NY Times says home prices to fall

The most emailed article in the NY Times says that economists predict a "1 percent to 2 percent" decline in nationwide housing prices.

Unfortunately for people who don't own homes, a mere 2% drop in price isn't going to make them much more affordable.

Comments

[vegas crash watcher]

The NYT is dreaming; 20-50% off peak or even current prices at a minimum. The largest credit bubble is history won't end with just a few percentage points of deflation.

[Brandon Berg]

Yeah, but they say it may continue in 2008 and 2009. 2% for three years, plus 2-3% inflation, is a 12-15% decline in real prices. Corrections can happen in two ways. One is for nominal prices to fall, and the other is for nominal prices to stay flat until fundamentals catch up.

[Brandon Berg]

Also, they're talking about the national median. Corrections in places where the bubble has been strongest are likely going to be much more severe.

[Rory Hester]

Credit restrictions will disproportionately affect sales volume on the lower end of the market, so that even though there will be dramatic price decreases in all segments, a shift upward in the distribution of buyers in each market will make the median price a poor indicator of the overall market.

What we need is a way to track the median price of houses per square foot, which will probably take a 30 - 40% hit, at least in the worst bubble markets.

[DML]

"Unfortunately for people who don't own homes, a mere 2% drop in price isn't going to make them much more affordable."

Agreed.

I always tell people that I need a housing market crash to even consider buying anything larger than an 800 square foot condo (West LA).

[Flur]

grrrrr. I was counting on there being good news for tomorrow's rally... grrrrrrrr

[David Alexander]

Supposedly, here on LI, homes are now selling for $25,000 to $50,000 off their list prices, with a few homes needing $75,000 to $100,000 to sell. The hardest hit have been homes that needed considerable work to look "decent".

[K]

Credit restrictions will disproportionately affect sales volume on the lower end of the market,

Why?

The NYT also had an article about people who complained that their apartments / condos weren't constructed properly and/or on time. Two of the buyers were a 28 year old stockbroker buying a $975k apartment, and a 29 year old real estate attorney paying, I think, $675k.

Are you telling me that these people could come up with this much cash after only working a few years (assuming the lawyer, for example, didn't start college at 14 or something)?

[the professor]

K, the salaries at BIGLAW are standard. They start at 165k with a 15k or more increase per year. At the 7th year you can make partner and your already huge salary may double. 29... that's on average 4 years after graduation, so yes, it's possible he even had 675k on cash. (nothing is being said about his spouse)

[David Alexander]

Or you can presume like HS does that they receive financial assistance from their parents and grandparents.

[K]

professor, the attorney was apparently a single woman (which definitely increases the odds of parental support, which I think was discussed in "The Millionare Next Door.")

But $165k*4 + $15k*3 = $705k. I find it hard to believe that she could live for free in NYC and pay no taxes for 4 years.

But it definitely makes me feel like a loser.

I still debate any assertion that one class of housing is generally purchased without mortgages, or that a class of housing is immune to economic downturns.

Even Jim Cramer is bawling about how the financial people might actually take a little hit from this one, which would seem to affect the NYC real estate market. (after almost 3 decades of cheering every time factory workers, engineers, and accountants got laid off and offshored, it's definitely their turn).

[the professor]

You didn't add up the bonus, which can be considerable.