How Bad Will The Market Be in '07?
Business Week asked a bunch of economists to look into their crystal balls to try to predict what the housing market would do over the next year. The general consensus was not too encouraging: Home prices will continue to fall in some markets, and the rate of price appreciation will slow in most places. Declines…
Business Week asked a bunch of economists to look into their crystal balls to try to predict what the housing market would do over the next year. The general consensus was not too encouraging:
Home prices will continue to fall in some markets, and the rate of price appreciation will slow in most places. Declines in homes sales, which directly influence price trends, will set the stage for another year of price decreases in 2008. Foreclosures will continue to increase. For those struggling to hold onto their homes, their net worth will shrink as these homes lose value. Long-term mortgage rates will rise. Housing starts will see double-digit depreciation, the sharpest decline since 1991, the worst year for housing starts on record.
You want the good news? Home prices are predicted to be flat to up slightly on a national level in 2007, with many large markets seeing small increases. (Of course, if you own in Southern California, Florida, and Las Vegas, you’re screwed.) And although new home sales are almost sure to be down for the year, existing home sales will probably be flat. And in a glass-half-full spin, housing starts aren’t likely to suffer as sharp a drop as they did in the early ’90s or early ’80s.
How Bad Will the 2007 Property Market Be? [Business Week]
rent v own nonsense
what about the interest cost on the mortgage, which in this rent v own market would be more than the rent assuming 10% down?
if you are going to do analysis, at least do it right!
…or collect rent?
…and is that cash ALWAYS recovered when you sell?
12:39,
“owners MAY lose equity over the next couple of years. renters WILL lose cash.”
At least they have cash to lose (how big of a loss compared to a failed real estate investment by the way) with no debt attached to it. Do you NOT lose cash while owning and operating a brownstone?
12:13,
“And if rents are on the rise in Brooklyn (which, in my limited experience, they are), wouldn’t that help to at least prevent current prices from falling dramatically in the future?”
That would be a ‘no’. The temporary hot rental market is a refuge camp for outpriced buyers. That market will soften, first, when more and more condos are converted to rentals and second, when these refugees are priced back in while brownstone medians fall and affordability returns.
owners MAY lose equity over the next couple of years. renters WILL lose cash.
rudimentary example:
rent: 2k/mo x 12 = 24k/annum.
were she to purchase, this renter could “afford” to lose at least 24k/annum in equity without taking a relative loss.
I have said this before (not the exact words) on this blog and I will say it again now: The most significant impact one will see in brownstone brooklyn as a result of a downturn is a flight to quality. Well-maintained, move-in condition properties will more or less obtain prices that are in line with recent trends. Recent sales have more or less bourne out this analysis (in the face doom and gloom projections since the end of 2005). I strongly believe that if an analysis of properties languishing on the market is done one would arrive at one of the following conclusions: (a) they are priced above or ahead of the current norm/trends, (b) they need work, (c)they have legal impediments (e.g.,rent controlled/stabilized tenants)or (d)there is a location issue. Or, in a some cases, its a combination of all 4 problems.
“You want the good news? Home prices are predicted to be flat to up slightly on a national level in 2007, with many large markets seeing small increases. (Of course, if you own in Southern California, Florida, and Las Vegas, you’re screwed.) And although new home sales are almost sure to be down for the year, existing home sales will probably be flat. And in a glass-half-full spin, housing starts aren’t likely to suffer as sharp a drop as they did in the early ’90s or early ’80s.”
This good news, only for 2007, simply means there is still time to cash out. What about the rest of the decade? The booms that preceded the early ’90s or early ’80s were dwarfed by the recent boom. The bigger the boom, the bigger the bust.
Back to Businessweek: “For those struggling to hold onto their homes, their net worth will shrink as these homes lose value.”
What exactly is the correlation between current/potential rental income and housing prices, especially with respect to multi-family, owner-occupied brownstone Brooklyn?
— is it not, the better the rental income, the more valuable the house?
Is current rental income in brownstone Brooklyn such that could support current housing prices or is the cost of ownership still too high? And if rents are on the rise in Brooklyn (which, in my limited experience, they are), wouldn’t that help to at least prevent current prices from falling dramatically in the future?
I don’t expect to see prices on multi-family brownstones in Brooklyn drop more than 10%, if at all.