Where are home prices/rents heading?

Badbeams3

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At some point the federal reserve will raise interest rates making the monthly cost of purchasing a home more pricey. I remember the late 70`s early 80`s when interest rates on home purchases were 12~15%. Will this hold home prices down? What about rents in the future...will they go up/down or stay the same?
 
Rates are not changed randomly or on a whim. Ideally, they are used to regulated the economy, made higher when the economy is going to fast, lower when it needs a boost. Unfortunately, it was kept low during during a 'go fast' period (like running a car at 8000RPM going down hill) and the economy expanded to far, burning itself out. Rates are now so low, making them much lower would be the equivalent of paying someone to borrow your money. Add to that our severe contraction, and there is little reason to change the rate much in either direction.

Short answer, it will be some time before the economy is racing along again at a pace that we would want to raise rates, slowing it down.

And keep in mind, house prices are not that low. Just lower than the inflated (burn out) prices of 05.
 
If you compare current housing prices to prices from 25 or 30 years ago, adjusted for inflation, they are still way too high. My mom's house was purchased for $52K in 1978. Adjusting for inflation it should be about $225K. Current market rate is about $525K-$550K, down from a high of $750K a few years ago. IMO, housing prices will fall another 50%. What will likely start the next round of declines will be baby boomers seeking to cash out the equity in their homes as they retire. Flooding the market with homes will drive down prices steeply.
 
Bob Chapman International Forecaster has been a pretty good source. He seems pretty level headed on these issues. I listen every week on Radio Liberty (Dr. Stanley Montieth.)
 
By 2011 more them 60% of home will be upside down or in foreclosure, depending were you live homes will continuous to fall from 20% to 30% over then 2 years. I recently purchased a home that I sold 2 years ago, the original purchase price I paid in 1998 was 120k sold it on Jan 2007 for 460k just bought it from the bank for 169k I didn't feel it would fall any lower in the area its located. Rated will stay the same for at least the next 36 month give or take 1 point to 1.5 points. One thing no one talks about on any of these programs is that fact that there are thousand of mortgages with arms to expire in the next 24 month.
 
Thank you all. What about rental housing costs? Rents do not seem to have changed much so far...will they remain more/less unchanged?
 
Thank you all. What about rental housing costs? Rents do not seem to have changed much so far...will they remain more/less unchanged?
Rents are more of a supply/demand kind of thing, and often change slowly due to being locked in with leases. In areas where it's desireable to live they will be higher than in areas where it isn't. It's very true that so far rents haven't changed much. A decent apartment here would run about $2K a month in the outer boroughs, much more in Manhattan. These prices are pretty much the same as they were at the height of the real estate boom. However, if the downward trend on home prices continues eventually rents will be affected. When it costs as much or more to rent an apartment as it does to own a home, there will be few takers. That in turn will push down rents.
 
By 2011 more them 60% of home will be upside down or in foreclosure, depending were you live homes will continuous to fall from 20% to 30% over then 2 years. I recently purchased a home that I sold 2 years ago, the original purchase price I paid in 1998 was 120k sold it on Jan 2007 for 460k just bought it from the bank for 169k I didn't feel it would fall any lower in the area its located. Rated will stay the same for at least the next 36 month give or take 1 point to 1.5 points. One thing no one talks about on any of these programs is that fact that there are thousand of mortgages with arms to expire in the next 24 month.
That's outstanding. :thumbsup: I believe your comments about the ARMs market is unfortunately true, and coupled with a rough looking commercial RE market by year's end, the next 1 1/2 years could be tough for the real estate market. Low interest rates are great, but no growth and looming tax increases are going to make a significant recovery in our country an unphill battle.
 
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