When do house prices bottom?

[venkman]

Faith and I are looking to buy some time soon as well. If my college finally offers me a full time position for the coming Fall (perhaps unlikely because of the economy, but possible, because I am part of a growing department), we plan to buy. I have been hearing something about some kind of new tax benefit/credit for home buyers. What do people know about this?

I believe it's an $8,000 tax credit, but it's only for first time homebuyers.

[MarkGrace]

Don't look for prices to spike up anywhere in the foreseeable future. You'll be more than fine in 12-18 months. The best case scenario for the economy is that prices will stabilize at their current levels and languish there for a while. More likely then not, the prices will go BELOW their historic levels.

That's what I was hoping to hear. It seems that Seattle was more stable than other markets for a long time, but it appears that lately prices are finally starting to drop. We are hoping to buy a condo in or around downtown, and the other factor we have working in our favor is that the building boom around here is still going on even though prices are apparently falling. 2-3 years ago a major building explosion started (I swear there is a condo going up on every corner both here and in Bellevue) and it seems that in a 1-2 years when many of these projects start wrapping up there's going to be far too much inventory on the market.

[ERCougar]

I believe it's an $8,000 tax credit, but it's only for first time homebuyers.

It's also more of a loan than a credit, in that it has to be paid back (I think the term can be up to 20 years).

Not necessarily first-time buyers, but anyone who hasn't owned a home in the last 3 years.

[TripletDaddy]

The numbers on Acton are quite a bit different. For example, the average income in Acton is $89k. The average income in Lancaster is $61k. I don't know anything about that area, but I do know that Lancaster and Palmdale blow. Acton looks like it's in the hills and could be like Thousand Oaks in that there are horse properties and things like that. Of course, it's also significantly farther away from LA so the incomes aren't as high.

I told my brother though that the entire inland empire just sucks ass and I don't know if that particular place is more inland empire or more of a nice suburb where people sometimes have big plots (2 acres) of land- like Thousand Oaks.

that area is not really considered to be IE, although some of the geography is similar. The IE gets a bad rap (mostly by stupid people that watch The OC and subsequently refer to Orange County as "The OC"....they also refer to IE as "the 909")....while it is more rural in areas, there are plenty of places that have very nice neighborhoods. Also, you can get serious deals on homes right now because that is where a lot of the foreclosures went down this past year. I know several families that left Harbor Hills or Irvine to start their families in places like Murrieta. It is too hot for me out there and too far from the ocean, but it isn't really as awful as people make it out to be.

Thousand Oaks is nice, as is the whole of Conejo Valley. NP, Westlake, TO....all great places with great schools. If your brother doesn't mind the commute, he could live there and go 118 through Simi and head out to work, although that could be a long commute.

Why doesn't he check out the Valencia area where Flystripper resides? Not terribly far from Acton but much nicer and closer to LA if he needs it.

[Surfah]

that area is not really considered to be IE, although some of the geography is similar. The IE gets a bad rap (mostly by stupid people that watch The OC and subsequently refer to Orange County as "The OC"....they also refer to IE as "the 909")....while it is more rural in areas, there are plenty of places that have very nice neighborhoods. Also, you can get serious deals on homes right now because that is where a lot of the foreclosures went down this past year. I know several families that left Harbor Hills or Irvine to start their families in places like Murrieta. It is too hot for me out there and too far from the ocean, but it isn't really as awful as people make it out to be.

Thousand Oaks is nice, as is the whole of Conejo Valley. NP, Westlake, TO....all great places with great schools. If your brother doesn't mind the commute, he could live there and go 118 through Simi and head out to work, although that could be a long commute.

Why doesn't he check out the Valencia area where Flystripper resides? Not terribly far from Acton but much nicer and closer to LA if he needs it.

Acton is all horse properties for the most part. It's grown in recent years. It's just north of Agua Dulce which is home to Vasquez Rocks which I am sure you'd all recognize from a million commercials, tv shows, and films. It's all foothills in a small valley. Aside from Vasquez Rocks down the road, it's not a visually appealing area.

Most people live their to have horses. I also think there is a wildlife refuge there for exotic animals if my memory serves me right. Valencia isn't much further and is much nicer and you have a great school district there with great academics and sports. And the Church is strong there too.

[cougjunkie]

Provo/Orem had a 3% increase last quarter, home prices there are staying pretty steady. I think Utah is right where it should be, home prices were inflated for a while here but I dont think they are now undervalued like in other states.

[Soccermom]

I see a lot of different opinions on the subject of house values. Here's mine.

The following chart shows the average home value in ten major cities over the last 20+ years. Trendlines showing the linear trend and upper and lower bounds suggest that the market has corrected nearly as much as it should, and will bottom within the next quarter.

[ATTACH]31[/ATTACH]

But we all know that trendlines can be misleading. Logically, we can assume that home prices should stay relatively constant, when adjusted for inflation, and some argue that this is a better metric by which to measure home values. The chart below displays historical home values adjusted for inflation.

[ATTACH]34[/ATTACH]

From the above chart we see that home values may have room to fall. Assuming that home values can fall to their previous inflation adjusted low, and projecting values to continue falling at their current rate of depreciation, home values may not bottom for another 18 months, as shown below.

[ATTACH]32[/ATTACH]

But more than inflation comes into play with home values. Home sizes are larger, and interest rates are lower now than ever before. Ultimately, in my opinion, the real determinate of home value is the amount that people are willing to pay for a home relative to their monthly income. In this regard, interest rates play a huge role in home prices.

The following chart shows historical home values adjusted for both inflation and mortgage interest rates. The circled portion is projected, and it forecasts that home prices will reach historical adjusted lows by mid to late summer, barring anything else unforeseen in the economy.

[ATTACH]33[/ATTACH]

So there you have it. In aggregate, I expect home values to bottom in the third quarter. I could be wrong - and I often am - but that's my take on things for what it's worth.

Awesome charts cowboy. Aristides and I are seriously considering buying a rental property and we are in your camp of thinking that barring unforeseen economic changes, the best time to make that purchase will be a year to 18 months from now.

[myboynoah]

Faith and I are looking to buy some time soon as well. If my college finally offers me a full time position for the coming Fall (perhaps unlikely because of the economy, but possible, because I am part of a growing department), we plan to buy. I have been hearing something about some kind of new tax benefit/credit for home buyers. What do people know about this?

Be careful RF, there are predatory mortgage lenders out there ready to pounce. Most are powerless against their wiley schemes. Now I'm worried. Please, please, please be careful.

[myboynoah]

Awesome charts cowboy. Aristides and I are seriously considering buying a rental property and we are in your camp of thinking that barring unforeseen economic changes, the best time to make that purchase will be a year to 18 months from now.

So the great question has been answered; Mr. Potter was/is married.

[Solon]

(mostly by stupid people that watch The OC and subsequently refer to Orange County as "The OC"....they also refer to IE as "the 909").....

At my house, "the OC" stands for "Oxnard College."

[RockyBalboa]

I read in the LA times this past week that average home prices were starting to approach a realistic ratio to the average income in Los Angeles, suggesting that we are somewhat close.

The one thing that always made me wonder whether the bottom was truly near was the fact that housing prices were still way above what people could afford. However, in some parts of LA, the ave price has dropped to the mid 300s.....well within the buying range of many incomes in LA. other areas are still grossly overpriced.

So that means you can now get a 800 Square foot house for only 350K?

That's a steal!

[Flystripper]

Acton is all horse properties for the most part. It's grown in recent years. It's just north of Agua Dulce which is home to Vasquez Rocks which I am sure you'd all recognize from a million commercials, tv shows, and films. It's all foothills in a small valley. Aside from Vasquez Rocks down the road, it's not a visually appealing area.

Most people live their to have horses. I also think there is a wildlife refuge there for exotic animals if my memory serves me right. Valencia isn't much further and is much nicer and you have a great school district there with great academics and sports. And the Church is strong there too.

what he said...if you are going to live up that way you might as well live in Santa Clarita. Just my opinion.

[Flystripper]

that area is not really considered to be IE, although some of the geography is similar. The IE gets a bad rap (mostly by stupid people that watch The OC and subsequently refer to Orange County as "The OC"....they also refer to IE as "the 909")....while it is more rural in areas, there are plenty of places that have very nice neighborhoods. Also, you can get serious deals on homes right now because that is where a lot of the foreclosures went down this past year. I know several families that left Harbor Hills or Irvine to start their families in places like Murrieta. It is too hot for me out there and too far from the ocean, but it isn't really as awful as people make it out to be.

Thousand Oaks is nice, as is the whole of Conejo Valley. NP, Westlake, TO....all great places with great schools. If your brother doesn't mind the commute, he could live there and go 118 through Simi and head out to work, although that could be a long commute.


Why doesn't he check out the Valencia area where Flystripper resides? Not terribly far from Acton but much nicer and closer to LA if he needs it.

my parents live in Temecula. (southernmost) part of Riverside county. Temecula is pretty dang nice.

[Color Me Badd Fan]

what he said...if you are going to live up that way you might as well live in Santa Clarita. Just my opinion.

He has to commute to Edwards Air Force base and according to Google maps Santa Clarita is 56 miles away, that's a lot of driving. Acton is 32 miles away and it probably wouldn't be too bad of a commute because he'd be typically going against the grain.

[Hallelujah]

I believe it's an $8,000 tax credit, but it's only for first time homebuyers.

Is it the same as the $7500 tax credit.....which you have to pay back. So it's basically a loan if it is structured the same way.