Inquiring minds are seeing where the experts are realizing that housing hasn’t stablized. The LA Times, no less, has an article “July uptick in home prices won’t last…” where the vaunted Case-Shiller index once again shows a slight increase from June. Yet economists expect a looming glut of repossessed homes flooding the market to drag values down:
Economists said they expected weak growth in housing and a decline in home prices this year despite a report Tuesday indicating that home valuations crept up in July.
The Standard & Poor’s/Case-Shiller index of 20 metropolitan areas showed that prices of previously owned single-family homes rose 0.6% in July from June and 3.2% over July 2009.
The closely watched index encompasses data from May, June and July. Although sales plummeted in July they were bolstered by popular federal tax credits for buyers in May and June.
One economist says it bluntly:
Celia Chen, a housing economist for Moody’s Economy.com, said she expects prices to fall as more banks step up their repossession of homes through foreclosure and put those properties back on the market. Lenders have been seizing houses at a record clip this year, taking back 95,364 U.S. properties in August, according to Irvine-based RealtyTrac, the highest monthly total in the research firm’s records.
“Eventually those homes are going to end up as discounted for-sale homes and will pull down prices,” Chen said. “So we are in for weakness.”
Most people ‘in the know’ in California feel that the market is ready for a drop between 25-45 percent. It is the opinion of this blog that housing prices will collapse and, in fact, lose around 45%. This is based partly on a time tested system that the price of a home is found simply enough by multiplying the monthly rent it would fetch on the open market by 100 on the low end and 125 on the high end. Therefore, a home that would rent for $2000 per month should sell for approximately $200,000-250,000. Older 50’s to 60’s “box” SFR’s in Huntington Beach typically rent for $2000 per month. But they sell for around $450,000. That simply is just not going to continue. The money isn’t available any longer.
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