It's Official

The house price collapse is now worse than it was during the Great Depression.

That astonishing piece of information comes from the researchers at the think tank Capital Economics. It follows Tuesday's news from Case-Shiller that house prices fell again in March, as the double dip gets worse.

Writes Capital Economics' senior economist Paul Dales, "On the Case-Shiller measure, prices are now 33% below the 2006 peak and are back at a level last seen in the third quarter of 2002. This means that prices have now fallen by more than the 31% decline endured during the Great Depression." This is on a National basis...here in South Florida our price declines are even steeper....over 50% from the top reached in late 2005. We are now back to prices not seen since 1999-2000. (italics mine).

Capital Economics says the latest double-dip in housing should come as no surprise. It's very much following a pattern seen in the early 30s, when a brief recovery also petered out. The same has also happened in other big housing busts around the world, the think-tank says. It believes prices are going to fall even further before we hit rock bottom, maybe sometime next year. Last year, the 'experts were saying 2nd or 3rd quarter of 2011 would be the bottom...next year, they'll move their 'predictions' again. These 'experts' should ask someone actually IN the real estate business their opinion. I have been calling a 'sawtooth bottom' possibly by 2015; and that's only if all other housing factors (interest rates, loan qualification standards, mortgage interest deduction, etc) stay the same!

Is there a silver lining? There is if you have a long enough time-line.

If you can get the financing, housing is now cheap. At many price points, renting is more expensive than owning. Capital Economics calculated that housing is now the cheapest it's been in thirty-five years.

With mortgages rates still at all time lows, and inflation creeping in, housing here can be a good deal. But you'll have to be patient to see the biggest rewards. Capital Economics says, back in the Depression, it took 19 years for house prices to recover to their previous peaks....and it will likely take longer this time around.

Now, I'm no Harvard trained economist, but my understanding is that during inflationary periods, having fixed rate debt is a benefit...you're paying back your debt with cheaper dollars. And this is the theory behind what Fed is going to do to pay off OUR debt!

So, what does this mean for you?

If you're a seller considering selling soon or within the next few years...sell now...be the NEXT home to sell.

If you're a buyer...make sure that you have a very good reason for buying (and there are still many good reasons) and a long enough time horizon to ride out the value fluctuations ahead.

If you'd like to further discuss the implications of the current market economics for your specific situation, just call me on my direct line, 561-602-1258.

Thanks for reading,

Steve Jackson

Market headed down...no, wait, it's headed up! Both reports on the same day!

Housing Slump Still Not Over, Says Economist David Levy


A housing rebound? Yes, it's possible.

...Credit Suisse says the worst is behind us and that fear of another hit on the housing market is just overreaction. The bank offers a few factors that could help home prices from here on out, including government support of about 70% of home mortgages that will likely keep prices from revisiting the nerve-wracking plunges seen in 2007 and 2008. Also, The Wall Street Journal's Brett Arends earlier this week listed 10 reasons to buy a home, countering a recent Time Magazine cover story earlier this month that questioned the pros of homeownership. Arends lists everything from record low mortgage rates to savings on taxes to guarding against inflation.

All are worth noting, but one of the more striking bullish arguments come from an economist at Massachusetts Institute of Technology's Center for Real Estate. Bill Wheaton, who thinks the housing market is poised to make a strong comeback, calls home construction "a sleeping giant that is about to wake up."

Wheaton thinks much of the excess home inventory would either be sold, occupied or other otherwise absorbed by 2013. But from 2011 onward, demand should return to pre-recession levels. What's more, he says, the recovery of home construction could boost overall GDP at levels unseen during recoveries after previous recessions, with the exception of the massive building that happened right after World War II. Not just a comeback, but a strong one...

OK, take your pick...but even the GOOD news is not that good. MY opinion, not that anyone asked, is a continuing downward movement in values for, at least, 12-18 months. That's if everything stays relatively consistent with how it is today; Interest rates, inflation/deflation, unemployment, taxes etc.

I'd love to hear your opinion...send me an email. And as always, thanks for reading!

Watch out for the double-dip...and I'm not talking ice cream!

Tax credits and historically low mortgage rates have failed to lift home prices so far this year. Prices fell 0.5 percent in March from February, according to the Standard & Poor's/Case-Shiller 20-city index released Tuesday.

The co-creator of the Case-Shiller index, who predicted in 2005 that the housing bubble would burst, is raising concerns that the worst may be ahead. That fear is shared by other economists who point to weak job growth, tight credit and many more foreclosures ahead.

"I'm worried still about the risk of a double-dip," economist Robert Shiller said in an interview.

The month-to-month drop from February to March marked the sixth straight decline. Prices in 13 of the cities fell. Only six metro areas recorded price gains. One, Boston, came in flat.

In the first quarter of 2010, U.S. home prices fell 3.2 percent compared with the fourth quarter.
Falling home prices raise fears of new bottom - Yahoo! News

CNN Money says the sky is falling!

A report today in CNN Money backs up what I have been predicting for some time now...below are 2 snippets from the article. Sellers (or owners thinking about selling)...I strongly advise getting your home on the market  ASAP...and price it properly...You can't have an agent just do an old-fashioned "look in the rearview mirror" CMA (comparative/competitive market analysis) and hope to maximize your sales price and get your home sold.

The screen-shots are really self-explanatory. Call or email me today if you'd like to discuss the market and how we can help you.

CNN Money reports 25% home price decline ahead for our area!!

Pretty scary CNNMoney chart above...and what makes it all the more scary is that for the past 6 months or so, prices here have stabilized or even increased a bit. This may sound contrary to news you see on TV or read in the local paper...but working every day in the market with both buyers and sellers I have seen pricing stability/increases myself. BUT...this is only because of the 2 big govt. market supports currently in place; 1) Homebuyer tax credits and 2) the purchasing of MBS in an effort to keep mortgage rates low.

On March 31st, the Feds program to buy Mortgage Backed Securities expires and on April 30th, the tax credits go away. On top of that, there is every expectation of an increase in foreclosures and short sales actually hitting the market as HAMP has failed and HAFA seems to be set up to increase and speed up short sales.

So, think of it this way...if CNN, through their research, is predicting an almost 25% decline in home values in our immediate area for the Sept '09 - Sept '10 year AND we have not had much, or any, decline from Sept '09 until now...all I can say is "watch out below"!

Mark my words...you are going to be reading reports in the 3rd and 4th quarters of 2010 (look-back reports) with headlines like: Huge UNEXPECTED Drop in pending home sales...Distressed Property Inventory Surges! All of the "so called' experts are going to report their "suprise" at the dramatic drops-off.

And...this solidifies what I have been preaching to owners thinking about selling, or current sellers holding out for a higher price: Your window of opportunity is closing rapidly...If prices drop even half of the CNN prediction, how long will it take to get back to the price you could get for your home today? If you could get $300k for your home today, and CNN was wrong by half...your home would be worth $263k next year...to get back up to todays price of $300k, your home has to rise in value by about 14%! Realistically, if the decline stopped completely once you reach the $263k number and home values resume an optomistic rate of appreciation...lets say 4% a year...it would be 2015 before your home would sell for $300k! (Case-Schiller Index: Nationally, the price of existing homes increased by 3.4% annually from 1987 to 2009, on average). And if CNN is CORRECT...you're looking at 2018 to get your same $300k that you could get today.

Sellers...the time is now...and the time is running out! Please call us if you'd like to discuss our current market analysis of the overall trends and for your specific Subdivision and home.

Thanks for reading,

21% to go?

I have recently read several news stories regarding predicted home values. The reports indicate that the 2 worst performing housing markets in the country in the next 12 months will be Miami with aprox a 30% drop in "median" value, then Orlando...but not far behind, and of little comfort that we're not number 1, is the report for West Palm Beach area home prices that predicts values to dip another 21.7 percent from a median price of $229,000 to $179,307. The report used the Case-Shiller index of home prices along with foreclosure data to formulate the prediction.

But I always advise my readers and clients to keep in mind that the "median" can be easily skewed and is not an accurate predictive statistic for individual home values. Along those same lines, the property value sites like Zillow can be wildly innacurate. As it has always been, the undisputed most accurate way to determine a homes value at any point in time is by comparable sales and comparable offerings.

As is especially true in this market, buyers ultmately determine a homes value and they do this by "comparison shopping", as you most likely did when you purchased the home you now own.