What About Real Estate Deflation In The Greater Depression?

[Water Mitigation]

hi,


Post deleted due to rules violation.

[fdjake]

$500,000 to $20,000????

I just sold a FULL RETAIL REHAB for $20,000 over asking and it sold in 4 days with 5 offers!!
This crazy New England winter has kept a BOAT LOAD of buyers LOCKED IN DOORS and they are dying to get out and BUY PROPERTY.

The last 5 properties I've sold all went in UNDER 5 days!

When I can buy FUNCTIONING HOUSES for LESS than the cost of the LUMBER in that home.....That's the BOTTOM folks!

When you can buy HOMES for less than USED CARS......That's the bottom folks!

When people call me looking to sell property for LESS than the value of the LAND it's built on.....That's the bottom folks!

PLEASE........D O   N O T   sit around WAITING for some BS 2018 BOTTOM.....You'll be missing the greatest REAL ESTATE SALE IN HISTORY.

What your THEORY fails to account for is this.......

A LOT of very WEALTHY people never got really hurt in this bust....THINK THAT'S BULLSH*T???

Talk to anyone that deals with high net worth clients....Porsche dealers, Luxury Resorts, High End Furniture dealers...They STILL have plenty of business and things are picking up.  Did these people pull in their spending in 2008-09???  YES they did....But when it became apparent that this was NOT their grandfathers DEPRESSION,  their MONEY was SAFE, and that money could now buy assets from DISTRESSED SELLERS at HUGE discounts......THEY DID WHAT WEALTHY PEOPLE DO......They let their MONEY make more MONEY!!!

I just got back from the Ritz Carlton St. Thomas....It was FULLY BOOKED and NO ONE there was holding back on their spending...I spoke with a number of people that are using the current economic stress to make themselves a LOT of money. 

For your scenario to play out....These high net worth individuals would have to get CRUSHED in the very near future by some unforeseen event. 

My opinion???

We've seen the worst of it, but it'll be a slow hike out for people with no capital or credit...For those with re$ource$.....IT'S THE $ALE OF THE CENTURY!!!!!!!!!!!!!!!!!!!

[andydallas]

the cost of rental property is based on two things, the cost of the property, and the interest rate,,even if prices DID stay at this level (and I don't think they will), no one thinks the interest rates will stay this low,,so I agree,,..if you don't buy now you will be kicking yourself later

[Sean_L]

If interest rates increase steadily over the next few years we haven't hit bottom. Rising rates will erode demand & purchasing power for buyers of new & existing units. Prices will need to shift downward to spur demand and increase affordability.
 

[javipa]

If there is further deflation of prices, which Gary Shilling predicts will happen over the next 2 years (20% additional loss in value), and rates go up, financing will be even harder to come by and prices will drop some more. 

It would seem that...

(higher rates = harder qualifying) = cheaper prices.

(Lower rates = "easier" [theoretically] qualifying) = higher prices. 

The latter defines the Frank/Dodd real estate bubble.

However, neither condition takes inflation into account.

If we calculate gas, food and certain textiles into the mix over the last year, if I'm hearing correctly, aggregate inflation has grown to 19% annually in the US.  I'm seeing it in medication already.  Medication my mom takes cost $90/each in 2010.  The latest bill was $130/each.  That's a 30% increase in one year. 

Normally, we've been led to believe that real estate is a hedge against inflation.  So, the question might be, "How come real estate values haven't risen by at least that much with the cost of gas, food and textiles going up?" 

Maybe it actually has.  We just can't "see it," because the RE market has actually fallen so far that it only appears to have fallen by half since 2005?  Just a question. 

Of course, the stiffer RE loan qualifying, and the glut of impending foreclosures would theoretically depress prices, right?  However, banks are keeping inventory off the market, on purpose, and the prices are still stagnant.  Maybe the real estate market is/was worse than we have/had imagined.

Lots of thinking-ness here.

Other thoughts...?

[jmd_forest]

How come real estate hasn't risen by at least that much...?

Real estate prices, at a macroeconomic level at least, are driven by supply and demand. Currently, supply is high and demand is low and that is creating a self perpetuating downward spiral of prices. Also considering that most real estate is highly leveraged via a mortgage and lenders are tightening up their lending standards, many would-be buyers would could contribute to the "demand" are unable to qualify and therefore can't contribute. Add to that the rising unemployment causes both inability to pay a mortgage resulting in forclosure (increased supply) and fear, uncertainty and doubt about the economic future for many potential real estate "consumers" that leads them to remain in their current housing (reduced demand).

With mortgage rates at some of the lowest in decades, there is little room for rates to fall and stimulate demand. It seems more likely to me that with the wholesale printing of money that has been going on for the past few years that interest rates will rise in the not too distant future, increasing the costs and reducing demand.

Gas food and textiles costs may be rising but most people don't need to qualify for a loan to buy them.

[alohatony]

As some other have pointed out, interest rates are also an important factor to keep your eye on; if they're raised in the future - and at some point they'll have to be - then that will likely bite into consumer demand for mortgages and housing as well.

[chrisevans]

Its true that there are a lot of depressions going in the real estate market... Double dip in home sales and others but there's also progress in some areas. Read on this news article: http://dld.bz/TZYW
It's  just a matter of making the right decision about a certain investment and appropriate marketing.