San Diego short sale

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Friday, December 5, 2008

Economists make predictions about home prices

REALTOR® Magazine-Daily News-Economists Ponder Future of Home Prices
Economists Ponder Future of Home Prices
When will home prices go back up again?

Economists surveyed by The Wall Street Journal say that home prices won’t hit bottom until the second half of 2009 at the earliest and some say the downward trend will continue until 2011 or 2012. After that they may rise again, but not nearly as fast as they have in the last decade. Instead they will rise just a little faster than inflation and stay in line with increases in household income.
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I was and Econ major -  I do loan workouts everyday  and I used to trade the bond market.  My take:

1. A former CNBC economist said the secret to being a good economist is to forecast early and forecast often

2. If anyone was anygood at making predictions they could make a fortune trading the bond market.... bill gross made a fortune trading and managing bonds - but he always seems to talk his book.  So basically there is no one who really knows whats going to happen more than a few months out. There is always some force that is unpredicted that shows up.  Who knew that china would keep buying bonds to keep our interest rates law and skew our real estate market into the largest asset bubble in history.

3.  If you study charts you will see bubble unwinds always seem to go back furhter than expected.  Remember Nasdaq 5000.

4.  In my opinion you have to figure out who will be qualifying for what loans and guessing if consequent "qualified demand" will balance supply.

5. In higher priced homes that could be a while.

6. In that category - I think appraisals will be very tough - the best houses, with the best views, on the best lots are likely to become much more valuable than the nearby competition.   In a rising market putting lipstick on a pig (upgrades, like granite and flooring could get inferior houses high prices)  it is no longer working. 

7.  Buyers are smart.  Some are paying good money for "location" the competition winners - and others are only buying at steep discounts. 

8.  I predict that will go on for years.