June 3, 2012

If People Don’t Think Prices Are Going To Go Up

Readers suggested a topic on opportunity. “It was said during the bubble years that for those who were waited the bursting of the bubble would provide great investment opportunities, perhaps the greatest in our lifetimes. Is that still true? And if so, what sort of opportunities and where should we be looking? I ‘always’ believe that ‘everything you you actually need to survive; food, shelter, energy, will rise in price.’ Does this make me a cargo cultist?”

A reply, “No. It just makes you appear to be misrepresenting reality about housing. I too always believe that everything you need will rise in price. I don’t believe that being forced to select 2 out of 3 is sustainable when 1 out of 3 is cost prohibitive.”

One had this, “There has never been a better time to buy a house, at least according to a majority of your fellow Americans. Oops…my bad. I see the article I posted below is three years out of date!”

“April 16, 2009. Americans See Buyers’ Market in Housing. Seventy-one percent think now is a good time to buy a house.”

Another said, “I bought three houses in 2009 and they have proven to be excellent investments. The cash flow is growing, vacancy is very low, and 4% of the loan balance is paid down.”

And another, “In my area we are still priced above 2003 levels, I use the 2001 to 2003 prices as a rough baseline for ‘normal’ or ’semi-affordable,’ so my answer would be no…there are no opportunities of a lifetime. In the last 3 years anything priced at 2001 levels or below were crap and needed many thousands of dollars worth of work. My target is a quality house for $90 to $110/sf, maybe I find one, maybe I don’t…life goes on.”

From Marketplace. “Kai Ryssdal: With the American housing market going the way it has the past couple of years, we’ll take our good news where it comes. Earlier this week, the S&P/Case-Shiller Home Price Index reported a slight — very slight — gain in home prices. A scant tenth of 1 percent. Not great. But you know how we are, right? The facts say one thing, we think another. The editor in chief at Gallup, Frank Newport, is here every week to give us an Attitude Check, what Americans really think about the news of the week, which today flies in the face of those facts I mentioned.”

“Ryssdal: Just because there’s been some buzz this week with the Case-Shiller and all the rest of it that somehow we have approached a housing bottom. Do people believe more broadly that housing is at least not going down any farther? Do you know that?”

“Newport: We have, right now, seven out of 10 Americans who say it’s a good time to buy a house, so that’s a good sign as well in terms of these perceptions, which of course are very important because you have to perceive the reality for the reality to become real.”

“Ryssdal: Whoa. That’s very zen, man.”

“Newport: Very zen-esque, but it’s the key principle of social psychology, regardless of what Case Shiller tells us and all that. If people don’t think prices are going to go up, they’re not going to go buy houses.”

“Ryssdal: What about, Frank, this whole issue of people owing more on this homes than they’re worth, whether they’re underwater or not? Is it still a sizable chunk of the American housing market?”

“Newport: Well it’s pretty negative. In the good ole days, in 2006, 92 percent of Americans who owned a home said ‘it worth more than I paid for it.’ Now it’s 53 who say it’s worth more, but 43 percent say it’s worth less. A lot of those are underwater, we make a presumption. And a lot of those, by the way, are younger homeowners based on our data.”




Bits Bucket for June 3, 2012

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