Given that most post-WWII American recessions have lasted about 18 months, is there hope that we have already hit bottom? I date the start of this recssion about mid-2007, so (hopefully) we should start to emerge by mid-summer. Would this be a good time to buy real estate? Or are the economists predisting a longer recesion? :mad:
Me thinks you don’t understand what the definition of a recession is if you date it to mid-2007. IF we are in a recession we have only just gotten there this month (or perhaps last month)…which means, if this one follows the usual pattern, that things won’t be getting back to normal until this time or later next year.
-XT
IIRC, the official definition of a recession is two quarters of consecutive economic retraction (negative growth). By that definition, Japan was able to have 1 quarter of anemic growth, 1 quarter of retraction, etc for years to avoid being in a “recession.” Officially, the US is not yet in a recession, much less 18 months into it. You need to look back at the circa 1990 housing market bust to draw some lessons.
This housing market has at least 2 more years before it hits bottom. You will have many more bad announcements at the investment banks about their sub-prime exposure. Witness Credit Suisse, who had a bunch of traders that deliberately mis-priced their sub prime exposure, got their 2007 bonus, and then were shit caned last week when caught. There’s a lot more of those out there, and each time it’s another *billion * dollars that gets written off. a billion here a billion there, pretty soon it’s real money.
If this is the low point of the recession, it’s unlike any we’ve had before. This is the beginning of the recession, and some would say it hasn’t even begun.
God I hope you’re wrong about that. We want to sell our house in 2 years and right now it’s worth $30,000 less than what we paid for it.
Heres Krugmans take. He thinks it is a very scary time. It could get a lot worse.
This graph depicts home prices since 1890. As you can see, the current boom is completely anomalous, and the projection is that homes will lose as much as 43% of their peak value by 2011, when they will return to a more sustainable valuation curve.
Check my zip 48127. Zoom in a little and see how many of my neighbors took advantage of the finance companies.
Check Key West. A wealthy community with high priced housing. It can be shocking.
I’d never taken ralph for an optimist before…
The low point? Nope. Hardly into it and it’s going to be a corker. Your new president, whoever it is ( cough Obama cough) is going to have more problems than pulling out of Iraq. I wonder how long into the new term it will be before the new president is blamed for it?
Pay down what you can on whatever debts you have, start cutting expenses, sell what you don’t need and can make a buck on, save every nickel you can get your hands on. Can it hurt?
I’ve been told that this advice is bad because, after all, consumer spending is the engine that drives the US economy. Well, yes. Which is the point.
If this were a “normal” recession, then yeah. Maybe 18 months. But it’s not “normal.” The mortgage mess is going to seriously string out its length and depth. Add to it that after the change in Administration we will begin to find out just how bad Bush and the necons damaged the economy, damaged the federal government and really made a mess of everything else. State and local governments are already beginning to reel in their budgets and it’s going to get worse there as well. We are also starting to see the Boomers begin to retire. That means their investment strategies should be changing as they move from income producer/creators to to limited spenders.
If the truckers follow through on their nation-wide strike planned for April1st, watch another level of panic begin.
If you’re rich enough to buy it without financing and wait several years for it to appreciate, this would be the best time ever to buy real estate.
Why .I doubt that it has bottomed out. Got a long way to go.
Depends on your local markets a bit too. I was out with my MIL last week looking at houses, and the realtor was saying that the local market was probably at or near its low point–it will still take a year or to before it starts growing again, but it’s not likely to go down much further.
Of course, it’s impossible to know for certain what will happen, and I’m certainly no economist. I’m not complaining though–we’ll be looking at houses ourselves before the market picks up again.
Look at China Guy’s answer re: the recession.
As to buy property, my non-expert opinion is if you can handle the payments and wait for the appreciation (as far as 2011 according to some quotes in this thread), then that’s your business and risk management.
I bought investment property because the asking price was lower than the market price, and I had a renter lined up right away. I also got a cheap mortgage, where the rent covers the mortgage payment. Even though I’ll probably be upside down due to the property tax increase and the fact that I’m not actually residing on the property, I feel comfortable with my financial situation to pay X thousands of dollars for X hundreds of thousands of dollars for real estate, particularly since the extra in taxes don’t add to the purchase price (I know, the exactly the right way to look at it) until 2013. I’d probably feel that way even if my purchase price was at market.
Ultimately, it boils down to how much risk you can appreciate and the location of the property as not all areas of the country are losing value.
Your broker said. Those are thee key words. He is a house salesman.
That’s the conventional thumbnail measure, but it’s worth noting that the National Bureau of Economic Research, the official arbiter of the U.S. economy’s status, uses a different definition contained in the first sentence of the second paragraph here.
That seems optimistic to me. Not the percentage, or the drop, but the timetable.
The last two booms shown on that graph took longer to bust from their peaks than they did to reach the peak in the first place. Eyeballing it, the periods are roughly proportional. The Japanese real estate mega-boom took decades to settle out. Housing prices are notoriously more sticky on the way down than on the way up. Yet, somehow, they’re predicting that this bust is going to take less time than boom that got us here? Add in almost-certain governmental meddling, and it wouldn’t surprise me if the real-estate low comes a decade after the peak, putting it somewhere in 2015 or 2016.
That appears to be what happened on the downside of the 80’s boom; it is noticeable steeper than the up side.