Thursday, December 4, 2008

I See the Future . . .well sort of

The Wall Street Journal published an article “The Future of Home Prices” on Tuesday in an attempt to gauge the mood of consumers and how they view the market in the coming year

The over all impression I got from the article is that people trust real estate more than the stock market and believe that it is their only true path to acquire wealth. Over the long homes do not rise in leaps and bounds and follows and the expertrs expect about a 4% return. The quote an investor that real estate is a way to “Get rich slowly.”

The article is lengthy, but it focuses on the location of the property, growing communities, and the impact of Baby Boomers. Overall the article takes a conservative approach to home ownership.

This article prompted an immediate response from the National Association of Realtors Chief Economist Lawrence Yun. Yun’s Future of Home Prices is a point-by-point spin on items that the association would like to redefine from the piece. Here is an example:

WSJ: Many Americans still see real estate as their best shot at wealth. In survey after survey, people expect prices to bounce back -- in some cases, as soon as six months from now. Those hoping for a quick rebound are likely to be disappointed. Economists and other pros generally say home prices won't bottom out before the second half of 2009, and some don't see a bottom until 2011 or 2012. Even when they stop falling, prices may scrape along the bottom of the rut for years.

My response: Market timing is always difficult and all real estate is local. The latest government data on prices shows 43 states with home price declines of 5% or less, and 18 states with a positive price gain. Only four states - Arizona, California, Florida, and Nevada - showed home price collapses in the double digits. This government data has narrow coverage on homes with subprime loans, so the data should be viewed as price trends in neighborhoods with little subprime loan exposure. Currently less than 10 percent of homes have subprime loans. Interestingly, these very four states are the ones showing recent notable sales increases as buyers take advantage of the knocked-down prices. Anecdotal reports of multiple bids suggest prices may be bottoming in these areas.

You get the idea of how this goes but it gave me the bright idea fior 94501Real Estate to do its own survey. I will run the survey until December 31, but please pass it along to anyone that has an interest in the local real estate market. It should be obvious that this is not very scientific but it may give us a couple of things to think about.

Please follow the link to Survey Monkey:

Click Here to take survey

A little "Back to the Future"

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