PROPERTY PRICES IN SOME AREAS COULD BE CUT IN HALF
September 3rd, 2007Via: Finfacts Ireland:
US homes may lose as much as half their value in some US cities as the housing bust deepens, according to Yale University professor Robert Shiller. Meanwhile, Martin Feldstein of Harvard University says that experience suggests that the dramatic decline in residential construction provides an early warning of a coming recession. The likelihood of a recession is increased by what is happening in credit markets and in mortgage borrowing. Feldstein says that most of these forces are inadequately captured by the formal macroeconomic models used by the Federal Reserve and other macro forecasters.
“The examples we have of past cycles indicate that major declines in real home prices — even 50 percent declines in some places — are entirely possible going forward from today or from the not too distant future,†Shiller said in a paper presented last Friday at the Federal Reserve Economic Symposium in Jackson Hole, Wyoming.
Falling real-estate values may undermine consumer spending by spurring households to save more and by preventing them from tapping home equity.
Because price gains were larger and more widespread this time compared with past speculative booms, the risk of “substantial†price declines is greater, wrote Shiller, who is also the chief economist and co-founder of MacroMarkets LLC. Shiller is also the author of Irrational Exuberance, in which he forecast the end of the tech boom in 2000.
Only in Amerika.
The magic of it all: (from the article) where “US house values, in constant or real dollar terms, rose 86 percent from the end of 1996 to early 2006.”
I should disqualify myself from this discussion since I rent, and do not have a mortgage to pay. But I spent YEARS trying to buy into my once American dream – owning a home in a “walking city community” (where I wouldn’t need a car) and got blasted at every turn. I think I made offers to buy; paid the inspection fees; and put a down payment on about 5 homes in the mid 1990’s – and every one fell through because I thought every seller wanted more than what I thought the property was worth. Picky, picky me. So there by the grace of the goddess/Source I “escaped” not having a mortgage to pay now.
I also went through scrunity extreme to “QUALIFY” for each and every home offer I made. I had to PROVE that I had the INCOME to PAY any potential mortgage. And as a single female I was probably considered a “debt flight risk.” Yawn.
The American Dream in practice, was highjacked by Reagan, or even before then, you know, where the dream involved saving BEFORE buying.
Since the Reagan years, where the dream for the elite was dreamed up by economists on LSD, the American has been taught that investing in something, whether stocks, bonds, housing or whatever, is better than saving. Sure, who would be so “stupid” to put their money in a savings account at less than 1 percent interest when investments are given preferential tax treatment and interest on savings are treated as income (as per tax return) and thereby “penalized!?” Bring on the tax breaks for investing! Investing on whether the value of something goes up or down is like putting money into a card game of poker. You just don’t know how your bet is going to pay off. The crooks on LSD dreamed up this trip and America is now on it in a bad way.
In the shakedown to come I HOPE to see just WHO the roaches in the woodwork are who worked behind the scenes to turn common sense about MONEY and how it WORKS up end. Preferably, during a sigmoidoscopy.
You know, who are the roaches who got into the “least able to afford it minds” and used their black magic to make the cardboard shack on the end of Elm Street USA appear to be a mansion? And who are the lenders who convinced the least able to afford it that we will loan you the money for free to buy that pig sty that you will eventually put thousands of dollars on your credit card at 18-25 interest so you can fix it it up to sell to another dumb sucker for more than 86 percent of what its really worth? Who will be Ken Lay of this debacle?
The American Dream WAS home ownership. THE AMERICAN DREAM IS DEAD. Welcome to the NIGHTMARE. If that’s what it takes to bring common sense back – so that that a NEW GOLD DREAM (Simple Dreams – good song) – you know, money paid for something equal to its current worth – rather than a dream of what it will be in times to come – bring it on.
Meant to say New Gold Dream is a song by Simple Minds.
Eileen–
You’d be amazed how cheap you can buy, if you keep your ear to the ground. I’ll bet that in a year or so you’ll be able to pick up properties cheap–on an owner finance arrangement. Low payments, short pay-out, no banks involved.
I bought this way in a distressed area six years ago. I also own a vacant lot that is not buildable because of city codes. A friend asked me if I wanted to sell a few weeks ago. Today, I stopped by to tell him I’d give him the lot, in exchange for bringing the taxes and assessments up to current.
He can use it; I can’t. He wants to put up a storage building and use it to store lumber and other materials.
I live in an area where it is far from unheard-of for people to simply give lots away because they are not buildable–or sellable.
Now, don’t you “dis” LSD, either. A jolt of that–the good stuff–is just what people need nowadays.
Sharon,
That is a wonderful idea to sell for the “cost” of bringing your taxes and other things owed on the lot. SMART!
Yes, although I hoping to to do something “smart” with dollar assets, namely put them into something besides the dollar, what I truly want to be able to do is buy a large farm. You have inspired me to keep me eye on a few places, one within walking distance.
I did not intend to dis LSD. The good stuff – was ingested over 35 years ago. I actually prefer shrooms but haven’t been there, done that for many years either. I hope to get back to that when I retire from office “life”:-)Maybe Grow my own underneath my dirty toenails! HAH
Eileen–
I’d like a farm or small acreage myself–though there is some question in my mind as to whether I might be just as well off where I am.
I have a small house on a large lot, in a rural incorporated township that was originally planned as a lake resort community.
Upsides: There’s water around here, of a sort, and I have a partially completed rainwater-collection system. (We all have cisterns here.) I still have plenty of room to expand the garden. Even if I didn’t, this township is mostly vacant lots whose owners live rather far away, or even out of state. I could have the use of some of these lots, for the asking–or even without asking, since many of the owners haven’t set foot on their properties in 15 years. There’s lots of firewood, free for the taking. (The township allows you to cut deadfall on the many overgrown properties.)
Downsides: The soil is almost unbelievably poor. We are not supposed to keep “farm animals.” (Bet that will change when hyperinflation kicks in.)
Much as I’d love a farm, I am probably too old to attempt to “go it alone”. Probably most younger people would have a problem managing a large garden, wood cutting, and livestock alone. Taking care of stock and growing field crops would require some kind of mechanization–not to mention extra hands. Though I do recall that my widowed aunt had 100 acres, and kept a couple of milk cows and some chickens until she was quite a bit older than I am. She probably paid someone to bring the cattle winter feed. (I’m no expert on this, but from what I’ve seen, it involves a tractor.)
I do keep an eye out for places on a small acreage–with the “five acres enough; ten acres too much” idea in mind.
I’ve passed up places that would have been perfect, because they were so remote–down in South Missouri by the Arkansas border. I really don’t want to move far from my kids, who are just getting launched into independence. They often need help from me–and I often need help from them.
But I can always fantasize that, when the dollar is worthless and the cities are on fire, I might be able to pick up a small farm for nothing and persuade the whole family to join me.
But I fear this is a fantasy.
Sharon,
My idea of buying a large farm goes back to when I lived in a “spiritual community,” ha ha ha. Long story. I left being labled as an ungrateful child. Well yes, I was. Ungrateful about a lot of things.
Anyways, the short story is that I want a large farm so to divide it into plots similar to the Los Angeles community farm that got shut down- and provide a place for people to grow their own food and raise animals.
I could teach them to grow food – and in turn -someone could teach me about animal husbandry. I believe in times to come, such a venture will require that participants become an arms bearing militia willing to protect the land and their food sources. Sounds so nasty somehow, writing this down, but there it is. Problem is that the land I have my eye on doesn’t have any more than a weak running stream. So I’m going to have to forage for other acreage in western PA or Ohio.