Is The Housing Recovery Over?

jyl · jyl's Garage

Poke around the house price charts for your city and see if they don't look like this:

http://us.spindices.com/indices/real-estate/sp-case-shiller-or-portland-home-price-index

What I mean is, after the bubble of the mid 2000s, and the crash of the Recession, house prices have recovered to basically the long term trendline.

For the 10-city index, looks like

http://us.spindices.com/indices/real-estate/sp-case-shiller-10-city-composite-home-price-index

And the national index looks like

http://us.spindices.com/indices/real-estate/sp-case-shiller-us-national-home-price-index

One might say the housing recovery is done, and that from here on out, further house price gains are either (if slow) the growth of prices with incomes, or (if fast) the next bubble inflating.

What do you say? And WHY? Opinions are a dime a dozen, what is your analysis?

jyl · jyl's Garage

Umm, wow, I have no idea how to resize those charts, but let me try.

(Later)

Sorry, no idea. Replaced charts with links.

asphaltgambler · 03-25-2015, 07:35 AM

In the Northern Va area - DC suburbs where I live I see sellers / RE agents overly optimistic about 2 things: Worth / pricing and abundance of sellers ready to buy. We're out of the market for now, looking to purchase next year. I see the majority of homes overpriced / overvalued and some within 30 days, sometimes less a price cut. I'm not an expert but as a buyer 2 things are red flags for me: Home is listed for 90 days (or more) and does not sell. So it's off the market for a week, re-listed at the same or slightly reduced price and still it sits. The other where the asking price is reduced in less than 3-4 weeks. This ***** is rampant here..............................

I don't think it's done. I see homes still being foreclosed on in the same neighborhoods where owners are overpricing their homes for sale. I see my local newspaper still listing a lot of foreclosed homes where the house is just starting to go through the process...........very unsettling

jyl · jyl's Garage

Quote:

Originally Posted by asphaltgambler

In the Northern Va area - DC suburbs where I live I see sellers / RE agents overly optimistic about 2 things: Worth / pricing and abundance of sellers ready to buy. We're out of the market for now, looking to purchase next year. I see the majority of homes overpriced / overvalued and some within 30 days, sometimes less a price cut. I'm not an expert but as a buyer 2 things are red flags for me: Home is listed for 90 days (or more) and does not sell. So it's off the market for a week, re-listed at the same or slightly reduced price and still it sits. The other where the asking price is reduced in less than 3-4 weeks. This ***** is rampant here..............................

I don't think it's done. I see homes still being foreclosed on in the same neighborhoods where owners are overpricing their homes for sale. I see my local newspaper still listing a lot of foreclosed homes where the house is just starting to go through the process...........very unsettling

Thanks, but a clarification - what exactly do you think is not done yet?

Scuba Steve · 03-25-2015, 07:45 AM

Around here things have rebounded to being just as bubbly as ever. Good luck finding a place without trying to outbid someone else!

ckelly78z · 03-25-2015, 07:46 AM

After the 2007-2008 real estate crash, banks became less willing to lend money, and imposed really tight restrictions on who they would loan money to and also tight requirements for what it took to get the deal done. As the government oversight and the failed loans have faded into history , they are back to thier old games of getting buyers more house than they can afford, and approving loans that are as questionable as they were before the crash.

This makes me nervous to some extent because I am heavily invested in real estate securities that generally operate off of commercial loans, but can be affected by a residential real estate slump, and the feds raising interst rates if the recovery is complete.

clearwaterms · 03-25-2015, 07:48 AM

I live in Chicago suburbs. As the foreclosures continue to dry up I think that we will see prices rebound the last little bit that they are below the trend line. That won't be a giant shift, but it will help a little.

Additionally, I think we will see another small bump in the coming years. The reason is that as the number of renters want to start buying they will create an increased demand.

Shaun @ Tru6 · 03-25-2015, 07:54 AM

Quote:

Originally Posted by jyl

Umm, wow, I have no idea how to resize those charts, but let me try.

(Later)

Sorry, no idea. Replaced charts with links.

Ask George.

jyl · jyl's Garage

Here's some stuff I see.

Inventory is very tight.

https://research.stlouisfed.org/fred2/series/HOSINVUSM495N

Sales volume (in units) is on the low side of historical.

https://research.stlouisfed.org/fred2/series/EXHOSLUSM495S

Price has been steadily moving higher (this chart is not seasonally adjusted, so it shows the annual cycle as well as the longer term trend).

https://research.stlouisfed.org/fred2/series/HOSMEDUSM052N

The housing affordability index is still near highs. But this index doesn't completely account for lending standards, e.g. if potential buyers can qualify for the loans, have the assumed 20% down payment saved up, etc.

https://research.stlouisfed.org/fred2/series/COMPHAI

Porchdog · 03-25-2015, 08:07 AM

Residential real estate values are always location dependant, but...

The Fed is doing whatever it takes to keep residential values high. That means (in my opinion) we still have way to many people over extended in real estate.

So I think the Fed is going to continue to try to keep values as a whole rising with inflation. When they lose their grip (the baby boomer generation is inexorably leaving the market, slowly now, but that trend needs to increase) prices will collapse again.

LakeCleElum · 03-25-2015, 09:33 AM

No expert, but:

I listed my house on an acre and half 15 miles outside Seattle in 2007 for $595,000. Turned down 3 offers between $485-$500.

My realtor said we were entering a decline and it could take 7 years to get back to 2007 prices.

In late 2008, I leased it to a fellow Pelican member and moved 90 miles east to my retirement home.

Today, Have it rented to a Doc and his nurse wife. They want to buy it, but can't seem to come up with the down payment. (They made $175,000 last year) . Looks like a current price would be about $450,000....

Isn't hindsight great?

asphaltgambler · 03-25-2015, 10:09 AM

Quote:

Originally Posted by Porchdog

Residential real estate values are always location dependant, but...

The Fed is doing whatever it takes to keep residential values high. That means (in my opinion) we still have way to many people over extended in real estate.

So I think the Fed is going to continue to try to keep values as a whole rising with inflation. When they lose their grip (the baby boomer generation is inexorably leaving the market, slowly now, but that trend needs to increase) prices will collapse again.

JYL - basically this ^^^^^

Ayles · 03-25-2015, 11:07 AM

Quote:

Originally Posted by LakeCleElum

No expert, but:

I listed my house on an acre and half 15 miles outside Seattle in 2007 for $595,000. Turned down 3 offers between $485-$500.

My realtor said we were entering a decline and it could take 7 years to get back to 2007 prices.

In late 2008, I leased it to a fellow Pelican member and moved 90 miles east to my retirement home.

Today, Have it rented to a Doc and his nurse wife. They want to buy it, but can't seem to come up with the down payment. (They made $175,000 last year) . Looks like a current price would be about $450,000....

Isn't hindsight great?

4 miles from downtown Seattle and houses are trading on my street for 2/3 more than they were in 2012. Two old house have been torn down and the new homes (zero lot line monsters) both sold for over a million. That's a million dollar home with no view, no yard. Not much of a decline at least when you are close in to the city.

EarlyPorsche · 03-25-2015, 11:16 AM

Because getting money is so so so so so much harder now and USUALLY a sizeable down payment or mortgage insurance is required...I believe we are seeing natural supply/demand growth.

We used to have people refinance, use equity to buy a BMW, and pay on $0 down homes. Thankfully that is done or at least sufficiently difficult today.

HardDrive · 03-25-2015, 03:58 PM

I'm in Seattle at the moment. Blow away by the development here. The number of condo projects scares me a bit. We still own a house here.

Quote:

Quote de LakeCleElum

No expert, but:

I listed my house on an acre and half 15 miles outside Seattle in 2007 for $595,000. Turned down 3 offers between $485-$500.

My realtor said we were entering a decline and it could take 7 years to get back to 2007 prices.

In late 2008, I leased it to a fellow Pelican member and moved 90 miles east to my retirement home.

Today, Have it rented to a Doc and his nurse wife. They want to buy it, but can't seem to come up with the down payment. (They made $175,000 last year) . Looks like a current price would be about $450,000....

Isn't hindsight great?

4 miles from downtown Seattle and houses are trading on my street for 2/3 more than they were in 2012. Two old house have been torn down and the new homes (zero lot line monsters) both sold for over a million. That's a million dollar home with no view, no yard. Not much of a decline at least when you are close in to the city.

jwasbury · 03-25-2015, 05:26 PM

My 'hood is white hot at the moment. We are well above peak pre-recession values. Inventory is tight, and there are buyers. I actually want to sell my house, take the gain and move, but the area where I'd like to buy either has garbage I don't like, or pretty nice stuff that is massively overpriced and sitting on the market forever.

I don't think my local market is a bubble. The demand is strong and I think it will continue, but there is a crap load of building going on around here. Most of it is high rise condo development, so I feel that our 3 story row house has more character, privacy and a private garage which will always appeal to a certain buyer, but some of the buyers will be attracted to the 10,000 shiny new high rise dwelling units coming online over the next few years.

A local real estate agent said that at this moment, buyers are ignoring conditional issues and paying record prices in spite of dated fixtures, ratty paint and floors that need refinishing, etc. Houses that are priced right (which is roughly 40% above peak of 2007ish) sell within a few weeks of listing. He believes the prices are likely to remain high but when the new inventory comes online, I would probably need to spend a bunch of money to update things in order to have a quick sale.

look 171 · 03-25-2015, 09:31 PM

I think there were many people who were ready to buy during those recession years but held back. With short supply and people buying and driving up value, many are feeling left out and interest are so good, its almost free money. Investors both domestic and big foreign money are driving the market in big cities across the US. There's going to be more of a feeding frenzy when interest inches up 1/4 to 1/2 point because buyers are afraid they will be "Left out" of the deals and miss the opportunity of the lower interest rates then it will be stable for a little.

porsche4life · porsche4life's Garage

I sure hope its not over!

From a Realtors perspective things seem to be cautiously optimistic around here. Pricing is up a few % over last year and predicted to grow around 7% this year. Its a very nicely balanced market right now and we have about a 4mos supply of houses in Phoenix. For buyers this means the really great houses that are priced right are going quick, many with multiple offers and in a week or less. Anything that isn't priced according to condition will sit for a while.

Price wise we still aren't back to '05 levels around here. If anyone bought between '05 and '08 we are doing really good to get them out with enough $$$ in their pocket to have down on the next place, and even then they won't be making a profit on the house.

Is the recovery over? I don't think so, at least not in Phx. I think we will stay on this gradual upwards movement for a few years, barring a major market crash. I just got into the biz, so I really hope it stays good!

aigel · aigel's Garage

SF Bay Area is practically back in 2005 numbers. Some local differences with the outskirts not as crazy, but the hot centers like the South Bay and SF making up for it.

It is fueled by a combination of foreign money and an excellent job market with well paying positions at the tech centers. Who doesn't fit that demographic, makes up for it with dual professional incomes or shared housing (3 generation families).

I don't think it is ending any time soon here. It is insane. This is the hot bed of the tech sector. Apple, Google, Facebook, LinkedIn, Ebay, Yahoo, Cisco, you name it, all within 10 miles from each other.

I sure am glad I bought many years ago. That east side of the Sierras in NV is starting to look like a pretty good idea!

G

look 171 · 12:19 AM

The eastern Sierra is where many of socal folks retire to. With benefit to stay close to Ca's big city without paying the high tax or the crazy home prices. My cousin and her husband bailed at 53 as aerospace engineers from Torrance so they can go fishing all freaking day and night.

that foreign money is floating in big time real estate like a broken fire hydrant. Plenty of flow. The residential is chump change for them. Many are just simply not interested. They are building high rise apartments right smack in the middle of some pretty expensive part of town. this is not just one building, but multiple projects. Some sit empty so they are parking their money driving that market further. I know its happening in SD, SF, Seattle, but I an mot sure about Portland.