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Housing Prices Might Fall More Than in the Great Depression
nuwireinvestor.com — A noted economist predicted Tuesday that the slumping U.S. real estate market could lead to bigger price drops than even those seen during the Great Depression, necessitating bailouts for millions of American homeowners.
FamilyGuyFan- 263 diggs
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- Tinu, on 04/24/2008, -0/+5Ok you guys are starting to scare me. I just read about the housing price drop on Digg from another perspective.
- nahsrocketeer75, on 04/24/2008, -5/+1"Home prices nationwide already have dropped 15 percent since their peak in 2006." ... Anyone care to venture a guess as to what year I bought *my* house in? Hint: ... Geez, you don't need no friggin' hint here and I'm going to be in this house for the rest of my life.
- staxofmax, on 04/24/2008, -1/+5Assuming that you bought your house to live in it and not purely for investment purposes, why should the drop in prices matter to you? Say you have 25% equity in your home, and the value of your home has dropped 20%, and say you have to move. Upon selling the house you make just enough to pay off the mortgage with nothing left over (assumed 5% of sale price goes to the realtor). However, because the value of everybody's home in your area has dropped by roughly 20%, the cost of your new home will be 20% less than the one you just sold (both homes assumed equal).
You can look at the situation like currency exchange rates. The value of housing has dropped with respect to the value of the dollar. If you're exchanging your housing for dollars, you'll do so at a loss. If you're exchanging your housing for someone elses, then you're really just breaking even, aren't you?
tl;dr: Stop freaking out.- Gabberwok, on 04/25/2008, -1/+1The value of his house has dropped with respect to the dollar, and the value of the dollar has dropped with respect to everything else. Are you sure he shouldn't be freaking out?
- DroogInPhoenix, on 04/25/2008, -0/+1Our dollar is dropping in value. We should all be starting to freak out, I just moved to San Diego, gas is $4 a gallon, cost of food is going up... I think we should all be freaking out..
- Gabberwok, on 04/25/2008, -1/+1The value of his house has dropped with respect to the dollar, and the value of the dollar has dropped with respect to everything else. Are you sure he shouldn't be freaking out?
- staxofmax, on 04/24/2008, -1/+5Assuming that you bought your house to live in it and not purely for investment purposes, why should the drop in prices matter to you? Say you have 25% equity in your home, and the value of your home has dropped 20%, and say you have to move. Upon selling the house you make just enough to pay off the mortgage with nothing left over (assumed 5% of sale price goes to the realtor). However, because the value of everybody's home in your area has dropped by roughly 20%, the cost of your new home will be 20% less than the one you just sold (both homes assumed equal).
- McGuinness, on 04/24/2008, -1/+9I work for a major company in the real estate market. We dont sell directly, but we work with just about every single real estate affiliate in the US. Recently some of the members of our company went to a "real estate conference" of sorts. This is what they had to say about meeting with everyone in the industry.
""It is amazing what they will say in conversation once they get comfortable. There were several analysts that came in to give their latest on how they perceived the market right now. They all agreed that the market was going to bottom out at the end of this year into the beginning of 2009, the market would then continue to be flat throughout 2009 and most of 2010, then we will start to see the market recover and starts and sales should begin to come back. Predicted full recovery by 2012-13. In a nutshell, another 3-4 years of a buyer's market. Another very eye opening statement that was made was that the foreclosure rates haven't even reflected the massive backlog to be processed by the banks. What that means? Foreclosure numbers are bound to continually increase if not jump much higher within the next year. It is agreed that we are currently in and facing a recession much like those of the past. There has never been a three month decline in employment without it being a direct reflection of a recession. We are currently looking at this exact scenario. On a good note, every speaker that gave their opinion seemed to agree that we are nearing a bottom. "
"Predicted full recovery by 2012-13" = Dont expect to see any increase in sales until 4-5 YEARS from now.
"Foreclosure numbers are bound to continually increase if not jump much higher within the next year." = This is going to get A LOT worse.
"There has never been a three month decline in employment without it being a direct reflection of a recession. We are currently looking at this exact scenario." = Welcome to a recession.
This is direct from the majors in the industry. - SilentStrider, on 04/24/2008, -0/+5A couple of big differences. 1. Houses were massively artificially inflated due to low loan rates, especially here in California. 2. The Great Depressions also caused huge unemployment rates. It'll be at least a couple of years before the housing market gets back on track. Hopefully the banks will have learned their lesson, at least for the time being.
- DiggMasterJ, on 04/25/2008, -0/+1Thanks to the stock market the banks are no longer owned by the people who run them. The CEOs aren't really hurt if the bank looses money. They still get their huge salary, and if they loose their job then they get a "golden parachute". The money the bank looses isn't it's own either. The Federal reserve loans the money to the banks to loan it out to people. So basically the more loans the bank makes, the more good loans they will have; the more money comes back which the board splits amongst themselves until the bad loans sink the bank. The board walks away with their tens of millions, the government prints bags of money to bail out the bank, inflation skyrockets. The lesson they learn: ***** everybody; that's how to get rich.
- jpat2323, on 04/24/2008, -4/+3Something dramatic needed to happen so that people stopped using their shelter as an ATM. Unfortunately the brunt of the housing bubble deflation is being taken by individuals. I don't mean the investment bankers working for Bear Sterns that cashed multi-million dollar bonus checks. I don't even mean the individual homeowner that put themselves in harm's way by taking on an exotic mortgage. I'm talking about the rest of us. We're the ones that will carry this burden for years. We will stay put in our homes (because we can't afford to leave them) and watch as inflation brought about by the Fed's bank bailouts slowly eats away at the purchasing power of our dollars.
Great Depression... We can call this one the Great Deflation.- staxofmax, on 04/24/2008, -0/+1Hold on a second, the depreciation of housing values should not affect anybody's ability to sell their home and buy another. It's not as if the value of your home depreciated significantly while everybody elses home retained their value. You'll sell your home at a certain percentage of what it was worth three years ago at its peak, and then you'll buy another home at roughly the same precentage of what that home was worth at its peak. The only way you could loose out big time is if you're exchanging the value of your home for purely liquid assets.
- Gabberwok, on 04/25/2008, -0/+1Unless people are deciding that it is no longer worth it to own vs. renting.
- staxofmax, on 04/24/2008, -0/+1Hold on a second, the depreciation of housing values should not affect anybody's ability to sell their home and buy another. It's not as if the value of your home depreciated significantly while everybody elses home retained their value. You'll sell your home at a certain percentage of what it was worth three years ago at its peak, and then you'll buy another home at roughly the same precentage of what that home was worth at its peak. The only way you could loose out big time is if you're exchanging the value of your home for purely liquid assets.
- juankovo, on 04/24/2008, -4/+19"necessitating bailouts for millions of American homeowners."
NO, NO, NO, NO, NO!
If you paid and borrowed too much for your home, DO NOT PUT YOUR STUPIDITY ON THE BACKS OF OTHER TAXPAYERS!
"Bailouts" = Legitimized robbery.
Knock it off and let the market do its work. I'm sorry, but you're going to have to suffer for a while. We all are.- R34C7, on 04/24/2008, -2/+4I would completely agree with you if it weren't for the fact that the decrease in purchasing that would result from mass foreclosures would create a wave effect through the economy that would eventually end up with:
1. Decrease in spending
2. Corporate profit loss
2. Corporate layoffs
3. High unemployment
4. Increase in saving to adjust for employment risk (decreased spending)
Now the economy enters a downward spiral of recession (see depression). You may very well be paying for someone else's stupidity, but a better way to look at it is as an investment to reduce the risk of economic downturn overall. The risks outweigh the costs in this case I'm afraid.- brycelb, on 04/25/2008, -0/+3This is why smart people make these decisions and not bitter individuals. If the current loan situation could be isolated to the individuals who made the bad decisions I would be on board as well. As you stated, this is going to affect everyone in some way if something is not done. It's why people study MACRO ECONOMICS.
- SquigglyP, on 04/25/2008, -0/+2I have to agree with you.
- R34C7, on 04/24/2008, -2/+4I would completely agree with you if it weren't for the fact that the decrease in purchasing that would result from mass foreclosures would create a wave effect through the economy that would eventually end up with:
- silverleaves, on 04/24/2008, -3/+2While working as a investment analyst I learned one thing and that was that as soon as the average person started talking about a recession, we have already been in one for about 6 months to a year.
I don't think it will take that long for the housing market to come back once a new president and the Congress have come to terms.
I hope the Clinton's get into the white house. When they left there was no trade deficit. When we keep sending our dollars out of the US, we will have less to use in the US. - ennTOXX, on 04/24/2008, -6/+2Here in Los Angeles, my home's price fell some $90,000 ($750,000 -> $660,000). I was warned last year, by my broker, that my home could see as much as a $100,000 total price drop in the future. Nobody seems to know exactly what is going on. I will admit that I believe that consumers are scared & banks are loving it when you have to default... :||
- lexicon8410, on 04/24/2008, -1/+5I think banks lose money when you default. "Each [foreclosure] costs lenders an estimated $50,000, on average, in processing fees, liquidation-sale price cuts and other costs, according to the Center for Responsible Lending," the USA Today reported."
- kemp34, on 04/24/2008, -1/+7Lenders lose a lot of money when sellers default.
- brycelb, on 04/25/2008, -0/+4I live in Orange County (which is a very similar market to LA for those that may not know) and there is a flip side to this fall in home prices. I purchased a house in 2003 for $500,000 and over the next 3 years that home peaked at just under 1 Million. Obviously an increase in equity of 100% is ridiculous but, that same home is still selling for around $850,00 or more. A net gain of $350,00 over 5 years is something people would have killed for in the 80's and 90's. The fall in home prices is not the problem. Home owners who used their equity as part of the yearly income is.
- ennTOXX, on 04/25/2008, -0/+1You people obviously don't do enough reading outside of DIGG.com. Banks have been making money on both ends. Just talk to your nearest broker, they'll tell you... :||
- Qong, on 04/24/2008, -2/+7Comparing the current housing bubble to the great depression is ridiculous. Even if you can make a valid comparison to the drop in value between now and then, the two are fundamentally different. With that said, it was a good article and I enjoyed reading it.
Also, the drop in housing prices is a good thing. The value of homes in many areas was increasing at an unsustainable rate that had absolutely no basis. It wasn't demand, it wasn't the cost to build those homes, it was because the prices were being inflated by everyone involved in the sales of homes; from the builders, to the bankers giving the loans, to the buyers, you guys, the consumers that wanted your investment to increase at an astronomical rate.
It wasn't real, and the reality is that if the bubble continued it would make things much more difficult for future generations to buy homes in those areas. It would be like a couple fresh out of school trying to buy real estate in Manhattan, except without any real value.- TypicalAfrican, on 04/25/2008, -1/+0basically you are putting your hands to your ears shouting "lALALLALALALALALLA I Can't Hear You" trying to ignore the ungold standard crisis that is coming which is bad because the totalitarianism is coming beause of the CFR
- brycelb, on 04/25/2008, -0/+1Is that any different from you putting your hands over your ears and SHOUTING, Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy-Conspiracy. I don't think so.
- TypicalAfrican, on 04/25/2008, -1/+0basically you are putting your hands to your ears shouting "lALALLALALALALALLA I Can't Hear You" trying to ignore the ungold standard crisis that is coming which is bad because the totalitarianism is coming beause of the CFR
- minnymoo, on 04/24/2008, -2/+1(edit) strange, my parents house in Brooklyn was bought at 450,000 dollars in 2001, and is now worth 1,400,000.
- staxofmax, on 04/24/2008, -2/+1Regional variation versus national averages, you retard.
- jaymzdean, on 04/25/2008, -0/+2They better sell right now.
- Gabberwok, on 04/25/2008, -0/+2New York City has been an exception. Particularly Manhattan, where the weak dollar is turning it into a kind of European condo-shopping free-for-all.
- TypicalAfrican, on 04/25/2008, -1/+2The CFR has been miseleading you carefally, you *****. Oopen your eyes man
- tarm, on 04/25/2008, -0/+1Worth 1,400,000 according to whom? The value of a house is nothing but opinion. The only value that matters is what someone will give you for it. Is there someone who has said to your parents "I will give you 1,400,000 dollars for your house"? If not, STFU!
- LaurenApril, on 04/24/2008, -0/+3The market needed to even out, it was just too over inflated, but if you have the money to, it will be a good time to buy soon
- Gabberwok, on 04/25/2008, -0/+2Depends on what you mean by "soon". I'd wait a few years.
- staxofmax, on 04/24/2008, -3/+1The FUD flows thick these days. *sigh*
- TypicalAfrican, on 04/25/2008, -1/+0It won'
t be so funny when the market crashes and the new great depression arrives. Suck on the teats of the New World Order while you can, because an obsequious weakling like you can only hope to brownnose through the oppresion that will come thanks to Bush and the CFRR
- TypicalAfrican, on 04/25/2008, -1/+0It won'
- StingingNettle, on 04/24/2008, -0/+6I'll never forget arguing with a guy in a bar in Cali. I told him the housing market will start heading south in a bad way. I said I didn't know when, but there is now way that this could continue. He laughed it off and said, "real estate always goes up." What if it doesn't?", I said. Then he actually told they can just print more money until everything is fine. "But that won't happen."
- TypicalAfrican, on 04/25/2008, -2/+0The Bloombarg Crew is manipulating the illegal Federal Reserve and getting exactly what it wants. It will take advantage of the New Great Depression to instate a New World Order, where the aristocrac will take power and enslave the world. It is time to act on what Alex Bones has been saying for years and stop this before it ;'is too late
- brycelb, on 04/25/2008, -0/+2As I scroll down this page your "STORIES" are getting much more entertaining. You would be a good fiction writer.
- TypicalAfrican, on 04/25/2008, -2/+0The Bloombarg Crew is manipulating the illegal Federal Reserve and getting exactly what it wants. It will take advantage of the New Great Depression to instate a New World Order, where the aristocrac will take power and enslave the world. It is time to act on what Alex Bones has been saying for years and stop this before it ;'is too late
- StingingNettle, on 04/24/2008, -1/+11Hahaha, so housing has inflated 80% and people thing that its done falling at 15%?? Oh man, they are going to be surprised.
- scy1192, on 04/25/2008, -1/+3all I can say is that it's a great time for a college grad to be looking for his first home.
- Gabberwok, on 04/25/2008, -1/+2No, it isn't. Prices are nowhere near their bottom yet.
- brycelb, on 04/25/2008, -0/+2It will never be a good time in CA. ***** holes in South Central are still selling for around $350,000 not to mention the fact that loan guidelines have changed and you are required to bring in a bigger down payment. And this is only if you want to live in the middle of a drive by.
- Hiji, on 04/25/2008, -0/+3One forecast that is guaranteed: Sensational economic articles forecasting disaster will continue to rise, right along with the pageviews.
- NonLeftistDiggr, on 04/25/2008, -0/+3I hope so, that'll bring down SoCal housing prices back to the utterly-Fking-ridiculous level from the community-will-break-down-soon level. Then I can slip into a modest townhouse with no yard with a loan 10 times my salary.....oh crap that makes me laugh. But the weather and coast are unreal.
- UltramegaOK, on 04/25/2008, -0/+5Moms house is always free
- Dbeneath, on 04/25/2008, -0/+1Mission...accomplished..?
- TypicalAfrican, on 04/25/2008, -3/+2I for one am sick of the ***** U.S. of oppression government that is Bush.
It is time for us to move back to the Gold Standard As Ron Pall has been saying for years. Remember, HE was the one to correctly predict what would happen if we kept the current trend. In no time at all, I will be wiping my ass with dollar bills because toilet paper will be worth more.
Amerika Crash here we Come. Stock up on food, guns, and medications while you can, sheeple. We need to rise up against the governemnt and stop the new world order/ilumonati when the time is right- during the new great depression.- Andrewbot, on 04/25/2008, -0/+2I like Ron Paul as much as the next digger, but remember: We cannot go back to the gold standard. There is NOT enough gold to back up the U.S. dollar. The value of our dollar comes from the government that backs it, which unfortunately hasn't been the best one in recent years.
While the "new great depression" may be coming, we might have bigger things to worry about, say global warming or food shortages.
- Andrewbot, on 04/25/2008, -0/+2I like Ron Paul as much as the next digger, but remember: We cannot go back to the gold standard. There is NOT enough gold to back up the U.S. dollar. The value of our dollar comes from the government that backs it, which unfortunately hasn't been the best one in recent years.
- SnedSneeden, on 04/25/2008, -2/+0http://www.youtube.com/watch?v=eBGIQ7ZuuiU
- UltramegaOK, on 04/25/2008, -0/+1Looking at your recent history in your profile shows you've been busy spamming DIGG with Rick Roll links tonight.
SnedSneeden = Fail
- UltramegaOK, on 04/25/2008, -0/+1Looking at your recent history in your profile shows you've been busy spamming DIGG with Rick Roll links tonight.
- Tomson74, on 04/25/2008, -0/+0How about some common sense? For example, stop combing a married couples income. What if one of you loose your job? Sure, the banks will tell you you can afford it, but what if something unexpected happens? Stop adding bonuses as a source of income. Companies can take that away at anytime. When my wife and I bought our house, we made sure, if something happened to one of us, we could still afford the house. Common sense people!!!!! Politics has nothing to do with this. This has been a long time coming. Like over 10 yrs in the making.
- nicolaport, on 04/25/2008, -0/+1that's scaring!
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