Yesterday’s RGJ’s had a piece regarding the outlook for Northern Nevada’s housing market. The story, “Housing outlook: Northern Nevada’s real estate recovery tied to jobs, experts say” featured commentary and predictions from:
- Brian Kaiser, housing and real estate analyst, Center for Regional Studies, University of Nevada, Reno
- Ken Amundson, 2010 president, Reno/Sparks Association of Realtors
- Ken Wiseman, broker-owner, Reno Rancho Realty
- Mike Dillon, executive director, Builders Association of Northern Nevada
The article is a good read; it was interesting hearing the different viewpoints on where median price is heading and key factors affecting the outlook. It got me thinking that we should do a similar post on the Reno Realty Blog.
Now before you say “it’s all been said time again on the blog”, I’ll make it easier. Specifically, I’d like to hear your predictions for where the median sales price will be one year from now. If you would like to also include your rationale or other supporting data, then all the better.
A year from now we’ll see who’s closest. Who knows, perhaps I’ll give away a prize.
To lay some ground rules we’ll use the median sales price as determined by Reno and Sparks sales reported on our MLS (Northern Nevada Regional MLS). I’ll use the same criteria that I use each month to report sales data. Namely, the median sold home price will be calculated by pulling all residential sales during the month of December 2010 that occur in the cities of Reno and Sparks, Nevada [NNRMLS Area #100]. Residential sales will include Site/Stick Built properties only. Sales of Condo/Townhouse, Manufactured/Modular and Shared Ownership properties will be excluded. I will pull the sales numbers sometime shortly after January 7th, 2011, as I like to wait at least a week to have the sales figures reconciled.
For those of you new to this blog see my post November median sold price… to access the historical median data for these criteria.
And for the most current median, I’ve just pulled the sales for December (as of today – December 21, 2009) and the median sales price is $190,000. Granted this is a number for only a partial month, but if it holds, that will be a significant increase over November’s median sold price of $175,000.
Predictions for December 2010’s median sales price must be made by January 15, 2010. So, if you’d like to wait until I post this month’s median [December 2009], feel free. When you’re ready to predict simply post your prediction as a comment to this post (that way I’ll have only one place from which to compile guesses).
There are probably points I did not cover, so let me know if you have any questions.
43 comments
Despite the positive signs, the local market continues to suffer from the effects of the mortgage meltdown. Median price, while more stable, has yet to hit bottom. Distressed properties and shadow inventory also remain as ongoing concerns for next year. Meanwhile, unemployment continues to be a key wild card for the industry.
and:
The most important issue for Northern Nevada is jobs. We need to address the employment issue more than anything and I think that will drive the market.
That took a group of ‘experts’ to figure out?
From the article: “Right now, we actually have a shortage of homes to sell, especially at the attractive price ranges from $100,000 to $250,000″
All I have to say is that these Realtors continue to amaze me with their dumb comments.
As for the prediction….two actually.
For the optimist and opportunist - 250K median. The high end foreclosures will generate some of that California factor and begin to sell for around 50% off peak, thus raising the median.
For the pessimist - 145K median. The stock market will correct over a two year period, beginning March 2010. Any wealth that is still left begins to wither away and sales of any sort will dry up, in addition to the continuing problems already in view.
I don’t think Guy asked for TWO predictions.
Median price will be $180k.
The great housing crash of 2007-? continues apace. However, the top end is finally starting the cave. That will give everyone the false impression that things are stabilizing or even improving.
Formerly $500k homes will be selling for less than $300k, and $1M homes will be selling for ~$550k. when these above-the-median properties hit the market and are sold everyone will be calling for a bottom and the end of declining prices.
Bull or bear, Cassandra or Pollyanna, BB or TOW, I don’t care. Reno has shown over the course of 2009 that it can handle a median of $180k in this economic environment. This will extend through next year. But don’t expect any parabolic moves up (ala 2002-5) anytime in the next few decades.
Some interesting stats to consider. For the last ELEVEN YEARS, the total number of unit sales: in November have averaged 336.72; in the following December have averaged 318.55 [a 5.4% drop]; in the following January have averaged 264.8 [a 16.87% drop]; and in the following February, have averaged 288.9 [a 9.1% increase].
For the last ELEVEN YEARS, the median sales price: in November has averaged $229.67K; in the following December has averaged $231.45K [a .77% increase]; and in the following January, has averaged $229.49K [a 2.46% drop].
Since we know the number of unit sales in November of this year were 448; and, the median sales price was $175K; the number of unit sales in December should total 424; the number of unit sales in January of next year should total 352; the median sales price in December should be $176.35K; and the median sales price in January of next year, should be $172K.
With that said, it should be interesting to see this year’s final figures. From there we can start speculating as to where December 2010’s/January 2011’s figures will be. But whatever they are, all other things being equal, I expect January 2010’s median sales price to be the lowest of 2010. Given that should be $172K…
And if it turns out to be between $185K-$190K as Guy suggests…
Now before you all start discounting the above, remember: many have predicted sales will remain strong through April of 2010 [given extension of the first time homebuyers’ income tax credit]; and, prices in a flat or increasing market generally increase during the summer months.
I’m going with a $187,000 median at 12/31/10 for the full year.
That equals 2.7x the inflation adjusted median income for Reno/Sparks, considering a 3.5% growth rate from 2008 ($69,259).
RE: “Median sales price – let’s hear your predictions for next year”
We’ve either hit bottom in Nov ($175K) or come within 5%. Barring a protracted downturn, even worse than 82/83 and the 70s, there’s not much room to fall from here.
The Dow will hit 3500 at some point in the year, brought about by man-made and natural disasters. In turn, causing a substantial drop in housing prices as people lack the means to purchase. Median will be 96,000 with few sales.
Really, the way the President is spending, it’s not unfathomable. China came out and said yesterday, that they will no longer buy treasuries, due to his spending habits.
Gosh, I hope the rest of you so far are right and I am wrong!
alternate link to Housing Outlook as the above appears to be broke.
http://www.rgj.com/apps/pbcs.dll/article?AID=2009912200334
Forget the predictions?.. Lets just go with the facts, If interest rates were not artificially low, Home prices would be much less.
The market is attempting to tell us that prices under normal interest rates need to adjust downward. Monthly mortgage cost at normal rates will force home prices down to meet the criteria?.. {It has to do with what the market will bear and what people can afford}.. The beauty of normal rates is your getting true value and not some temporary overinflated propped-up price.
Nope sorry, The foreclosures are just gonna keep coming..
The Feds typical futile intervention to keep rates low long enough to burn up the inventory? And even if by some miracle that happens.. Then what? Your still stuck with a bunch of overpriced homes that average incomes won’t support..
Interest rates gotta go up sooner or later {and there’s plenty of hints out there that time is not to far away}
Thats where this is all headed and there’s No cheat-en it…
The real scream here is the 8k stimulus, Here it is the majority of people are thinking “WOW what a savings” And in reality all that did was allow a bunch of Realtors to stack that price right back on top,… Unbelievable dummy’s out there!
I don’t believe in “green shoots” at this time, especially for Reno, NV. I think, nationally, we’re right in the thick of the mess. Today, they just revised down the growth rate for the past quarter to an annualized 2.2% instead of the previous 2.8%. That’s a paltry .55% that the economy grew. If not for “cash for clunkers”, and all the other stimulus, it likely would have been negative- yet again. Not really great news.
When I ponder what’s in store for Reno over the course of the next twelve months, I don’t see anything positive economically speaking, and that carries right over into housing. I don’t believe housing finds a bottom and turns around until employment improves. I anticipate higher levels of unemployment throughout next year as compared to the numbers this year. This, in turn, will only exacerbate the foreclosure problem, and add to the already bloated shadow inventory.
Considering that many builders have decided to continue building out developments, this will further contribute to the mountainous inventory overhang, pressuring prices even more. I don’t know if anyone has a real handle on how many houses are actually vacant and in need of owners, but I’d be willing to bet that most people would be shocked by that number. There are too many homes, and not enough end users. Even without the economic troubles, this would be a serious distortion in the supply/demand equation. Given the lack of employment opportunities, much less decent wages, available in Reno, and I see another horrific year for home prices insofar as owner equity is concerned. I’m going to go out on a limb and call for a median of $135k this December after the “worse than expected” news starts coming out next year. Of course, one can never rule out more shenanigans by lawmakers, pushing the inevitable further into the future, at the peril of everyone and their children.
An edit button sure would be nice on this site. Or, at the very least, an expandable comment field or a “preview” button. Any of the three would greatly reduce errors.
$166,250 is my number. Why, you ask. Why not? My big fat guess is as good as anyone’s attempt to predict the future by putting together a bunch of hypothetical outcomes or staring into a cup of tea leaves all afternoon, only I didn’t have to spend nearly as much time doing it. Ok, I actually just took 5% off of Novembers $175,000, but it still didn’t take that long to do and it is as good as anyone else’s number right now. Good luck to all, except BB because your number looks like a disastrous year.
If you didn’t catch this morning’s RGJ story covering First American CoreLogic’s latest predictions, “First American CoreLogic is forecasting a 12-month appreciation for Reno-Sparks of 1.56 percent through October 2010.”
http://budurl.com/k7ym
Sully, thank you for the alternate link. I have corrected the post.
I have to believe as the higher end housing prices continue to fall, we’ll begin to see a few more sales in that sector. This in turn will raise the ‘median’. As to the true cost of housing though the arrow continues to point down until unemployment stabilizes and we start to see jobs coming back.
But what are the jobs that will come back in the Reno area? This should be the biggest concern of the elected officials. Luring new businesses to the the greater Reno area would pay off in spades.
Until this is done a drop to $158K is my guess.
The median sales price is not important, given the dramatic distortions by the first time homebuyer’s tax credit. The Case Schiller Index, a better measure because it measures resales of the same properties, will decline nationally by another 5%. Sold prices per square foot, another reasonable measure, will fall nationally, as the nonconforming market de-levers. Reno will fare worse, down another 10 to 20 percent by Dec 2010. The previous 30-year era where Americans lived beyond their means is done. De-leveraging, less lending, municipal deficits, crowding out of the private sector, higher taxes, higher unemployment, and lower home prices will be the stories for 2010. Some smarter than me call it the “new normal”. First half of 2010 will be a dead cat bounce, with major structural headwinds facing the economy during the second half of 2010 and during 2011. Nothing is worth more than it can produce, including Reno real estate and the American consumer. Ever since WWII, when America was the only economy left standing, we have enjoyed a free ride. But given our lack of savings and education in this country, America’s standard of living will continue to converge with the wealth of emerging markets. This has happened consistently for the past 65 years and the trend won’t change, especially now that industrialized country debt/GDP will soon average THREE TIMES the debt/GDP of emerging market countries! Global trade is a very good thing for all of us as consumers, what consumer doesn’t love Walmart!!..but expect the USA to own an ever shrinking share of the growing global economic pie. Demographics are another huge headwind during the next 20 years. The only thing that will “help” these problems is the fact that Uncle Sam owns a printing press. As some smarter than me have said, never bet against a man with a printing press! Eventually he always wins! Voters will have to decide in 2010 and 2011, “Is Uncle Sam MY Uncle?” Sorry, that wasn’t much about median sales price, but I feel better.
Bondstevebond,
I would argue that we have already seen the bounce retrace in the last 9 months and it is over. The USD is now rising and Treasuries-Bond rates are starting to rise nicely here. This is not inflationary BTW..Quite the opposite, in this debt laden environment, rising interest rates are stake in the heart stuff without increasing job growth and wages. Notice how interest rates are rising, but currencies and metals (inflation plays) are starting their decline. That would normally not be happening in a true inflationary environment.
$190,650 will be next years median come january.
* correction *
$190,650 will be the median in january 2011
Considering that after a bubble collapse prices have a tendency to fall well-below fair value, I suspect the median will fall to $140K or so sometime next year. Very few of predicting this, and markets also have a tendency to go where no one expects.
FWIW, from today’s RGJ [Business section, page 7A (sorry, couldn’t find an online link)]:
“Home resales surged 7.4% in November from October to the highest level in about 3 years, as expiration of a federal tax credit spurred buying, the NAR said Tuesday…The [NA]R estimated that about 2M homebuyers have taken advantage of the credit so far, and forcasts that ANOTHER 2.4M will use it by the middle of next year…Sales of existing homes are up 46% from the bottom in January…Things are stabilizing, said Pete Flint, chief executive of…Trulia.com. There is a significant amount of buyer interest out there.”
Regardless of the reasons, if sales of existing homes are up 46%, in large part because of 2M first time homebuyers; there will be another 2.4M first time homebuyers who will be purchasing by the middles of next year; and based upon historical data, January 2010 will mark the low for the year insofar as unit sales and median sales price; draw your own conclusions.
BTW, according to Guy the median sales price in Reno/Sparks has remained flat for the last seven or more months AFTER reaching its low point. Now I’m not saying that the top nor bottom of “the market” can be measured by median sales price alone, but how many more months does it need to remain flat before one concludes the bottom was reached seven months ago?
smarten in answer to your last question:
How many times did wall street say the NASDAQ had bottomed (after the dot com bust) and now was the time to buy? I count 6 for the NASDAQ comp and 8 for NASDAQ 100 over the nine years since Mar/2000.
Whereas, you may very well be right (and I hope you are) I still harbor doubts about anything the govt has a helping hand in. The 2010 elections could change a lot of this ‘printing press’ attitude, Bernanke still has to be approved for second term, without him I doubt another Fed Chmn will print as fast as he is or keep interest rates down as much.
Which brings me to this:
It’s tough making predictions, especially about the future.
I predict that this year we will see an eye popping capitulation in the above 500K market -which will raise the current median to about 225K.
November new home sales sink 11 percent
12-23-09 “WASHINGTON — Sales of new homes plunged unexpectedly last month to the lowest level since April, a sign the housing market recovery will be rocky and heavily dependent on the generosity of Uncle Sam.”
My prediction is that home mortgage rates will climb dropping the median sales price to 183, 700.
Sane is right but I don’t think the median will climb substantially for such reason. True, the median presently is skewed and does not reflect the entire marketplace, just the lower-end housing because that primarily is what appears to be selling. Once a significant number of over $500k houses are discounted to where they will sell, the numbers of sales those transactions produce will necessarily create a higher median. But I don’t think that the number of such sales will be statistically dramatic, since the lower-end housing will continue to sell, also. So this would tend to shift the median up, but not in my view a large way up.
Interest rate increases will also tend to depress pricing, counter-acting the above.
I would guess at $180,500.
I don’t buy into fantasies like:
“Once a significant number of over $500k houses are discounted to where they will sell, the numbers of sales those transactions produce will necessarily create a higher median.”
A statement like this suggests that only low end buyers are in the market, and a bunch of wealthy people are standing collectively on the sidelines waiting to pounce all at once. The fact is those “over $500k houses” are already being discounted and selling for much less than that right now. The real problem is that there are WAY too many of them- way more than there are buyers who can afford them. Unless Reno starts importing rich people, and deporting median wage earners, the median is not going to be distorted to the higher end. It was a nice thought though.
I respectfully disagree with you BB.
If there were 448 SFR sales in November and the median sales price was $175K, that median WILL rise just as easily if an additional 1% of sales are at $176K versus $500K. The only statistic that will matter will be the number of sales at/above $176K. One does not need to be “wealthy,” even by your definition, in order to be able to afford a $200K Reno/Sparks SFR.
And as I previously quoted from the RGJ, the NAR estimates there will be an additional 2.4M first time homebuyers [which will really no longer need to be truly first timers] between now and mid-2010. The point is that as long as mortgage interest rates remain low [which in the short run is the prediction], there ARE a good number of homebuyers sitting on the sideline. As long as they will be purchasing SFRs in excess of $176K, the median sales price in Reno/Sparks will be increasing.
Many [even on this blog] have observed that the under $175K Reno/Sparks SFR market has pretty much bottomed. If so, then in the near term we should expect the median sales price to increase because a greater percentage of sales should be taking place in excess of $175K. For the median to drop to $135K as you have predicted, the under $175K SFR market would have to drop ANOTHER 20% in value from today’s already depressed levels. I just don’t see this happening.
Bottom line, IMO it’s really not going to take much for the median sales price to increase from/to $175K to let’s say $190K. My personal view is we’ve been pretty much skating along the “bottom” of the median sales price range [$170K-$180K] for the last seven months. I wouldn’t at all be surprised if this pretty much continues for the next year [which appears to be the consensus of many who have already opined on this subject]. But I wouldn’t be surprised if the median sales price increases to $200K or higher by next year’s end. I would be very much surprised if it dropped to $135K as you have predicted. But as always, we’ll soon see.
A comment to SmartMoney’s post re: new home sales numbers “plunging” 11% last month. Jim Cramer addressed this subject last night and his response was basically…duh! If it costs more to construct than what the market will bear, why would anyone expect new home sales numbers to increase? As existing new home inventory sells, the supply will dwindle as will the number of sales until market prices rise to the point where it again will make sense for builders to construct new housing. If market prices don’t rise [because the median drops to $135K as BB has predicted], new home sales numbers have no where to go but down!
Sorry, one more point.
If the SFR median continues to skate along the bottom of its most recent range, many homebuyers who have been afraid to take the plunge because of perceived market volatility, will come to the conclusion that prices have stabilized. But by then it will be too late for those who had hoped to buy at the “bottom” of the market. The people who profit from future market appreciation purchase prior to market stabilization.
You can disagree with me all you want, Smarten, but I don’t need a tutorial on how median price is calculated, and thus how it increases and decreases.
The fact that you’re now quoting the NAR, and Jim Cramer, is quite sad. This is the same NAR that said there was no housing bubble. This is the same NAR that said prices would continue going up forever. This is the same NAR whose previous chief economist actually wrote a book called “Why The Real Estate Boom Will Not Bust.” And, are you talking about the same Jim Cramer who was telling everyone to buy, buy, buy Bear Stearns the week before it went under? The same Jim Cramer who called a stock market bottom in July, 2008? This is where you glean your information? Very, very disappointing to hear. I thought you were wiser.
I have never once agreed with the bottoming out of the “low end”. I have, and will continue to maintain that people are overpaying for houses in the under $200k range. As the higher priced properties continue to fall, so do the lower priced ones. Many of today’s $175k sales will be tomorrow’s $125k sales. That’s a very crude example, but that’s what happens as prices correct. The entire market is inter-connected.
I will certainly agree that getting to the $135k median is hard for people to imagine. I don’t actually believe it’s out of the question, though. It seems quite plausible to me given the economic realities of the area. The last time the area saw a median price in the $130k’s was back in 1998. The economy today is MUCH worse than back then. Furthermore, you would be surprised by how many people have a hard time affording a $135k house, especially with little money down. This isn’t the days of old, when a $135k median was supported by 20% down payments. No, we’re still in the low/no money down world, but we’re moving away from that. As people are required to come up with larger down payments, that only hurts sales and, in turn, prices.
Considering that the area is only supporting a median of $175k with historically low rates and low down payments, it’s easy to see how weak the market is, and also to imagine how bad things can get given the high rates of unemployment and the general economic malaise.
Where are the jobs?
And what happens when interest rates rise?
Answer these questions and I see only a downward pressure on prices.
160K
The NAR currently exists, has always existed, and always will exist, for one reason and one reason only. To line the pockets of its legions of dues paying six-percenters.
I call upon anybody, anybody, who can refer me to even one instance when the NAR said it was not a good time to buy a house. Just one instance.
Sorry Smarten, but anyody who cites the NAR as a source of information instantly loses credibility.
You doom and gloomers out there, continue to doom and gloom. I’m not citing the NAR for anything more than the fact they have: reported that so far, there have been 2M first time homebuyers; and, estimated [and I don’t know how] that between now and mid-2010 there will be 2.4M more of them. And FWIW, the NAR is NOT the only source that has reported a large number of first time homebuyers [in fact, Guy was one of them (our President and his economic advisors being others)]. If there are going to be 2.4M more first time homebuyers between now and mid-2010, then like it or not there’s going to be “demand” for housing.
I only referred to Cramer because of his tackling of a subject coincidentally raised by SmartMoney. But really, none of us need be economists to understand that new home construction is essentially zero [Breckenridge notwithstanding] because the cost to build is more than the cost to buy. Consequently as more and more new home inventory sells, the number of future new home unit sales is going to fall - that’s reality.
Doom and gloomers disregard factual data, just the way eternal optimists do. The data, according to Guy, is that the Reno/Sparks SFR median sales price reached a low point 7 months ago and has basically been skirting the bottom ever since. Further according to Guy, that’s going to be the case for at least an 8th month [i.e., December]. And if the predictions of some, for whatever the reasons, are correct [i.e., that a year from now the Reno/Sparks SFR median sales price bill be around or higher than $170K], then we’re going to be talking about 20 straight months of skirting the bottom.
This is the very reason why I asked the question: how many months of skirting the bottom need occur before the doom and gloomer recognizes a bottom has been reached? Now that matter may be a short lived, or one of several bottoms. But anyway we define a bottom, it is a bottom nonetheless.
If January 2010 will be the low point in the year for unit sales and median sales prices; there are going to be another 2.4M or more first time homebuyers entering the housing market place within the next six months; we expect unit sales to be higher during the prime seasonal months of June - September; and due to the economy, we don’t expect the housing market to rebound anytime soon; it’s very likely to me that the Reno/Sparks SFR median sales price a year from now, will continue to skate along the bottom. You disagree with my conclusion, fine. But at least I’ve backed it up with some facts.
One more thing [insofar as credibility is concerned]. Nearly two years ago we had a similar discussion on this blog. At that time you will recall I predicted the Incline Village SFR market would bottom on January 11, 2009. Now I wasn’t correct because the bottom did not occur until late April or early May. But I was pretty darn close and if I’m going to be close, I’d rather be a little early versus a little late. So I should have some sort of track record independent of the NAR and Jim Cramer.
And as I recall, there was someone else on this blog who was making similar median sales price predictions who was also pretty darn close - Mr. BB! As I seem to recall, his prediction was that the median sales price would drop to right around $170K - just about where we are and have been since May of this year. Now his timing was off just like mine, but in my book he was pretty darn close [unlike Mr. Derrick, Big Baby, TOW or whatever his current moniker is who promised us that if the median sales price dropped below $240K he would leave this blog forever].
But as I said, we’re all just speculating at this point based upon whatever rational that happens to tickle our fancies and we’ll soon find out who was right and who was wrong. And really, wasn’t that precisely what Guy asked us to do?
Sorry, I forgot to wish everyone a very Merry Christmas!
Prices have gone nowhere but flat to slightly down over the last several months. Some call it a bottoming process, but this is an environnment of interest rates likely representing lows for decades to come and unprecedented government intervention in the form of tax credits and foreclosure mediation legislation.
So, what happens when these things change? It is inevitable that interest rates will go up (as in the last 5 days). The tax credit (probably) won’t last forever.
In short, no one can truly predict stock, real estate, or commodity prices one year from now. But unless the economy experiences dramatic improvements over the next year, today’s lows will be next year’s highs.
To answer the unanswerable, median sales price in Jan 2011 will be lower than today. Call it $170k for the sake of debate.
P.S. sales price/sq. ft. is a more important stat, as it will not be inordinantly affected by price declines in the top end. In fact, $/sq.ft. will certainly decline 10-20% between now and Jan 2011, minimum. That said, I’ll be buying next year.
I am amused at the swipes at the “doom and gloomers”. I am amused because ever since this board got started, the “doom and glommers” have been nothing but right.
I stated reading this blog about 3 years ago. I was going to buy until I found this blog. I figure that Reno Ignoramus, Gotlots, Bantering Bear, SkrapGuy, Wazoo, and others have saved me about two hundred thousand dollars that would have been up in smoke. So to all these dreaded “doom and gloomers”…..I offer my heartfelt thanks. And Merry Christmas.
All interesting comments here but no one is pointing fingers where they need to be pointed.
No company is moving their “manufacturing” to a state that is at the bottom of almost every list of importance.
No company is moving around right now if banks are not lending.
You are forgetting the bank part, people. Have you not learned anything over the past two years.
A close friend of mine when to LV this past month to help her parents move their life savings out of the Silver State teachers Credit Union (in extreme trouble at the moment). While at Wells Fargo to open a new account for them, they were told that WF is holding on to the majority of its “TARP” dough because of the next wave of foreclosures coming, 33,000 just in the Las Vegas area.
So, do you people think Washoe County will be immune to this? Banks cross county lines and state lines the last time I looked.
Guy, put me down for a $150,000 median price. The pace of price declines is slowing down, but the fundamental factors driving residential real estate pricing are still bearish.
To briefly describe these:
1. Higher mortgage rates
2. Continued high unemployment
3. Flat to declining median household income
Impossible to predict 2010 monetary policy and credit market performance, but Reno will eventually return to home prices reflective of about 3 x median household income.
A good read http://www.marketoracle.co.uk/Article15138.html if anyone is interested. The graph of the Japan housing collapse is especially interesting. An 87% drop. Crazy.
Get ready…. Median 135k. I’d like to be lower but any lower and I scare myself.
-TRUTH and EVIDENCE- (granted some of these “facts” are rough)
-Interest rates are at an all time low (4.75% ish). Artificially set low, due to an attempt to move inventory.
-FHA is the only realistic option for buyers because of its fantastically low 3.5% down.
-50% of home owners in our area are under water
-Federal Government is subsidizing housing with its incentives.
-13% unemployment in Northern NV (If you buy the official numbers….the REAL unemployment is more like 19-21%)
-hiring is minimal and most employers are freezing wages or reducing them
-Anybody thinking about the eager College and HS graduates that will need jobs and keep adding to the jobless, but don’t get counted officially?
-Not sure what percentage of jobs were directly related to housing (ie: roofers, framers, foundation, salesmen, realtors, contractors, and engineers) but folks these aren’t coming back.
-Government shortfalls, on a State and local level are increasing (Completely ignoring Federal) They’re all broke. So when the Fed can’t help prop up unemployment, and these poor folks stop qualifying for aid…..you figure out what comes next (hint: it starts with a T and it’s not Trains. Rhymes with “Faxes”)
-There is only one tool that the Fed can use to fight inflation. Higher interest rates, even if we get lucky and dodge the kind of rates that plagued the 80’s (20% folks). What would happen to housing if they went to say, oh I don’t know…10%? No loans…..no houses sell.
-Inflation has been hiding due to bank hording of Fed cash to fix there balence sheets. There will be a point when, right before interest rates go up, you will truely see inflation….I pray we dodge hyper-inflation.
-Taxes WILL go up…they have too. It’s the only way to pay for all the promises. When this happens, everyone (not just the rich) will have less in their pocket at the end of the month.
So to re-cap: 135k median price for 2010, which translates to probably 110k to 115k for next November and December’s numbers.
Higher taxes, higher interest rates, and Inflation. They’re looming on the horizon. The only question is when?
TP
Adding this… (Still thinkning $135k median)
If FHA changes it’s rules and no longer offered 3.5% down. What would happen if FHA required 10% down? Think you’d sell any houses? To anybody other than an investor? Not many…
What’s the plan when the $8k government tax credits are gone? April right? Hmmmm, I’m betting there will be a fairly large reduction in homes sold.
I forgot to mention the “Shadow Inventory”…. There’s a pretty picture. What happens when the market gets flooded with houses for sale, but the buyers don’t increase. Demand and Supply shows you how they opperate. In this case they pull down there buddy named “Price”.
The more the prices fall the more people are under water. The more people decide to walk. It’s a vicious cycle.
Stock Market correction. When it happens again…housing will feel it.
The dollars loss of value….this one hurts everyone and everything.
Wow the future looks bleak.
TP
Interesting article in yesterday’s NYT. Thesis is that the fed govt.’s loan modification programs might actually be making things worse. Many contributors to this blog have already posited that there would be such consequences:
“Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.
As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.
Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.
“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”
Mr. Katari contends that banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses still on their books. Only after banks are forced to acknowledge losses and the real estate market absorbs a now pent-up surge of foreclosed properties will housing prices drop to levels at which enough Americans can afford to buy, he argues.
“Then the carpenters can go back to work,” Mr. Katari said. “The roofers can go back to work, and we start building housing again. If this drips out over the next few years, that whole sector of the economy isn’t going to recover.” ”
http://www.nytimes.com/2010/01/02/business/economy/02modify.html?hp=&pagewanted=all