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On Housing, ‘Worst Is Yet To Come'

Submitted by Stan, Mar 27, 2007 01:01

Dan

Great article. We definately have not seen the worst of this real estate downturn. As a real estate broker and appraiser, I have seen the ups and downs of these real estate cycles especially in Sacramento.

When I hear Realtors or local economists suggest that a recovery in the local housing market is just around the corner, I could only describe this assessment as "wishful thinking". After nearly a ten year run up in real estate where prices more than doubled, anyone suggesting that there is going to be a price rebound in 2007-2008 is in denial. The skyrocketing prices exhibited by the local housing market was artificially fueled and therefore, unsustainable. Simply put, two plus two equaled five (2 + 2 = 5) for too long. The fundamentals are now back but it is a little too late – thanks in part to Greenspan". Property owners, real estate agents, homebuilders, etc. now have to come to the realization that real estate does in fact go down in value, remember 91-96? Communities where real estate/finance/construction made up a significant portion of the economic pie (i.e. Sacramento, Stockton, Modesto, etc.) will be hit hardest by the real estate downturn.

What is interesting about this housing correction soon to collapse is that interest rates are at historic lows and unemployment is low-although it appears we do have a case of underemployment. There is discussion among the Realtors and economists that the Fed may lower interest rates by Fall, 2007. I am of the opinion this will not happen due to increasing inflation - partly triggered by a continual precipitous decline in the dollar and astronomical deficits. Furthermore, several foreign banks appear to have started a rate hike campaign that will result in narrowing carry trades and ultimately less appetite for U.S. treasuries. If there is anything that needs to go up, it is interest rates to prolong the once preemptive dollar from its eventual collapse. This will further crush the real estate market.

Stan

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Other reader comments on this article

Comment	By	Date
In all of the negative commentary I've read in response to my factual comments, I have heard nothing FACTUAL that... [MORE]	Kenneth J. Jones	Mar 29, 2007 08:36
Jones -- Your fondness for capital letters and smug indignation doesn't substitute for the FACT that you haven't answered any... [MORE]	BLANEY	Mar 29, 2007 18:41
"To the ignorant and depressed among us:" Kenneth Jones? Did you even bother to read the response to YOUR ignorance,... [MORE]	Roy A. Hughes, III	Mar 29, 2007 22:21
Mr. Jones- Your attempt to paint a rosy outlook on the housing market is kind of sad. I realize you... [MORE]	Cornelius	Mar 28, 2007 15:17
It is now April 12, 2007. Ive been in phoenix for about 6 weeks looking for a home and am... [MORE]	bank of amigo	Apr 12, 2007 12:26
Dear Mr. Case: I don't doubt the experiences of you and your friend. However, isolated cases of personal experience, upleasant as... [MORE]	Kenneth J. Jones	Mar 28, 2007 07:00
There is one hint that prices will drop. No one can afford even a decent condo today. If you have... [MORE]	Blaney	Mar 28, 2007 18:14
I for one agree with what Mr. Case's article contained and let me tell you why... My wife and I bought... [MORE]	Roy A. Hughes, III	Mar 28, 2007 21:53
Mr. Krystofiak is apparently not a student of history. IN FACT, during the worst real estate markets since the great... [MORE]	Kenneth J. Jones	Mar 28, 2007 05:01
While I haven't read the NAR data to which Mr. Jones refers, I DID live through the late 80's and... [MORE]	Rick Case	Mar 28, 2007 06:31
I lived in Austin TX from 1983-95...The 1985-92 bust ranged from 25% to 50% decline depending on location and quality... [MORE]	Army No. Va.	Mar 28, 2007 21:13
Your story is right people making 40,000 a year can never repay a 500,000 fix @ 30 years let alone... [MORE]	notarealtor	Mar 27, 2007 20:38
We are just at the beginning of this Housing Crash. Just look at how ridiculous things got. Homes appreciatated from... [MORE]	Bruce Bartman	Mar 27, 2007 19:08
Many people believe that this will all blow over in a few months. Most don't understand the causes of the... [MORE]	Don	Mar 27, 2007 15:45
We won't have hit bottom until it becomes "common knowledge" that it never makes sense to buy when you can... [MORE]	Paul	Mar 27, 2007 12:50
I'm amazed by economists who can't clearly see that housing is going to be in trouble for the next few... [MORE]	Charlie	Mar 27, 2007 09:18
D: Most major economists like Paul Krugman of Princeton and Schiller of Yale have been saying there is and will be... [MORE]	bababoey	Mar 27, 2007 08:22
Dan Great article. We definately have not seen the worst of this real estate downturn. As a real estate broker and...	Stan	Mar 27, 2007 01:01
I have been following the housing market for a bit more than 2 years now. I think Mr. Green Span... [MORE]	Vu Nguyen	Mar 27, 2007 19:45
In many parts of New York City values seem to be holding up. In Brooklyn we still have areas moving... [MORE]	Marc	Mar 27, 2007 20:44
Lenders have provided programs to qualify most any buyer today. Loan officers are not properly trained to sell sophisticated mortgage products.... [MORE]	Jim	Mar 28, 2007 10:29

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