If you are trying to follow where we are in the real estate cycle you may want to check out “The Big Picture” at www.ritholtz.com and specifically read the recent post on the blog at http://www.ritholtz.com/blog/2009/07/why-housing-isnt-yet-bottoming/ it has some great arguments about why we are still headed down. Sadly, I agree with his assessment. He published the following chart on his site which dramatically displays just how bad things are historically:
As discussed on this site within other posts, there are some who believe that we will not turn around this mess without having housing prices stabilize and turn back up. There are just too many people who will continue to hit deep negative equity water and dump more real estate onto the market.
I really don’t expect to see prices continue to drop at 32% or more per year, which has been the case here in Las Vegas. The prices are likely to continue to decrease in price at a decreasing rate. Las Vegas, unlike many other cities, is adjusting quickly to price drops and my expectation is that we will hit the bottom sooner than many others. That could occur when home prices find their way below the cost of construction or below their expected or forecasted value based on historic trends.
At some point the psychological aspect of the housing market will change, and assuming credit is available, there will be more people willing to consider a purchase. The fact that things have fallen so far is of course going to stigmatize the entire market for quite a while.
When will it happen? That’s the trillion dollar question that no one can answer. In Las Vegas we are already seeing many properties sell below what it would cost to construct them. When you get to about $ 70 per square foot for an average home here, you are near or below the cost of construction (which includes the lot and site improvements).
Popularity: 6% [?]
No wonder why many companies now are just closing. They’d rather choose to shut down instead of continuing their businesses to avoid further damage. How much does it cost to construct a simple house these days? And you’ll sell it for a lower amount that how much you used to construct it?
I wonder how many people are taking advantage of these low prices? I think if you’re considering relocating to another area, and you haven’t been hit very hard by the real estate market in your area, you would consider buying a place in Florida for example, if you were looking ahead to retirement… Which could be another nasty discussion in itself.
On the other hand, I wonder what shape these “bargain” neighborhoods will be in after the bottoming out has definitely happened?
Although property prices have come down so is the income level and job certainties. I wonder how many people will be able to invest in a low cost house in these circumstances. Also location of house has a lot to do with job location, location of good schools ect. A lot of bargain properties my remain so on paper only.
I am wondering what were the causes of Las Vegas housing to drop its price per square foot.. can you elaborate more on this? I am thinking that Real Property/housing is a good investment which always appreciates every year compare to cars and the likes..
Maybe this could also be a start of a good sign. Although it is obvious that the market is going down, judging by the very low prices of houses these days, that is also an opportunity to many people who may want to have a house.
Yes, it is an advantage to some. But the thing is, just the fact that their prices is so low now is a sign that not many people would be able to buy them as well. And with more people not having anywhere to live, just imagine how the country would look like.