9Rents are basically a function of housing prices and the interest rate (if you want to be technical it's actually the reverse). Housing prices going down should actually bring rents down with them.
  - grumpyrain, on 07/20/2008, -0/+4If you want to be really technical, rents are a function of supply and demand of rental properties, and 1 degree separated from housing prices and interest rates.
    
    If there is an under-supply of rental properties, rent will increase. If there is an over-supply of rental properties, rent will drop. There are two factors that determine this. Both high house prices and high interest rates reduce home affordability, and therefore increase the number of people who are looking for a rental property (+ supply). Housing bubbles are largely driven by capital gains. In other words, if you look at the rental returns as a percentage of property cost, they are terrible. Back a few years where we live, these were as low as 2% or 3%. This is because the properties were horrendously overpriced and so many people were putting their money into investment properties.
    
    Then the market stopped growing, interest rates started rising and property prices started to fall. It became a bad idea to invest in new developments with a grim outlook, and so the supply slumped. Now rental properties are in short supply.
    
    This is neither a good thing nor a bad thing. It is simply the function of markets. What was a bad thing is that lenders were throwing lots of money at people who with hindsight had no means to repay in a tougher economy. I appreciate that some people will be burnt by this. They have lost a significant amount of money and some may never recover. Other people made an absolute mint, buying at the right time and selling at the right time.
    
    My only advice is this. Bubbles will *always* burst. Do not buy on the assumption that prices will never drop or that the economy will be the same as today.
- savantidiot, on 07/20/2008, -1/+5Housing prices go down = more are able to afford a home = smaller market looking to rent = why would rent go up? much less "crazy stupid with demand"?
  
  Why people are digging you is beyond me.
  - cam0man, on 07/20/2008, -0/+3Nobody can get loans to buy houses now...the only people buying them already have tons of capital. I know of lots of people who are stuck renting now even though they could afford mortgage payments, just that they can't get a loan. These are houses, not pizzas....low prices doesn't mean someone can just open their wallet and cash in on the savings.
    
    So the rental market is now flooded by two new demographics...those who would have been able to get a loan from a bank, and also the people who lost their homes to forclosures.
    
    Sucks....because of the spike I'm demand my rents jumping $300 a month come october.
- thumperings, on 07/20/2008, -0/+2just rent a house boat.
tastynuggets, on 07/19/2008, -0/+7Think like a contrarian - if you can afford it, might want to start looking around to buy over the next year or so.
yourbrokenoven, on 07/19/2008, -1/+15Good. I'll be glad to see housing prices and apartment rent go back down to what they were Pre-Katrina. They're ridiculously expensive and have been getting more and more expensive over the last three years.
- ralphodog, on 07/20/2008, -0/+1Prices started to correct themselves in late 2005, I'm not sure where you're living that has been able to avoid this nationwide trend.
  - dgaspard, on 07/20/2008, -1/+1 Katrina reference -- New Orleans
    
    New Orleans' housing market is crazy. Most people got money from FEMA, their insurance claim, and sold their house to someone or some corporation. Also, remember that thousands of people we're buying houses all at the same time. Most didn't care about the price since they had a lot in their bank account at the moment.
    
    With a flood of money in the city and everyone buying houses when they normally wouldn't the market skyrocketed while the rest of the country was plummeting.
    
    Now, no one wants to sell their house for lower than the artificially high price. Sellers have been fighting it, but prices are finally starting to come down.
Ninh, on 07/19/2008, -2/+7If he had the first clue about the real estate market, his company wouldn't be in this kind of *****, no?
- dilpil1, on 07/20/2008, -1/+2Yeah seriously why are people listening to this idiot?
- ralphodog, on 07/20/2008, -0/+4To be fair, one should note that Citi did a somewhat better job than most of their competitors in predicting the problems we're now seeing and is doing better than most of them.
- jerbaker, on 07/20/2008, -0/+1I don't get it. What kind of "*****" is his company in? You make billions off of bad loans, and then you rake in the government bailout. Where's the problem? It's the best of both worlds - they have little government regulation to keep them from getting into these situations (they were removed by Congress in 1999), and then they get a government handout when they gorge themselves on bad loans to the point of insolvency. While the going's good, they get to live like they are in a free market economy, and when the going's bad they get to live like they are in a socialist economy. They have their cake and they're eating it too. Of course, consumers get screwed twice. First by losing their homes and whatnot from the bad loans, and then they have to pay taxes to bail the banks out. God I love American corporatism.
- fokov, on 07/20/2008, -0/+1Greed trumps logic.
Fangsinmybeard, on 07/19/2008, -0/+10Local, county and State budgets will see themselves go without money. Federal government doesn't run on property tax.
- zacharytelschow, on 07/20/2008, -0/+5Less of my money in politician's hands AND lower housing prices? This article just keeps bringing more good news :)
drawkward84, on 07/20/2008, -1/+7Let's make the best of a bad situation. Who needs a roommate?
- hwy9nightkid, on 07/20/2008, -0/+625 yr old, looks for 2-3 women roommates to share a bed and corners of a small room. rent is free, but you need to be between the ages of 22-24, have black hair, and smell nice.
  - cdigioia, on 07/20/2008, -0/+3oh and NO FAT CHICKS
chaos7, on 07/20/2008, -1/+5i believe it
Seldon2639, on 07/20/2008, -2/+7Guys, we're putting the wrong face on this. Remember, in any market, there have to be winners and losers. When housing prices are high, sellers win and buyers lose. When prices are low, sellers lose and buyers win. No matter what happens in the market (short of full-scale collapse) someone will benefit and someone will be screwed.

Besides, house prices are only of a concern when you're buying or selling. Excluding that, the basic Maslow-based value of a home is all that it's really worth. Aside from that, it's pure vanity.
- Dumbledorito, on 07/20/2008, -0/+1Except the buyers (or would-be buyers) are in an economy wracked by the housing crisis itself, are up to their eyeballs in debt (usually due to sub-prime mortgages and re-fi's) and sellers have yet to come down to what the remaining buyers are willing to pay.
  
  It's a bargain-hunters market, except the hunters are suffering from the price cuts themselves.
- ralphodog, on 07/20/2008, -0/+2You're massively oversimplifying the situation.
  - jerbaker, on 07/20/2008, -0/+1As a potential buyer, I'm not so sure that's the case.
rajputwarrior, on 07/20/2008, -0/+6i wish housing would get cheaper in canada, its just stupid how much houses are here... especially in the west coast
- StillAnonymous, on 07/20/2008, -1/+3Don't worry, Canada's along for the crash too. It's just a few years behind the US. It's funny how you can read the exact same predictions you saw in yesterday's USA news in Canada right now: "Soft landing", "temporary drop in sales", "we're different",etc.
  
  If you learn anything from history, it's that "people don't learn from history".
zspeed78, on 07/20/2008, -0/+10This kind of speculating, ".. could go down.." reminds me of my favorite stock question and answer:
Person 1: Do you think ABCD will go up or down this week?
Person 2: Yes.
jer2eydevil88, on 07/20/2008, -3/+3Let me be the first to say it. They Won't.

Wow was that going against the tide or what?
- zacharytelschow, on 07/20/2008, -0/+2They won't... gosh, that was a convincing argument. The "there will be a further fall camp" has a historic run up in prices along with a lot of future foreclosures and no more loose credit to back their point. What have you got?
ousthouse, on 07/20/2008, -2/+16Cheaper houses. What's the problem? The problem is with the dummies who think buying a house they can't afford is a good retirement strategy.
RegalGSX, on 07/20/2008, -0/+5I own a house but I agree home prices are inflated in many areas of the US. There are a lot of people losing homes over bad loans that they can't afford to pay, but this problem will eventually fix itself. The banks that fail will be bought by other banks, people will snatch up deals on cheap homes, inventory levels will drop, and prices will go back up. It's simple supply and demand at all levels of the economic strata.

For those of us with a lot of equity in our homes it doesn't matter if the price drops 10%, 20%, 30% or perhaps more. Property values are falling nationwide, so if you have to move and sell your house, likely you will be buying a house that has followed the same trend. Actually, you're better off renting until you can find a good deal or until prices begin to level off in a couple years.

Also, sometimes when no one is looking I eat my own boogers.
- hwy9nightkid, on 07/20/2008, -1/+1but the banks that are failing are being bought by Tax Payers..not other banks. Unless you count the Feds.
kosmoss, on 07/20/2008, -4/+4On the internets you can find any opinion about any market right now; its full of "experts".
- StillAnonymous, on 07/20/2008, -0/+3The problem is that there are too many experts with agendas.
  - kosmoss, on 07/20/2008, -0/+2Exactly.
Papajohn56, on 07/20/2008, -2/+4next up: oil bubble popping.

a few people say $40 a barrel is coming again
- grumpyrain, on 07/20/2008, -2/+5Don't count on it. Unless China and India decide to drop back to their demand from 5 years ago, supply and demand will ensure you don't see that price. The high price is exaggerated by speculators, but I will be highly surprised if it drops below $100.
  - KhanneaNL, on 07/20/2008, -1/+3You can hope can you? But it ain't going to happen.
- jabberwolf, on 07/20/2008, -0/+3If GM and Toyota start mass producing cars like the Volt, see speculators to be scared and the price of oil to drop.
KhanneaNL, on 07/20/2008, -4/+2*yumm*
- whatever it takes to teach imperialist US a lesson in humility. I hope they fall twice as far for four years !
- cdigioia, on 07/20/2008, -0/+1what?
kahrytan, on 07/20/2008, -4/+2It's *****. Buried for Inaccurate. Besides a Banker wouldn't know *****. Ask your own local real estate broker/agent. In my area, it seems to be stabilizing.
- jerbaker, on 07/20/2008, -0/+7Ya, because a real estate agent is chomping at the bit to tell you that if you buy now, you're going to lose equity for the next two years.
  - jodes440, on 07/20/2008, -0/+1hahaha - no *****
    
    You mean, my RE agent won't inform me if I'm making a bad financial decision? But surely, they'll tell me if I'm overpaying right? RIGHT???
- carpespasm, on 07/20/2008, -0/+5Right, because listening to the advice of real estate brokers/agents has worked out really swell in the past 10 years. They wouldn't have any reason to try and sugar coat their story.
- EmperorAwesome, on 07/20/2008, -0/+1"*****"
  
  How do you pronounce that?
- richardstaboner, on 07/20/2008, -0/+2You just drank their kool-aid.
- arplayer2k, on 07/20/2008, -0/+2What qualifications does the average RE Agent have to be an expert in giving any advice, let alone regrading RE. Reading your local home sales magazine doesn't count. In California, the requirements to become an agent aren't that high, neither are their qualifications. A good RE Agent is hard to come by and they will cost you.
DirtySanch, on 07/20/2008, -3/+2People have been saying that by now (2008) the market will be bottoming out and ready to come back up. It will be another two years easy before anything positive starts to happen.
- cmorriss, on 07/20/2008, -0/+1Your first statement proves that what people say is worthless, and then make a statement of fact based on "what people say".
  
  The truth is, nobody knows for sure. Predictions are useless. Could take 6 months to hit the bottom, could take 3 years. We just have to ride it out.
  - spectre_25gt, on 07/20/2008, -0/+1Only if predictions are made on unsubstantiated opinions. If you have enough data, you can somewhat accurately predict when this whole thing is going to be over. The question is more about who's looking at the facts and who just wants to get on the news.
    
    If nothing else, looking at the amount of people who are currently past due by 60 days or more on their mortgages will give you an idea of whether the foreclosures are continuing, speeding up or slowing down.
- DirtySanch, on 07/20/2008, -0/+1I got my real estate license about two years ago, and the people that I was referring to are real estate agents with experience. I don't ask any Joe on the street what they think is going to happen to the market.
  
  As far as how long it will take for the market to come back thats just my opinion, based on what the economy looks like now. The ***** we're in doesn't get fixed over night.
nick111, on 07/20/2008, -4/+5Yea well. How long will it take for them to fall for them to become affordable without enslaving yourself to a bank for 30 years?

How long before teachers or nurses or firemen can afford to buy them?

***** the housing market, and ***** the parasites who profit from it. I know that it's more complex than this - but I'm happy for the prices to carry on falling for as long as it takes for me to be able to afford somewhere to live. It should be a ***** human right.
- carpespasm, on 07/20/2008, -1/+2The reason houses cost so much is because most people have someone build their house for them. If you spend 50-70 grand in materials (a commodity that you can't really bitch too much over the price of), then pay one company to organize and pay many other companies to each build one part of your house so that you can move in 2 months after signing the contract then you're paying a premium for having it done so quickly and by professionals. If you learn what you need to build it yourself you pay substantially less. My dad built a concrete house stuckoed with cocina (tiny shells) for way less than half what it would have cost to have someone do it for him. Doing it slowly also gives you time to think out how you want things done more thoughtfully.
  - NonServium, on 07/21/2008, -0/+2"The reason houses cost so much is because"...
    
    ...is because that's what they can sell them for. Why would they sell them for a penny less than they think they can find someone to pay to purchase them in a reasonable time period?
- jabberwolf, on 07/20/2008, -2/+1A human right?
  
  Sorry but nothing in life is guaranteed even "rights".
  Shoulda woulda, its a jungle out there, deal with it, move on, move forward.
  
  Life doesnt care if you have excuses, even if they are good ones, they will always still be excuses.
InorganicMatter, on 07/20/2008, -0/+2Oh good, that's right about when I'll be buying!
rtphokie, on 07/20/2008, -0/+2Or they may fall for 2 more weeks or 2 more decades. Why anyone pays any attention to these fabricated numbers I dont know.
knumbknuts, on 07/20/2008, -1/+61. They sure as hell won't be going up any time soon.

2. People will always buy as much house as the bank will let them. Right now the banks are tight as hell, even ratcheting down existing lines of credit.

3. Momentum is going down as fast as it went up.

4. We are returning to an era where median house prices will be tied, albeit it use loosely, to median income (traditionally this ratio is 2.7-3.5:1 was up to 8-1 at its peak).

5. For various reasons, I turned down an offer on my house 18 months ago and took it off the market. I just accepted one for $110K less and am going to rent for a while.

6. I got off light, that represents about a 15% drop. Most So Cal Zips are at least 30% in that timeframe.

7. I predict, and I am betting strongly on it, that prices will go back to 2001 levels, based on math. Further back if emotional inertia is involved.

8. It only takes a $15K drop/year for renting to make money for me (that's the value of the tax write-off).

9. Realtors are the very last people you should listen to about price directions.

10. With Fannie Mae and Freddy Mac's debacles, banks BKing left and right, and not a dime going into private placement REITs, if my buyer bails, I'm effed. I am pretty sure he's the last one out for a while.
- CHANNELOCK, on 07/20/2008, -0/+0Most S.Cal Zips are ***** places to live,overcrowded,underfunded,racially antagonistic,the only homes worth living in are in the $700,000 range . the affordable homes are in the ***** zip zones and they can drop to $0 and they still would be overpriced
madk, on 07/20/2008, -1/+5Good...I'm in the buying market and most housing costs are still over-inflated.
- lazerflesh, on 07/21/2008, -0/+1Good luck getting a mortgage loan.
- madk, on 07/21/2008, -0/+1I have good credit...so no problems there either.
Konrad9, on 07/20/2008, -1/+1Good time to be a college student about to graduate.
Or to be in the buying market at all, really.
Sucks to be selling, though.
spaceman84, on 07/20/2008, -1/+3This should be obvious. Housing prices are still 50% above historic value in the US. It's not as bad as it was (nearly 100% over historic value), but we've got a lot way to go just to get back to normal.
NonServium, on 07/21/2008, -0/+1I hope the price of oil doesn't drop because then the oil I already have in my tank would lose value!

Maybe we should rejoice when the basic necessities of life such as housing becomes cheaper? Just because you may have made the choice to take out a loan that it will take you a lifetime to pay off to buy a house you never should have spent that much on doesn't mean others should suffer. If you don't own any houses beyond the one you live in, when you sell it for a cheaper price, you'll get enough to purchase another one at it's cheaper price. Or you can do what many do now and trade houses. Sure you'll still be required to pay that loan off, but you'd be required to do that even if the houses hadn't dropped in value. In the end, you don't really lose anything as long as you don't own extra houses. Unless you planned to sell and not buy a new home, (just become homeless), in which case, yeah then you'll have less money.
TheTruthHurts, on 07/21/2008, -0/+1I work in real estate in L.A Ca , and let me tell you its going to be more like 3 or 4 years
findgoods, on 07/21/2008, -0/+0Think like a contrarian - if you can afford it, might want to start looking around to buy over the next year or so.
robertmules, on 07/21/2008, -0/+0 The recent rate hike from the ECB exacerbated relative weakness for the dollar against the euro as well. On the corporate front, · Despite profit falling 41 percent at Bank of America to $5.76 billion, or $0.72 per share on a Y/Y basis, the company beat estimates and shares are rising in pre-market activity. · LG Electronics reported higher profit by 84% for Q2, to $694.4 million on sales of $7.1 billion. Get more at http://www.smallcappulse.com/index.php/commentary/ ... .
BotchaMcCoola, on 07/21/2008, -0/+1Something is rotten in all this though. As bad as things are made out to be, there should be many more bargains out there.
- rebelcapitalist, on 07/22/2008, -0/+1The problem is that homes are so leveraged that sellers cannot afford to lower price. They have huge amount of mortgage debt on the property that they have to payoff at closing. They have little room to negotiate.
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House prices could fall for two more years

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