Quote:
Originally Posted by 1stLand
A 20% drop in prices is not out of the question, but something drastic would have to occur, like another economic meltdown, job losses, and a significant jump in interest rates.
I have seen plenty of listings out there that have dropped in price over 20%.
Does this mean the market has come down more than 20%? More often than not it meant their initial list price was way out of whack.
I just purchased a Condo (Foreclosure) and negotiated $16,000 off the price. Between what I bought it for and what it was initially listed at this past March, there is a $40,000 spread.
If you go back further and see what it was listed at in 2007, there is almost a $100,000 spread.
Could the value of that condo go down further? Ofcourse.
As long as I can rent it when I decide not to live there anymore and have mortgage and expenses paid for with a little cash left over I am happy.
That is the philosophy many of people are adopting out there.
Many times I have left listing appointments empty handed because the value of their home is far less than their mortgage. 4 or 5 of these houses I visited have turned into Rentals, because the owners had to relocate and refused to take a $30,000 to $50,000 loss.
So for the people out there waiting for the other shoe to drop and prices to come crumbling down in excess of 20% because current home prices are 'overvalued', I advise you that people are very resistent to lose money on their homes.
Significant Job losses in the economy or drastic rise in carrying costs (interest rates) are about the only likely catalysts out there that will bring about a wholesale drop in Prices to the extent it could be referred to as "A Bubble Popping"
|
I guess the one problem I see with your opinion is that if you are going to turn your place into a rental and move somewhere else do you not need to have 20% down for your next place? 20% down is not common these days especially when the average house price is $400,000.
I agree with you that people are very resistant to lose money on their property, that's common sense. However, there are people out there who are retiring, have lost jobs, etc who purchased properties before the spike and can therefore lower their prices if they need to sell, and still make a killing on their home.
If sales are declining, and it is becoming more difficult to sell, some of these will lower their prices, and it will affect other sale prices.
Also I don't agree that something drastic such as increased unemployment levels are needed to cause housing prices to decrease. Houses are over valued, and people have spent more than ever before on their homes. I believe it was posted earlier in this thread.
Before 2000, house prices tended to hover with a narrow range of between three and four times provincial annual median income. Today, house prices are anywhere from 4.7 to 11.3 times the median income, says the report.
I guess I just can't ignore that stat.
I look at the new MLX listings everyday, several times a day. Prices are dropping out there. There was listing I just looked at, that is down over $60,000 from when it was purchased in 2007. The list price is down over 20% from what the property was purchased at. This is not a special case, the exact same unit in better shape just sold for significanly less than this unit. Meaning that this particular property could potentially sell for 25% less than it was purchased for in 2007.
Does this mean every property will decrease by this much? Absolutely not. But these situations are occurring right now. Decreased demand, increased supply, increasing interest rates (BOC at least
), all point in one direction. Add to the fact that housing prices have exceeded wage increases. It just seems to me that everything points towards a serious correction. Call it a bubble, or whatever you like.. As far as I'm concerned 15% is getting into serious correction territory..
These are the same things heard from the U.S. before their meltdown, can't happen here, it would take something drastic etc. Are prices guaranteed to decrease by a large amount, no of course not, but thats the way it looks.
Meh.. I'm getting tired of this debate at this point. Those associated with the real estate industry, and those who have recently purchased will never admit that housing prices could potentially decrease by a significant amount without an earth shattering catastrophic event causing such a decrease, I can certainly understand that position.
I dunno it's very late/early depending on who you are so this may be complete jibberish....