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Current Topic: Home and Garden

RE: Home Market Takes a Tumble
Topic: Home and Garden 7:28 am EDT, May 10, 2011

possibly noteworthy wrote:
While some analysts have argued that home prices need to fall to "clearing prices" that will attract more buyers, price declines could also complicate any recovery by pushing more borrowers under water.

I'm starting to get annoyed with the analysts who are talking about how prices are too high.

I felt fairly confident buying my place because at the time, the mortgage payment was comparable to the rent you'd pay on a similarly sized place in the area.

Not anymore. Zillow provides a suggested rent payment and an estimated mortgage payment at current interest rates given their sales price estimate for the place.

The suggested rent is nearly twice the estimated mortgage payment.

What this means is that you could buy my place at the current market price and then rent it out for a yield of 80% or more!

Anyone currently renting stands to save a significant amount of money buying at these prices. Anyone looking for an investment opportunity stands to make a handsome profit.

This means that prices are not too high. Prices have fallen way, way below where they are supposed to be. Commentators who talk about the need to reach "clearing prices" are not providing useful insight into the situation.

We're way past any reasonable concept of a "clearing price" in this market. And prices are still falling.

There are several factors:
1. Economic growth: Atlanta is not growing right now, so there is less need to consume homes.
2. Gridlock: People stuck underwater in their house can't move and so the whole market gets gridlocked.
3. Availability of credit: There are perfectly responsible potential home owners who are not allowed to buy right now because credit restrictions have become more strict than they should be.
4. Fear: No one wants to try to catch a falling knife.

But the number one factor in my mind is foreclosure sales. They are a race to the bottom - past the bottom - with each bank trying to offer their places cheaper than the next bank in an attempt to avoid the load associated with holding onto the properties through a normal sales cycle. This process feeds itself - they've driven the prices so low that the prices are a catalyst for more foreclosures - people who need to leave end up foreclosing because they cannot compete with bank prices. Ultimately, it is the banks that suffer. They're going out of business at unprecedented rates.

The banks aren't going to change tactics until the people who run then - the economists - recognize the reality of the situation for what it is and start making useful recommendations. Instead there is this constant drum beat of "prices are too high" and so financial institutions act accordingly.

Its madness.

RE: Home Market Takes a Tumble

The Bottom for Housing Is Probably Not Near
Topic: Home and Garden 7:44 am EDT, Apr 25, 2009

David Leonhardt:

As long as home prices are falling, foreclosures are likely to keep rising and the toxic assets polluting bank balance sheets are likely to stay toxic.

There are reasons, though, to think that prices may be on the verge of stabilizing. Relative to fundamentals, like household incomes and rents, houses nationwide now appear to be overvalued by only about 5 percent. You can make an argument that the end of the housing crash is near.

But that’s not what I found at the auctions.

Almost posted this earlier - Atlanta doesn't look so bad from this perspective.

The Bottom for Housing Is Probably Not Near

At home on Pablo Escobar's ranch
Topic: Home and Garden 12:25 pm EDT, Jun  2, 2008

"This place is really nice and tranquil."

What a good message for the children...

At home on Pablo Escobar's ranch

Woes in Atlanta Condo Market Build As New Supply Floods Cities
Topic: Home and Garden 10:15 am EDT, Mar 24, 2008

While home prices in Atlanta haven't gone up as much as prices in other markets, this article seems to suggest that prices, particularly for condos, may be in for a crash anyway. This map, also from WSJ, singles out Atlanta as an area with a particularly high vacancy rate.

The condominium market is about to get worse as many cities brace for a flood of new supply this year -- the result of construction started at the height of the housing boom.

More than 4,000 new units will be completed in both Atlanta and Phoenix by the end of the year. Developers in Miami and Fort Lauderdale, Fla., are readying nearly 10,000 total new units in a market already struggling with canyons of unsold condos. San Diego, another hard-hit region, will add 2,500 units, according to estimates provided by Reis Inc., a New York-based real-estate-research firm.

The deluge means bad news for developers and potentially lower prices, including in cities such as Atlanta and Dallas that have avoided the worst of the housing bust. If defaults and foreclosures rise, lenders will feel the pain too.

Woes in Atlanta Condo Market Build As New Supply Floods Cities

Penny Arcade! - Perfectly Reasonable
Topic: Home and Garden 2:45 pm EDT, Jun 26, 2007

Acidus says:

Jill and I are starting to shop for a house. Having lived in a house with a scary basement including a room we affectionately deemed "the murdered children room"* this comic presents a very real and legitimate fear.

* - 6x5 room, covered with falling down acoustic tiles, drain in the floor, no windows, and it locked from the outside... Seriously, that basement was freaky. Ask anybody.

Yeah, I've seen it. He's not kidding.

Penny Arcade! - Perfectly Reasonable

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