Will it be a disaster if home prices don't shoot upward?

By
Services for Real Estate Pros with Marte Cliff Copywriting

According to a report in Money News, Yale economics professor Robert Shiller predicts that housing may not rebound "in our lifetime."

The report went on to cast gloom and doom about prices being flat or falling in the 20 metropolitan areas they track. They also cite low "seasonally adjusted" numbers of sales.

(What the heck is a seasonally adjusted number anyway? Does 10 equal 12 in December, or perhaps in May? Or is it the other way around?)

This report got me thinking two things.

First, I don't believe it.

I've read enough posts here on Active Rain saying that sales are going well in many areas of the country. When I read about multiple offers, it tells me that prices have to be inching upward. But of course they can't inch too far or too fast because of the appraisal factor.

Second, do we really want prices to begin skyrocketing again?

Isn't that one of the factors that caused this whole mess?

For many, many years, we expected homes to appreciate at about 5% per year. Some years it was more, some less. It was slow and steady.

Then came 2002 – 2003 when things started to change.

 

The elephant remembersThe government and the banks conspired to push home ownership on people who seriously couldn't afford it – offering nothing down with low "teaser" interest rates to lure them in.

The law of supply and demand caused prices to escalate to ridiculous levels, so that in communities like mine, long-time residents could no longer afford to buy homes. The home prices were simply not in sync with the incomes provided by local employment.

I don't know if the majority of locals didn't buy into the "zero down and .99% teaser rates" or if they weren't offered here, but the complaint was that if you worked here, you couldn't buy a home.  It was people who had sold out in high-income communities who came here to buy our "cheap" homes and who drove the prices skyward. Quite often, those who sold out in California and other high-dollar areas were able to pay cash when they arrived here, so appraisals didn't enter into the picture.

Now, in many communities, prices have fallen back to their 2002 – 2003 levels. Those who purchased during the boom years have either gone through foreclosure, done a short sale, or are toughing it out, making high payments or having their cash tied up in a house that's worth far less than they paid.

Some are still in one process or another, and more homes will be offered as short sales or REO's. That will affect the law of supply and demand for a while yet and will hold prices down until that supply is exhausted.

On the up-side, people who live and work in communities can once again afford to purchase homes without getting into risky adjustable rate mortgages.

Do we really want that to change?

 

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Fred Griffin
Frederick Griffin, Licensed Real Estate Broker - Tallahassee, FL
Licensed Florida Real Estate Broker

Robert Shiller is a college professor at a left-leaning University.  He is in bed with Bloomberg, Wall Streeters, and others who will benefit financially from an increase in housing prices.      

   I take "Case-Shiller" with a grain of salt.

Apr 24, 2012 09:36 PM #1
Rainmaker
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Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Fred - What bothers me is that the media so often affects people's behavior. I don't want him scaring people away from home buying - but we don't need a repeat of the bubble and the burst.

Apr 24, 2012 09:55 PM #2
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Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Selling Daytona paradise for heavenly good prices

Marte - I would rather not see the rising prices yet for some personal reasons, but this is not what is happening here. Inventory is decreasing very fast, and level of activity goes up

Apr 24, 2012 10:27 PM #3
Rainmaker
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Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Jon - Hopefully the banks learned something about offering loans to people who can't possibly make the payments. And hopefully appraisers won't go along with inflated prices just because someone wants to pay them.

We're supposed to see another wave of foreclosures tht will keep prices down for a while, but who can predict?

Apr 24, 2012 10:39 PM #4
Rainmaker
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Debbie Gartner
Floor Coverings International - Westchester NY & Stamford CT - White Plains, NY
The Flooring Girl - Westchester hardwood flooring

"In our lifetime?"  Oh my, talk about pessimism.  I believe it will be a slow recovery, but it seems like it's starting.  I wish it would accelerate, but you're right, we don't want it getting out of control again.

Apr 25, 2012 03:40 AM #5
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Chris Ann Cleland
Long & Foster REALTORS®, Manassas, VA - Bristow, VA
Associate Broker, Northern VA

I don't expect my home to ever be worth what I paid for it, but I do expect that over the next 24 years I can pay down the note and whatever it sells for will be my equity in the future.  And I imagine that the price will be relative, as it always is, to everything else around me.  So if I want to purchase another home, I'll be able to.

Apr 25, 2012 08:43 AM #6
Rainmaker
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Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Debbie - My thought exactly. Maybe his lifetime. (How old is he??) It does look like it's starting, at least in some parts of the country. I can't help but think that if it happens slow and steady, it will be better for everyone.

Chris Ann - That's how people used to think. They didn't buy a house expecting it to double in value in a couple of years so they could make a quick buck. They bought a home to live in and looked forward to the day that it would be paid off.

Apr 25, 2012 10:34 AM #7
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John McCormack
Albuquerque Homes Realty * www.AlbuquerqueHomes.com - Albuquerque, NM
AlbuquerqueHomes.com, Albuquerque Homes Realty

Marte -

I hope we don't see home skyrocketing again.  In the Albuquerque area they are priced right about where they should be.  And I don't believe Mr. Shilller knows what he is talking about.  Just my 0.2 cents worth :)

Hope you have a great afternoon......

Apr 25, 2012 02:59 PM #8
Rainmaker
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Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

John _ I think your 2 cents and mine are in agreement.

Apr 25, 2012 07:50 PM #9
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