real estate predictions

real estate predictions

What do you think will happen in the next year with the real estate market? Here in Calfornia it seems as though there is no end in sight to the high prices for homes. Does anybody have a story regarding the market in the last few years ie. crazy overbidding?

Re: real estate predictions

I personally do not have any stories about crazy overbidding, but I have read stories in the WSJ and on MSN money about people buying real estate to try to "flip" it, and make a profit, in less than one year. Just my opinion, but I think that it is clear that we are in the later stages of a bubble. Anyone agree? Disagree?

Re: real estate predictions

In my area the market has been crazy with bidding wars for the past couple of years.Buyers are just now seeming to have reclaimed some of their sanity,although the market is still strong and "good" listings sell very quickly.Prices don't seem to be climbing upward as fast as before but they're still up there.

Re: real estate predictions

We have friends in DC area. Back in 2003 they put an offer on a mid $500k house, but the winning offfer came in at $50k over asking. Less than a year later they found another house they liked in the mid $600k, so they overbid by 50k. This time the winning bidder came in $250k over asking. My brother in law moved there late last year. They're renting as the madness has yet to abate.

Bubble behavior? You bet, but I think this bubble is more isolated, so as long as there aren't major changes in economic activity in a given area (e.g. Tech bubble in CA) you won't see a sudden collapse - more like "death by a thousand cuts"

Meanwhile, here in SE MI, the market has been soft for the past 18 months or so. On average, houses take 9 months to sell. In 90% of the communities, prices are flat or falling. Note: Michigan has the first or second highest unemployment right now.

I'll go out on a limb and make some predictions for the next 12 months....it's basically taking what I see in Michigan and expanding it to the rest of the US.

1) Oil prices continue to climb, staying between $50 and $65 a barrel.

2) No significant improvement in budget or trade deficits.

3) Dollar does not weaken due to political pressures from Asia and Europe.

4) Dual deficits force the Fed to continue creeping up interest rates.

5) Higher commodity prices, stable to stronger dollar and rising interest rates mean the US economy will continue to straight line or even weaken. Right now there is minimal ro moderate economic growth but it is not broad-based.

6) Localized pockets of prosperity continuing to drive higher RE prices in very isolated areas.

7) General stagnation or decrease in residential RE prices in most metro areas.

Re: real estate predictions

Twentysixtwo, I have read articles that call for a long period of real estate prices going sideways, and other ones that call for an orderly decline over a period of time. This is what I assume that you mean when you say "death by a thousand cuts". Of course, the US is a geographically large and diverse country, with similarly diverse local economies. Generally though, I forsee some pain on the horizon for lenders and borrowers, as the ratio of ARMs to all residential real estate loans outstanding has risen during this current "bubble". I think that after the initial shock (read as: initial drop in prices) caused by more and more lenders defaulting is over, will come either an orderly decline, or a period where real estate prices only go sideways. Just my $ .02, and I hope that I am wrong.

Re: real estate predictions

Yes, a slow painful decline rather than a fast drop as we had back in 1992-ish.

New housing has been a bright spot over the past few years, but it's been in large part driven by low interest rates which allow those with good stable jobs to trade up. Meanwhile, used home sales are slowing as the pool of qualified buyers on the low end dry up. What has to give is the price of existing homes. Unless you're in a region with a strong economy......