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Housing Bubble Bursting?

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I still don't see indications of major price declines in the resale market here, yet.
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I see down 20% in some neighborhoods around here.

The one short sale in my neighborhood that I am watching is indicating how bad things are going to be; bought August 2005 for $585,000 - first listed in September 2006 at $579,000 then $569,000 then $559,000 then $549,000 then $539,000 and now $519,000 at 80 days on market without any interest.

The borrowers have moved out and the property is vacant. This one is going to go to foreclosure. Speculators are not interested and investors can't make the cash flow work at current pricing.
 
Steve Owen said:
You sound surprised. But, why would it be surprising that the stock market would suffer from deflation in such a major industry as housing? The real shock, IMHO, is the DOW closing at record highs last week.
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investors/speculators are not usually realist and that is why they take the asset prices up to unrealistic point. When they see a sector of the economy is going down, they run away from that sector and invest their money in another sector. where are they going to investment their money?
 
This article has many charts and analysis but it has nailed the housing decline to the end.
http://www.safehaven.com/article-6329.htm

By Gary Shilling
I am convinced that the housing bubble is gigantic and will burst before long with massive implications here and abroad. In fact, it's the key to the global economic outlook.
 
Moh thanks for the link....it was a good read. Some great info on subprimes and ARMs.
 
Boy, the last time I checked on this thread I was in my 40's. :)
 
Locally our vacant land tract sales seem to mimic what I think is happening overall. The trend is down - sales volumes are way off.

This is 20+ acre vacant tracts in the west 1/2 of the county.
 
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There have been some very good posts here and some very good information presented. Now, humor me while I ask what may seem like a dumb question....... I am asking only to discover how my peers utilize such information and what impact such knowledge might have on the marketplace.

How are you going to apply this information to your appraisal efforts?

Assuming your individual market has yet to experience a downturn, do you continue to appraise based on historical data which does not reflect the anticipated downturn or do you go ahead and become more conservative in your estimations as to reflect your knowledge of current economic trends?

If you continue to appraise based on historical data which does not yet reflect the downturn, are you doing your clients a dis-service since you had current information from respected sources that a downturn was imminent?

If you adjust your estimates in a conservative manner based solely on this knowledge, are you hastening the downturn and possibly contributing to its effect on the marketplace?

In the reverse, should the economic outlook change to the positive, would you wait for this change to be reflected in your local marketplace before applying the good news in your appraisals?

I guess what I am trying to get a handle on is how much impact does national or regional economic forecasts, without supporting local market data, have on your analysis of the appraisal problem and any conclusions you reach?

Please note, these questions are asked in regards to the single family residential marketplace only.
 
ChrisB:
Assuming your individual market has yet to experience a downturn, do you continue to appraise based on historical data which does not reflect the anticipated downturn or do you go ahead and become more conservative in your estimations as to reflect your knowledge of current economic trends?
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MV data based upon closed sales goes back to the time of the meeting of the minds....the most recent one, if the deal has been renegotiated:) It's alright to use pending sales/listing data to influence your point value estimate & certainly market trends should be depicted in a factual manner.

However, it is not up to an appraiser to decide to be conservative or liberal in establishing a point value, unless that is part of your agreed to scope of work. Normally it is an underwriting function (the weight given to appraisal report elements). Just remember, at any given time, there may be darned near as many opposing views of future market activity by economists. If they all say the same thing, be very very alert:) JMHO
 
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