When Will Real Estate Values Begin to Appreciate Again?

Aubrey, thank you for taking the time to write on an interesting topic that many want answers to yet only time will tell. You bring an interesting opinion to the table when you say Americans need to reinvest back in to America relating it back to the 1930’s and 40’s. However, those newlyweds back then, that so called made the “American dream” was able to make the investment into their home because banks were able to back them up, given their financial situation. Today and at our current time, lenders are becoming more conscious of people and will not give those loans such as a mortgage for a house unless they have a decent job with a well paying income and good credit score. Young people today who become married and want to save enough money for to put a down payment on a home might not have the credit score a lender wants to see. You are right on the other hand; people today have become obsessed with credit and making their money liquid.

What I am trying to get at is yes Americans need to start reinvesting into real estate but many do not have the criteria lenders are looking for and therefore we are asking the ones who are financial sound to help bring back up our economy. On another note you say it will not take Wall Street in doing so to help the housing market out. I disagree, if Wall Street is up people will earn their money lost and will be able to invest in real estate and therefore bring back the old America you talked about. Until then you are correct no one can predict the end to this slump only time can.

Easy answer: it depends on the area. Some neighborhoods here in Washington, DC, are still doing ok.

You bring some very interesting ideas to the table. However, instead of dissecting the root of the problem. Do we have any suggestions for possible solutions?

This continuious banter about the “Wall Street Main Street” lingo is not addressing the fundamental issue at hand. I offered some ideas on stabilizing real estate values in my most recent article.

http://rocrealproperty.blogspot.com/

Please offer your comments and ideas would be very much appreciated!

We found that the properties with the best locations (ie ski-in/ski-out…your equivalent to beach-front properties) held their values much better than lesser locations…

Park City Real Estate Guide

You are right. It is unfortunate how real estate is now a disposable commodity now rather than a valuable investment to be protected at all costs. I think in the future increasingly stringent lending standards will weed out those that would walk away from a home.

The $64,000 question. When will home prices recover?
Great Question and as several have commented that its not a simple question. It depends on location, kind of property, national economic conditions, credit availability and regional economic conditions.

In Pensacola, FL active listing are declining and will be back to normal levels in about a years if the trend continues. I see this as a primary factor for price stability.

Now the national economy, the recession, will largely dictate how people spend or more likely, not spend money.

We have seen what amounts too the 2nd “Great Depression” in the last 100 years. Look back to the 30’s for some lessons that will unfortunately apply today, mainly this: Market values will likely fall quite a bit in the markets that were the most overheated.

Not in a straight line down, more like whipping a hose laying on a downhill slope, we’ll see some humps (upward moves)move along the hose, but it’s still going down hill.

It will no dought takes a number of years for this to work itself out, maybe 15 or so like Japan suffered from 1991-2005.

Depending on your area, I think, right now, housing prices are too high in general. I remember when home prices were about twice the average household’s yearly income. So, if in the 80s they were making 30k, a decent house was about 60k (in New York). Now, if the average person is making 80k, the average home would cost (at the top of the bubble) around 400k. That’s 5x their income.

Now, I know that many people have gotten used to two family incomes and I know people want a lot more house than they used to, but I think home prices will have to come down to at least 3x the national average income before we can consider it totally finished.

This is on average, so I know it won’t hold totally true across the United States. Some areas will be 4x income and some will be 2x income.

So in my example, if you use a family income of 80k, then that 400k house will have to be 240k in an average area.

I don’t normally do market commentary, but if you want, check out my Real Estate Investing Guide

I referred few investment and realty blogs and can say that it will take end of 2009 to appreciate values again.

I know a couple friends who’ve taken a Creative Investing and Wholesaling seminar program and they referred me to it, I’m going to the next one and I can’t wait, the website for the information is http://www.elitementoring.com

Great question, there are many factors that will dictate when this market will turn. First of all real estate is local in nature. The Fed has been pumping money and reducing Fed Funds (down to 0 today). Mprtgage rates are approaching the 4’s. Inventory levels in many areas are dropping and new contruction is at historic lows. When will it turn, I don’t know but I know for sure it will and hopefully sooner than later.

Its not the crash of realestate market but actually It is because of Current Economic Crises. Latest real estate news are on aim168realestate.

[...] will read something like this: I found this great post over in The Real Estate Blog called “When Will Real Estate Values Begin to Appreciate Again?” by Aubrey Clark. Aubrey claims that the current slump is forcing us to return to values held [...]

[...] will read something like this: I found this great post over in The Real Estate Blog called “When Will Real Estate Values Begin to Appreciate Again?” by Aubrey Clark. Aubrey claims that the current slump is forcing us to return to values held [...]

I appreciate this post. Not often do we have clear talk about what the market will do in the future; but can any of us really predict it with any confidence?

My bet is 2009 will be another flat year. While it will be flat, I doubt will we will see the extreme turmoil in the stock market, food, gas, and other major economic issues.

The 2009 real estate market will be slow again forcing property values to again go down. It will be a much slow depreciation the 2008 but home prices are still overinflated.

I am hoping for a flat year in 2009; and the data shows that we have too much inventory… it will take 18 months to bring in line with population growth…

Real Estate Professionals will benefit greatly by building their business in 2009…

Key Yessaad – Real Estate Internet Strategist

[...] will read something like this: I found this great post over in The Real Estate Blog called “When Will Real Estate Values Begin to Appreciate Again?” by Aubrey Clark. Aubrey claims that the current slump is forcing us to return to values held [...]

I agree with a previous poster that it largely depends on the areas. Places like Florida and California that had large appreciations will take longer to rebound than my local market of Rochester, NY. I believe we actually had one of the highest appreciation rates last year, which was slightly over flat, just because we had not seen the huge (false) appreciation of some other areas.

Freedom First Real Estate Investors Association

Home buyers are waiting until the market hits a “bottom”. The problem I see with that is due to lag time in statistical reports we won’t know we hit bottom for a minimum of 6 months after. There is no doubt that it is a great time to buy and there are great deals to be had. Mortgages are hard to come by but they are out there and if you can buy, you should.

http://www.REALTYoogle.com

Outstanding article. You might be interested in

While we can not pinpoint a recovery date as a whole, we can site many pieces of evidence to the future potential of growth in our local markets. Buyers should not ask when but where will the market recover and why. Company relocation, infrastructure plans, new business openings etc. Here in San Antonio TX we have multiple projects underway, from river expansion, special needs parks, green transportation and green renovation of factories into condos.

Prices are set by basic supply and demand, with some regard to location and savvy marketing. But in this depressed market, because of public opinion, it may take a more “macro” change before the change trickles down to the particular area.

My friend, a realtor, once said to me, “The true values of properties are determined when people start moving.” This means that what people are willing to pay sets the overall prices for an area. This sets “comps” in the area. If people keep putting off purchasing due to either bad news being reported or the tendancy to wait for prices to fall some more, it will take THAT MUCH LONGER before prices begin to rise again.

Just my two cents. Awesome discussion!

-Richard
The Flip Board

As soon as all of these foreclosures and short sales are off the market. Then we will know we have bottomed out.

When will the prices stop their downward slide? I think it will be in 2010, I agree that it depends on the area you are in. In some areas waiting until the market hits a bottom can stil be even longer. I am waiting to purchase a home in No.Virginia and the prices were inflated so much that even though I keep hearing that prices are getting better- I don’t see it.

I hope by this year end, everything will come to normal.

Todd Covington: what do you think now? A flat 2009? Not likely, we are not at the bottom yet ladies and gents. What is next, inflation. With unemployment at the worse numbers and those that are employed taking salary cuts = no spending for a long time = no companies making money = more of the same .. what a vicious circle we are in. Jobs = money = spending = supporting capital markets = more jobs - thats where we need to get back to, hmm but how?

PS, not to mention mortgage crash round 2 coming: all of those hybrid ARMS resetting in late 2009.

Hope things get better

I am a RE Broker in southern AZ and I have already seen things get a little better. As prices continue to fall the number of home sales are beginning to increase. 1st time home buyers that have good credit and a stable income are taking advantage of some great deals. They are able to buy homes that they could not afford during the boom. Another great strategy right now, is to rent the house you currently own and buy another one to live in. This does require good credit and a nice income, but if you can buy something now, you should. It also allows you to use loan programs that are based on owner occupancy and therefore much easier to qualify for.

http://www.REALTYoogle.com

I feel that the market will level in 2010 and we may see small single digit growth in 2011.

I think another 10% decline is on the cards this year, unfortunately.

I think a large part of the market stabilizing is affordability. In our area (Seattle) a starter home was starting to become out of reach for the average homeowner. In 2005 you needed to be in the upper 400’s to get something reasonable. Today, you can find that house in the 300’s. I am seeing alot of first time homebuyers entering our market now that they can finally afford to. That will be the start of a recovery. The rest will come as the economy stabilizes. Unfortunately, my crystal ball is murky. However, I do think we are bouncing around near the bottom and would expect this year to be another down year with 2010 showing signs of stabilization.

That is a good question.

All of this really depends on where you are. In Dallas, the values really never went down all that much. Since the economy is in better shape in Dallas and Texas as a whole, the appreciate will most likely begin here and then fan out as the economy improves.

I think now is the time to buy, the upturn is just around the corner. There are beautiful, affordable parcels of Idaho Land. Don’t wait, get while the gettin’s good.

It really depends on where you live. Some areas of the country area still thriving right now. They are considered emerging markets. I think in a few years most of the country should start seeing a turn around. House prices needed to readjust and stabilize.

http://reitvshow.com

The root of the problem is the private banking system. Your right, back in the day people didn’t rely on credit as much so the private bankers (the FED) starting flipping our economy upside down in debt in order to line their pockets, not ours. Our forefathers even warned us of this type of central banking scheme. I can’t remember if it was Franklin or Adams who said, “there are two ways to conquer a nation, one is by the sword, the other is by debt”.

When we flip over the tables of the money changers, that’s when this country will get back on track and homes will once again be assets to the people who own them and not assets to the bank.

Whoa, that was really entertaining. I would concur with you that Americans need to come back into reality of their spending. I would agree with Dave Wagner, our economy is built on over excess. No other country has an economy like ours…debt, debt, debt.

I am grateful that I have had some success in the real estate business. I hope the same for everyone else.

I agree. It just depends on location. I think we are at the bottom of the residential market nationwide and the beginning of the commercial decline…which will be shorter and less deep.
You can check out more of my comments about this at:

properties having better locations & amenities have respect value in every era. thanks for nice post.

I have been speaking to a lot of investors lately who are considering buying some of the large notes and assets hitting the market in Phoenix, Tempe and Scottsdale (e.g. Century Plaza, Safari Drive, Portland Place and many more). At first blush it can be a bit depressing witnessing all the carnage of unfinished and/or unsold high rise and loft condominiums. But here are some good points:

The fact that sophisticated and experienced investors are finally seeing the “value” in the distressed assets and notes means that we actually might be near “the bottom.” Of course the reason the prices are making sense to the investors is becuase the holders of the notes (i.e. the construction lenders) are finally getting real and slashing the “market value” of their assets so they can get them off their books and move on. Regardless of how we get there, when prices make sense to the “pros” then maybe we are truly nearing a bottom.

New investors know to address what has been a major concern for potential buyers in the failing high rise buildings; that being the financial instability of the Home Owner Associations of those buildings. You see, even with low prices, buyers have been hesitant to be one of the first people to buy in a building that might be failing. After all, if you are one of only fifteen owners in a building and the developer goes bankrupt, who pays the electric bill, the water bill, maintains the elevators, etc? The answer is most likely the lender will pay the bills. But what if the lender goes under. Then I guess the answer is that whoever takes over the asset will pay the bills. But do you really want to have to worry about all that? I know I don’t. So, again, the good news is that the investors who will by up these assets will come in with enough capital to bring the HOA’s into the black.

Some of the investors will rent the condos out while others will seek to slash prices and sell out quickly. In either case it will mean lower prices for consumers. Lower prices will result in purchases.

Over the last several months we at WeKnowUrban have seen a major uptick in buyer inquiries. This, plus the coming lower prices and assurance of solvent HOA, leads us to think that we’re are about to see improving sales numbers in the high rise and loft condo market. So, hang tight as you read “doom and gloom” stories about entire high rise buildings going under. Because now you know the good that will rise from these events.

Here in the suburbs of DFW we are on a very slow and steady increase. I would have loved to be on the up tick but am glad we did not have such huge swings.

In the past couple of months the real estate market in Nashville has been consistantly strong in home sales under the $300,000 list price. Up to around the $1.5M mark the home sales have been seen to be a lot softer and the number of builders that have succumbed to rapid economic downturn and the buyers reassessment of the need for a home with an extra 2000 sq ft, compared to their current home, has meant that the downward pressure in this price range has been much stronger.

In the end, buyers are realising that the hit they take on a sale is proportionately made up for in the purchase of thier next home, assuming they are buying within the same market and really any losses are being felt by home owners that bought at the height of the market and are now selling due to the usual reasons for moving…marriage, death, babies, job losses and relocation etc.

when the right time comes, the value of real estate will appreciate again.. we are now experiencing global crisis, that’s why i guess its not the right time…

-david

Lets hope that recent legislation will help turn the market around.

-aspire
http://www.realestateadvantage.net

Great post and comments. I really think each market is local, and the time to recover will vary.

As soon as the market stabilizes. We also have to get all the short sales and foreclosures off the market due to downward pricing pressure.

Jeffrey Owen
IonHomeInspecion.com
Katy, Houston, Sugar Land TX

It depends on the market situation.

The thinking needs to be adjusted if you are looking at real estate as an investment and not just a home.

With real estate, you make money when you buy. Banking on appreciation is gambling and so many people have gone bust because that was what they were doing.

If you are living in the house, it still has value to you, so why would the equity really matter?

If you are looking for investor funds to be able to snatch up hugely discounted properties, use
LocalHardMoney.com to get your deals done.

It is going to take patience to wait this thing out. We also as a country need to trust in our government even thou we are in this because of them. It is going to balance off, i just hope its sooner then later.

It will be nice when things take a turn for the better. Once things level off real estate will be a winner again. For more information about real estate visit here

Just like everyone else I’m not sure but I do know that without all the media hype we have a better and quicker chance of recovering sooner. The longer the government interfers the slower it will return. The real estate market will stabalize itself as it has always done over the years. Government intervention to get votes and poll points will not help and thus far they haven’t done anything to help except spend trillions more in a shorter period of time.

I’ve been reading and hearing a lot of positive reports lately. Hopefully we will start seeing attitudes and confidence changing soon.

The increased traffic has continually risen over the past 4 months as well as prices are holding somewhat steady here in Myrtle Beach in the residential market. The condo market is another story, with the inventory on hand it may take some time to re-coup. Still, a wonderful time to invest in real estate. The old story “Location, Location, Location” has somewhat changed now to “Timing, Timing, Timing.”

Second quarter of 2010 in the US. CANADA and CHINA probably by the end of 2009.

Thats a good interesting analysis. The parallel analysis of the 40’s with the present day secnerio give a great insight in the way we buy our dream house. Your article is really worth reading.

Homeowners: First, as homeowners - an ENTIRE generation (or two) has been “sold” a bunch of BS. One, that your home is an investment. Two, that home ownership is an American “right”. Your primary home is shelter, not an investment. It keeps you warm and dry when its cold and wet outside… You really have control over only two factors: how much you paid for it and the rate in which you amortize (pay down) that debt. Everything else is speculative. Speculation in and of itself is not bad, yet when applied to an illiquid product such as real estate, you either “win big” or lose big”. As for the ‘right’ to homeownership, I feel homeownership is a privilege. Not everyone is cut out to be a homeowner. We all know someone who bought a home in this past era of easy credit and lax underwriting who we know deep down inside (but would never speak it to them directly) - that they were not cut out to be a homeowner, yet there they were drinking the real estate Kool-aid and boasting of how easy it was. Now unfortunately to the pain of us all, that privilege which should not have been extended to so many is being taken away via foreclosure (that’s a different topic).

Investors: “Buy, fix, and flip” was supercharged by the access to easy credit, fueled by lending institutions, wall street institutions, and others wanting their slice of the real estate boom. There are many, many ways to invest in real estate profitably, most of which work wonderfully when used during the correct market/business cycle. I myself am primarily a “buy and hold” investor. I could care less if any home I buy appreciates in value. Appreciation is nice, don’t get me wrong, but it is not in the top 5 criteria I look to in buying property. How much I pay for a property and how quickly I (or more aptly, my tenants) pay down that debt are the most direct influences on my bottom line.
As for the current market condition - this is likely the best time to buy real estate that I or my children will see in our lifetimes. The problem currently lies in the credit market’s inability or unwillingness to fund investment purchases. Of course, if you have 30% down payment, stellar credit, 6 month’s reserves for each property owned, own less that the FHA cut-off number of financed properties, you may convince an institutional lender to CONSIDER financing your transaction. For my transactions, I don’t rely on institutional lenders or the credit markets to supply the capital needed (I also very rarely use hard money lenders).
Bottom line, as an investor if you are calculating on appreciation to make up for mistakes made elsewhere in the buying process, you have better odds in Las Vegas.

Best Regards,

Sylvester The Investor

That is the most important question of these days.I wish to know the answer before all the people.

Thanks for that bringing up that news, I guess in general that’s the scenario, however there are places in America that real estate is still doing good.

I think 2010 it will start slowly to be ok

I think that this real estate market will take some time before we see home prices go up. Yes many of the REO’s have been purchased and are off the market (this helps as there is less homes being sold at a lower value, in turn homes values will stop going down) But what about all these short sales that are on the market! If they do not sell then they will become REO’s and we will have the same effect! Unitil we have more regular sales that REO/ShortSales on the market we will stay the same. The good thing is that there are people buying who can see that now is the time to buy!

A fabulous and accurate overview which optimisms the current situation Aubrey!

I believe that we will see some green shoots in October/November albeit I believe that the recovery will be slow but encouraging from this moment on. Its certainly a good time to buy between now and then.

Although it may be quite a while before property prices start to appreciate again it is not all doom and gloom.

In fact it is far from it. If you are fortunate enough to invest in property now and place some tenants in this property, in perhaps a couple of years time this property will be worth a small fortune, I am sure of that.

Perhaps while we are waiting for the increase in property prices we could all invest in virtual real estate. Try it for free simrealestategame.com

If I only knew–

However if you look at a number of real estate charts & graphs, you’ll see that the downward slope is starting to slow down significantly, especially in those markets that were the worst hit (Miami, San Diego, Vegas, etc.). My only concern is that unemployment will take its toll next on the market. If you want to see what I’m talking about, there are a few sites that display state level, county level and even ZIP code level trends on real estate–http://www.the-marketpulse.com is one of them.

The market will get better and when it does, we need to make some laws to prevent lenders refinancing homes for no good reason. They do it in an rising market and low and behold, when prices fall along with the entire economy, millions of home owners get into deep financial trouble.

The market will get better when people start having more open houses.

ya i really fabulous…
Boise real estate

We’re looking for the real beginnings of recovery around mid-2010 but there are so many factors that can delay that time frame. For example, the cost of gasoline going up by 17% in the last month just puts more pressure on consumers and businesses and if that trend continues to $4.00/gal gas again, who knows when we could see some relief.

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My name is Mike. I have seen this issue before. you ahve to read about it
here, this will tell you want to do. Go to http://www.craigproctor.com for mroe about it. CRAZY~