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Housing Prices to drop ANOTHER 20 to 30%%

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
Peter Schiff is, in my mind, the best investor in the world today. Here is an article you may want to consider, it simply makes sense. That is Schiff's downfall, everything he says is so simple and makes so much sense that some people can't believe it.

Link => http://www.streetinsider.com/Inside...me+Prices+to+Fall+Additional+20%/6186413.html
December 30, 2010 10:50 AM EST

According to Peter Schiff, the recent drop in home prices is unnerving, but there is still another 20% drop to go before we reach a historical trend line.
. . .
From the start of 1998 through the middle of 2006, arguably at the peak of the market, the Case-Shiller 10-City Index rose an astounding 173% at 19.2% per year. Schiff notes that we now know that the gains had little to do with fundamentals and more to do with "distortionary government policies that mandated loans to marginal borrowers, and set off a national mania for real-estate wealth and a torrent of temporarily easy credit."

One of the co-founders of the Case-Shiller index, Robert Shiller, contends that home prices, from 1900 - 2000, followed a more muted 3.35% average growth rate, which included the Great Depression, post-war eras, and the boom of the 90's.

So, Schiff notes that in 1998, the Case-Shiller index was at 82.7. Following the 3.35% average annual price increase predicted by Shiller lands us at a point of 126.7 in October 2010. However, the Case-Shiller Index came in at 159.0, suggesting an additional 20.3% decline in the index to get it back to more normalized levels.

Schiff continues that no one is making a case that fundamentals have gained traction, and most point to government intervention as an artificial stop to the free fall. Programs like "the home buyer's tax credit, record low interest rates, government mortgage-assistance programs, and the increased presence of Fannie Mae, Freddie Mac and the Federal Housing Administration in the mortgage-buying business" have put the kibosh on falling prices for now.

But, contends Schiff, with "bloated inventories, 9.8% unemployment, a dysfunctional mortgage industry and shattered illusions of real-estate riches, does it makes sense that prices should simply fall back to the trend line?" He argues that they would overshoot to the downside.

So what's the outcome? A major market correction in the next year.
Schiff thinks not, rather that there may be potential for an additional 10% dip below the 100-year trendline in the next five years, espically is mortgage rates continue to more historical rates of 6%. He notes that that would put the index at 114.02, or about 28.3% below where were at now. Even a 5% dip would put the index at 120.36, about 24.3% below current levels.

Concluding, Schiff comments that, "In trying to maintain artificial prices, government policies are keeping new buyers from entering the market, exposing taxpayers to untold trillions in liabilities and delaying a real recovery. We should recognize this reality and not pin our hopes on a return to price normalcy that never was that normal to begin with."

Now if you don't like what Peter Schiff has to say, consider these other sources that seem to be prognosticating something similar:



Gary Shilling: House Prices Will Drop Another 20%

ROBERT SHILLER: If House Prices Keep Falling This Fast, The Economy Is Screwed


Impossible Foreclosure: Never Late on a Payment | The Big Picture

Roubini: 'Housing Prices Can Only Move Down'

News Headlines


US Foreclosures Jump in Third Quarter: Regulators


News Headlines

Doubling Up’ in Recession-Strained Quarters

http://www.nytimes.com/2010/12/29/us/29families.html?_r=1&hp
 

BigAl

Gone But Not Forgotten
SUPER Site Supporter
Well I hope not . Guess I was lucky to close the deal on my place in Calif last night . The paperwork gets dropped off today .

I have decided to carry the loan myself and pick up a little extra income .

This will take care of the little women for the rest of her life too . I purposely set it up on a 30 year loan . Lots of interest !!!:biggrin:
 

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
GOLD Site Supporter
And here we go AGAIN and we can blame government for all of this! Digging up a post from 2011. History repeats when bad policy repeats.

As reported by NY Post. Full Story at the link but this gives you a pretty good idea. Why are most of the mainstream sources not reporting this?


Home asking prices tumble at record pace as mortgage rates surge: data

Thomas Barrabi
Home sellers are slashing their asking prices at a record clip as surging mortgage rates drive a downturn in the US housing market, according to a recent report from real estate firm Redfin.
About 7.9% of home listings reported price drops during the four-week period ending Oct. 9, according to a rolling average compiled by Redfin. That figure marked a record high and a significant uptick compared to the same period last year, when just 4% of listings reported price cuts.
Mortgage rates are approaching 7%.AP
“Prospective homebuyers and sellers barely had time to get used to 5.5% mortgage rates over the summer before they rose to nearly 7% this month,” said Redfin Deputy Chief Economist Taylor Marr.
“The second sharp rate increase this year, together with nerves about inflation and the direction of the economy, is dragging home-sale activity down further than it was over the summer and pushing homebuyer sentiment down near its all-time low,” Marr added.
Home price drops 7.9% of homes for sale reported a price drop over the last four weeks.Redfin
Buying activity in the once red-hot US housing market has considerably slowed as higher mortgage rates make it more difficult to afford homes. A 30-year fixed-rate mortgage averaged 6.92% last week – more than double the rate for the same week one year earlier, according to Freddie Mac.
Based on the current median home asking price and the 6.92% average long-term mortgage rate, buyers face a record-high monthly mortgage payment of $2,559, Redfin’s calculations showed.
Mortgage payments are 51% more expensive than they were at this time last year, . . .
 
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