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Post by jeffolie on Aug 27, 2007 11:22:35 GMT -6
Two Irresistible Reasons Housing Will Retrace to 1997 Prices (August 23, 2007) Two historically irresistible patterns suggest speculative-bubble housing values will eventually retrace back to their 1995-1997 levels: -the symmetry of speculative rises and retraces -the unbreakable links between income and housing values. Just as stocks break free of fundamental metrics of value in speculative manias, so too do houses. But just as stocks retrace to historical levels of price-earnings ratios, so too will housing retrace to historical levels of income-to-value ratios. Historically, this is about 3-to-1: long-term, houses cost about 3 times household income. Since the median household income in the U.S. is abour $46,000, U.S. incomes would support house values of abour $125,000 - $140,000. www.oftwominds.com/blogaug07/RE-retrace.html?ref=patrick.net
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Post by unlawflcombatnt on Aug 27, 2007 14:12:52 GMT -6
Housing Will Retrace to 1997 Prices.... This exactly what I think will happen as well. Until recently, so-called "experts" were talking about small, single-digit declines in home prices. Even the most pessimistic were talking about no more than a 10% decline. Slowly but surely, previous conservative estimates are being replaced with larger estimated price declines. Peter Schiff states prices will decline over 50%. I think he's right. Common sense dictates that prices will drop much farther than previous single-digit estimates. This is especially likely with record inventories of unsold homes, and huge numbers of homes bought for "investment" purposes only, from buyers whose only reason for to purchase a home was to re-sell it. Increases in individual ownership rates were relatively small, compared to the increase in individuals owning multiple homes. Estimates for speculative/non-residential home purchases go as high as 40%. I suspect it's even higher, especially buyers who bought a home instead of renting, but mainly because it was a "good investment", not because they wanted a place to live. Even many single home owners had re-sale in mind, not long-term residence and ownership. Below is a graph from the above reference, mapping out a path for home price declines that are the equivalent of the increases that started in 1997. I'd be surprised if the decline wasn't even more rapid than the graph suggests.
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Post by beachbumbob on Aug 28, 2007 11:38:23 GMT -6
what goes up..comes down.
rule of thumb?? 120 times monthly rent = value of house
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