Just How Far Down Can Home Prices Fall?
From CNN Money:
Home prices get even more overvalued
Overall, 37 markets were found to be severely overpriced, which meant that they were at least 15 percent more expensive than they should be, and only 6 were underpriced by 15 percent or more. Fifty-seven were deemd to be farily priced.
...
The level of over-valuation matters in three ways, according to Ingo Wenzer, president of Local Market Monitor. The higher it is, the greater the risk of it correcting; the greater the correction can be; and the longer it will take to return to present-day prices after they fall.
"Once markets are overpriced by 40 percent or so, the risk is pretty high and the adjustment can take five to 10 years," said Winzer.
Local Notables:
Atlantic City, NJ 41% Overvalued
New York, Northern NJ 43% Overvalued
(remember these are statistical areas, not actual towns)
Caveat Emptor!
Grim
Thanks to Judy for sending this link in.
Home prices get even more overvalued
Overall, 37 markets were found to be severely overpriced, which meant that they were at least 15 percent more expensive than they should be, and only 6 were underpriced by 15 percent or more. Fifty-seven were deemd to be farily priced.
...
The level of over-valuation matters in three ways, according to Ingo Wenzer, president of Local Market Monitor. The higher it is, the greater the risk of it correcting; the greater the correction can be; and the longer it will take to return to present-day prices after they fall.
"Once markets are overpriced by 40 percent or so, the risk is pretty high and the adjustment can take five to 10 years," said Winzer.
Local Notables:
Atlantic City, NJ 41% Overvalued
New York, Northern NJ 43% Overvalued
(remember these are statistical areas, not actual towns)
Caveat Emptor!
Grim
Thanks to Judy for sending this link in.
7 Comments:
A long way down to "Normal" prices, but the RE clan will make you believe that things are normalizing now.
Hahaha. Okay with their money!
Now now.. No reason for the name calling. We don't know the reasons that surround his decision.
grim
I went to an open house in Glen Rock Sunday for a house listed at $500k. Small expanded ranch. Other than expansion which didn't add much to the house, nothing seems to have changed from 1950...
Anyways... as I left, I told my wife that these guys were on drugs, maybe $350 but not $500. So here I read this article divided 500 by 1.43 and lo and behold $350.
I think I've got a handle on this overpriced market. Funny thing, the broker didn't even try to sell us on the house.
Many readers here know that I've said Northern NJ requires a 30% reduction is prices to bring prices back in line with fundamentals.
This recent study finds this area approximately 40-43% overvalued. Which matches up exactly with my forecast of 30% declines. It only takes 30% down to negate 43% up.
~350 * 1.43 = ~500
~500 * .70 = ~350
Further validation of the 30% prediction..
Caveat Emptor!
Grim
I would think 40-50% downside in house prices.
People I know complain about several things: Little to no raises, property taxes soaring and utility bills. Thes are from people that have owned a house for 10 years or so and have benefitted greatly from real estate appreciation, but you wouldn't know it by hearing them complain.
"Being called an idiot for buying is just as insulting as being called an idiot for renting."
This is not a bright statement on your part. You know based on your moniker including "bubble" that rents to home prices are going in opposite directions last 5 years.
a $750,000 4 bedroom house that some greedy seller wants $750,000 cuz the neighbor got it from some risk taker using an ARM loan would rent out for about $2500-2600.lets be generous a give'em $2600 a month. Well at $2600 a month it would be 24 times annual rental. Normally should be 15 times. About 37.5% overpriced. This house should be valued for about $465k.
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