Comments on: Real Estate: What does the future hold? http://funny-about-money.com/2009/10/15/real-estate-what-does-the-future-hold/ Simple Living = Frugality = Peace of Mind: Personal Finance and Stress Control Sat, 11 Feb 2012 14:47:18 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: funny http://funny-about-money.com/2009/10/15/real-estate-what-does-the-future-hold/comment-page-1/#comment-19359 funny Wed, 04 Nov 2009 04:10:35 +0000 http://funny-about-money.com/?p=9436#comment-19359 @ Hope to Prosper (& Erica): it's very probable that low wages--or no wages--will keep property values from rising for some time. However, it must be remembered that in Arizona, a right-to-work state, wages have always been below par, yet prices blew way up out of proportion to the locals' earning power. This happened partly because in-migrant Californians, who were accustomed to inflated real estate prices, were willing to pay far more than the market value of properties here, apparently unaware or not minding that they were being ripped off. And, as elsewhere, it also happened because banks were writing loans that they knew very well borrowers couldn't afford. Even at the height of the bubble, a very few real estate agents kept repeating the old mantra: <em>It's not what you can qualify for, it's what you know you can actually pay</em>. But most people had too much stardust in their eyes to read that particular message on the wall. Despite the generally low wages, there's a surprising amount of money here. Large swaths of the Phoenix metropolitan area are very upscale and very expensive, well beyond the reach of what remains of the middle class. The result is that by and large we don't have a lot of truly middle-class housing. What you see is either upscale or downscale -- often in enclaves set side-by-side -- with very little that's in-between. Frankly, I wonder if wages will make much difference. Most people mid-level white-collar workers and people in the trades can't afford nice housing in good school districts, no matter what. And the people who are wealthy enough to afford better housing likely will stay that way. Them's that got, gets. IMHO, prices may stay static for several years; a 3% increase that keeps up with inflation is not a real rise in value. But I doubt if they'll drop much further. @ Hope to Prosper (& Erica): it’s very probable that low wages–or no wages–will keep property values from rising for some time. However, it must be remembered that in Arizona, a right-to-work state, wages have always been below par, yet prices blew way up out of proportion to the locals’ earning power. This happened partly because in-migrant Californians, who were accustomed to inflated real estate prices, were willing to pay far more than the market value of properties here, apparently unaware or not minding that they were being ripped off. And, as elsewhere, it also happened because banks were writing loans that they knew very well borrowers couldn’t afford. Even at the height of the bubble, a very few real estate agents kept repeating the old mantra: It’s not what you can qualify for, it’s what you know you can actually pay. But most people had too much stardust in their eyes to read that particular message on the wall.

Despite the generally low wages, there’s a surprising amount of money here. Large swaths of the Phoenix metropolitan area are very upscale and very expensive, well beyond the reach of what remains of the middle class. The result is that by and large we don’t have a lot of truly middle-class housing. What you see is either upscale or downscale — often in enclaves set side-by-side — with very little that’s in-between. Frankly, I wonder if wages will make much difference. Most people mid-level white-collar workers and people in the trades can’t afford nice housing in good school districts, no matter what. And the people who are wealthy enough to afford better housing likely will stay that way. Them’s that got, gets.

IMHO, prices may stay static for several years; a 3% increase that keeps up with inflation is not a real rise in value. But I doubt if they’ll drop much further.

]]> By: Hope to Prosper http://funny-about-money.com/2009/10/15/real-estate-what-does-the-future-hold/comment-page-1/#comment-19357 Hope to Prosper Wed, 04 Nov 2009 02:34:50 +0000 http://funny-about-money.com/?p=9436#comment-19357 I enjoyed reading your post and I offer no criticism. But, I do agree with Erica that real estate values are tied to wages. That's why they ratchet up and then crash every decade. But, they are never going to go way up and stay there as long as wages aren't keeping pace. Otherwise, the houses become unaffordable to most buyers. I live in a very desirable part of So. Cal. and you can't find a decent house for less than a half mil. But, my kids probably won't be able to afford a house in San Clemente. In fact, if I hadn't bought my house in '96, during the last crash, I could barely afford it myself. I suspect houses are going to come down even further before this is all over. I enjoyed reading your post and I offer no criticism.

But, I do agree with Erica that real estate values are tied to wages. That’s why they ratchet up and then crash every decade. But, they are never going to go way up and stay there as long as wages aren’t keeping pace. Otherwise, the houses become unaffordable to most buyers.

I live in a very desirable part of So. Cal. and you can’t find a decent house for less than a half mil. But, my kids probably won’t be able to afford a house in San Clemente. In fact, if I hadn’t bought my house in ’96, during the last crash, I could barely afford it myself. I suspect houses are going to come down even further before this is all over.

]]> By: funny http://funny-about-money.com/2009/10/15/real-estate-what-does-the-future-hold/comment-page-1/#comment-19285 funny Mon, 02 Nov 2009 23:37:11 +0000 http://funny-about-money.com/?p=9436#comment-19285 @ Erica: What you say may be so. On the other hand, it might be good to check out <a href="http://funny-about-money.com/2009/11/02/wow-real-estate-update/" rel="nofollow">this development</a> before violating every rule Dale Carnegie ever wrote about how to win friends and influence people. It's possible to <a href="http://www.dalecarnegie.com/search_courses/sem_desc.jsp?cCode=HTWF" rel="nofollow">take a course in that subject</a>, BTW, if your mother failed to teach you basic good manners. @ Erica: What you say may be so. On the other hand, it might be good to check out this development before violating every rule Dale Carnegie ever wrote about how to win friends and influence people. It’s possible to take a course in that subject, BTW, if your mother failed to teach you basic good manners.

]]> By: Erica Douglass http://funny-about-money.com/2009/10/15/real-estate-what-does-the-future-hold/comment-page-1/#comment-19270 Erica Douglass Mon, 02 Nov 2009 20:16:44 +0000 http://funny-about-money.com/?p=9436#comment-19270 This whole analysis is completely absurd. It fails to take into account wages and inflation. Houses can't rise faster than wages, because at some point no one can afford houses. Wage inflation over the past 10 years has been basically 0. It's likely that housing prices will continue to fall until they are back in line with wages and rents. We're in deflation right now, between 3-6% per year, so until that stops, it is unlikely that housing prices will rise at all. This analysis cannot be taken seriously unless that is all factored in. When you factor it in, you may find that housing prices may not rise much (if at all) for the next 5, 8, or possibly 10 years, and even then, won't outpace inflation. -Erica This whole analysis is completely absurd. It fails to take into account wages and inflation.

Houses can’t rise faster than wages, because at some point no one can afford houses. Wage inflation over the past 10 years has been basically 0. It’s likely that housing prices will continue to fall until they are back in line with wages and rents.

We’re in deflation right now, between 3-6% per year, so until that stops, it is unlikely that housing prices will rise at all.

This analysis cannot be taken seriously unless that is all factored in. When you factor it in, you may find that housing prices may not rise much (if at all) for the next 5, 8, or possibly 10 years, and even then, won’t outpace inflation.

-Erica

]]> By: funny http://funny-about-money.com/2009/10/15/real-estate-what-does-the-future-hold/comment-page-1/#comment-18350 funny Thu, 15 Oct 2009 18:00:09 +0000 http://funny-about-money.com/?p=9436#comment-18350 @ Julie-- Thanks! Consider it fixed! @ Julie– Thanks! Consider it fixed!

]]> By: julie hocking http://funny-about-money.com/2009/10/15/real-estate-what-does-the-future-hold/comment-page-1/#comment-18349 julie hocking Thu, 15 Oct 2009 17:41:08 +0000 http://funny-about-money.com/?p=9436#comment-18349 If you owe, say, $211,000 on a house for which you paid $235,000 and that’s now worth $160,00, what does that mean for you? Hi - I enjoy your blog greatly. You need another "0" in $160,000 Best regards, Julie If you owe, say, $211,000 on a house for which you paid $235,000 and that’s now worth $160,00, what does that mean for you?

Hi – I enjoy your blog greatly.

You need another “0″ in $160,000

Best regards,

Julie

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