One firm specializing in real estate research and analysis is not pulling any punches: Altos Research says that home prices are set to tank. In fact, according to a recent report released by the firm, home prices at the start of 2011 will actually be lower than they were in 2009, thanks to a massive drop in the number of able home-buyers and a similarly dramatic spike in the amount of available housing, thanks to the influx of the much-touted “shadow inventory” into the real estate market[1].
However, the firm, which specializes in local inventory analysis, emphasizes – perhaps not surprisingly – that “recovery period is dependent on inventory [and] it’s important to get local.” For example, the report indicates that San Diego, CA and Las Vegas, NV should actually remain pretty stable in the coming months, while Chicago could be set to tank. These discrepancies are due to discrepancies in the shadow market volumes and predicted buyer behaviors in these areas.
Morgan Stanley estimates that the national shadow inventory could be greater than 7 million properties, while Standard & Poor estimate that the aggregate balance of the loans on those properties could come in near $480 billion. Does your preferred investing area have a high shadow inventory volume? Would you target areas that do for investment purchases?
Thank you for reading! Your comments and questions are welcomed below.
[1] http://www.housingwatch.com/2010/07/30/home-prices-forecast-to-drop-below-2009-values-by-early-2011/
It ain’t going to tank more in 2011 (exclude places like Chicago with its troubles, killings and other crimes, unemployment,etc.). Neither is growth and absorption going to be great. Yes, a hugh “shadow inventory.” What’s new? Tom.
I totally agree. In fact, I predict that the market will not fully recover, as in home prices of 2005, until 2020! This is going to be long and protracted.
The problem is economic recovery. There is none. A huge tax increase is set to go into effect in 2011 when the Bush tax cuts expire. The death tax is back, not to mention a load of other taxes that will be implemented. This leads to a lot of downward pressure on the economy in general. Things will get worse before they get better.
That is a very bold claim to make, than prices in 2011 will be lower than in 2009. That would imply a wiping out of the gains we’ve seen lately, which I think has been as much as 25-40% in some areas in the past year. This article essentially says that low demand and high supply will drive down prices.
It doesn’t mention payment affordability as a driver. Whenever rates start heading north, and they will sooner or later, that’s going to mean your monthly payment will not take you as far after 30 years, meaning lower sticker prices for people.
At least, if you feel as an investor you missed out on great opportunities last year , maybe you’ll get a second chance.