July 13, 2024

housing bubbleFrom The Economist: "An IMF study on asset bubbles estimates that 40% of housing booms are followed by housing busts, which last for an average of four years and see an average decline of roughly 30% in home values.

But given how many homebuyers in booming markets seem to be basing their purchasing decisions on expectations of outsized returns—a recent survey of buyers in Los Angeles indicated that they expected their homes to increase in value by a whopping 22% a year over the next decade—nasty downturns in at least some markets seem likely."[tags]housing, real estate, housing bubble, real estate bubble, housing bust[/tags] downtown San Diego condos

8 thoughts on “Housing bust … still has years to go!

  1. Homeowners just saw their wealth shrink, by a lot. The numbers will only get worse. It’s time to examine the clichés that the “experts” – chiefly analysts and economists from realtors and mortgage associations – used to convince Americans that what they’re seeing now could never happen.

  2. The fallout from the housing bust continues. A few weeks ago, the 11th largest subprime mortgage lender in the country, basically went POOF!

    The culprit appears to be the forced buyback of loans from mortgage investors. In a nutshell, subprime originators make loans, then sell them off to end investors. If those loans go bad quickly, or if other conditions are met, the investor can put those loans back to the originator.

    The company, Ownit Mortgage Solutions of California, reportedly ran out of cash to buy those loans back. According to one employee, the company (which made more than $8 billion in loans last year) basically shut down overnight.

  3. At a recent real estate auction in the Miami area, one three-bedroom ranch house with a pool sold for $671,000. In 2005, the same house sold for $809,000. Another house, just steps from Naples Bay, sold for $880,000 at the auction., compared with $1.35 million a year earlier. On average, the houses that changed hands at the auction had fallen about 25 percent in value since 2005, according to a real estate consultant who analyzed the auction’s results.

  4. Here is a quote from 2005: “We’ve had the biggest housing boom in the history of this country,” explains Yale professor, Robert Shiller. “That can’t go on forever…I’m thinking that this boom is so much bigger, that we will see a substantial fall that will affect the country overall…We’re not [automatically] bound for an enormous decline, but I think it’s likely.”

    How many paid heed to the professor??

  5. Thanks for the solid, informative posts. I like the fact you back up your opinion with actual news stories.

    The San Diego press seems to always twist the real estate news or downplay the extent of the problem. Do you think all their real estate advertisments have some effect on this???

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