Zillow has my texas house gaining 5.0% in the last 30 days... that would be like a 53.9% annualized gain if that keeps up! Of course it is, as the locals here say, a bunch of hooey...

DOM is just as bad as always, I can't fathom why zillow says its going up so much.

Prices here in ND are down a bit, but not the foreclosures as the other states. Our military base helps a lot along with lots of local businesses and the oil fields. But then we don't have the mega houses, and large tracts either.

Well, I'm outside of chicago and sold my place last week with only 2 weeks on the market. Prices? well, I got top dollar for the neighborhood. I have noticed a few other homes I have looked at over the last month have sold. So, who knows?

Of course the real estate professionals are calling it close to the bottom...what else are they going to say? "Well, things are bad, and there's no end in sight to the free falling housing market. But hey -- Sell! Buy! We need those commissions!" No one will know when we've hit bottom until well after the fact. It's something you can only see in hindsight.

I remember plenty of "We can see the bottom now" type articles issued from the real estate gurus and industry insiders. Obviously they were wrong then and could be wrong now. I think prices are still artificially high. Few people can afford them, a reality that many in the industry and many sellers can't accept.

I think the biggest problem is, they try to assume that this market will not fluctuate as it does. It has been strange here. Some months are unexplainably hot and others are so slow. It looks like it is stabilizing, then it just doesn't.

Economists generally look at the ratio of housing prices to income. By that measure, prices are still historically high. There are plenty of foreclosures that will add to inventory this year too. And there's another problems that doesn't get much attention:

Here is a link that might be useful: The housing market has a new problem: ageing Americans

Another indicator is housing price to rents in an area. CNN had several articles about this relationship and some areas that are poised for market corrections.

I think it's fairly obvious that overall it's not over. This is just my common-sense opinion, but I would find it hard to believe that it wouldn't take at least as long for the slump to resolve as it took for the bubble to build and then burst. Wasn't that about 4-5 years or so? I think in places like Florida, it will take a lot longer. Maybe 2-3 times longer.

I was astounded to hear a real estate 'expert' on CNN yesterday say that Chicago and Boston had 'bottomed out'. News to me!

This was part of a Q and A on when one should Buy, Sell or Hold in today's market. Her ideas were:

Buy if you're going to be there five years or more.

Sell if you can't make the payments; if the market is declining; if you bought so long ago that you are still making a good profit and you want out. (Don't bemoan what you could have gotten in '06 -- take what profits you can get and move on with your life.)

Hold if you don't have to sell for five years or more.

It's not over - RE is tied (as everyone can now appreciate) to the economy in general, and as it was able to bring the whole thing down so quickly, on an international level affecting millions of people not directly in the US RE mkt, and as your economy is still going south, it's not over by a long shot.

I think some people in the industry are assuming that bemoaning the sales slump is a self-fulfilling prophesy and that if they try to stay optimistic, then people will have "faith" and trust in the old system and start buying. I don't think it's at all that simplistic. Just singing the market has bottomed out isn't going to make it happen.

There are too many things going on with interest rates, oil prices, job outsourcing, elections, foreign obligations to have any feeling whatsoever of economic security. Then, when the housing market rebounds, I expect it to be slow and cautious for a very long time. And probably in a more healthy way than before.

It's hard to see how it could recover until the credit markets straighten out.

"It's hard to see how it could recover until the credit markets straighten out."

Bingo. Housing is going to continue to go through a HUGE slump because of the credit markets. Bonds coming from banks are tainted with bad loans, the insurance companies (MBIA and Ambac) are insolvent despite their insane AAA ratings. Because the loans are tainted and have questionable insurance, buyers will not touch them. What this means is banks can't get money for mortgages by selling debt, which is the way the whole bubble was built.

Here is what I think will happen: housing is going to continue down far more than people want to accept because interest rates are going to continue to climb and loan restrictions are going to get increasingly tight. Pile on top of that a recession. Long term housing is not going to get back to where it was because nobody can afford that with 20% down fixed rate mortgages. All this 0% down, ARM crap will be gone. The average housing price will go back to 2.5-3x the average income.

The news last week was startling: Small banks could fail, brought down by bad loans. (Was it Paulson or Bernancke who made that statement?)

I've thought times were going to get real tough for awhile and its going to take a long time to straighten out.
One thing I don't understand
Bernanke, the Fed, whatever has lowered interest rates lower than they've almost ever been. Now I sort of realize that this interest rate affects banks and big financial institutions more directly than mortgage rates - but don't mortgage rates usually sort of follow the rate up and down?
So why do you say interest rates are going to climb?

Just look at the last 3 weeks or so, mortgage rates are climbing. The reason? Risk. People who are lending money are realizing (again) how risky mortgages can be and thus are charging a higher interest rate to make up for that larger risk. Part of the concern is further reduction in housing prices, another involves the insurance that is sometimes bought to cover the mortgage (MBIA and Ambac for example), finally, everyone finally knows the rating agencies are full of crap and AAA rated mortgage securities means nothing.

Go read this cartoon:

http://docs.google.com/TeamPresent?revision=_latest&fs=true&docID=ddv7hj34_03774hsc7&skipauth=true&pli=1

That is actually what banks did with mortgages. Now given that, who now is going to buy the mortgages from the banks? Banks can't just lend out what people deposit, that isn't nearly enough money. They have to sell mortgages and right now there aren't any buyers.

It doesn't matter if the Fed lowers the federal fund rate to 0%, the cost of credit is going to go up because nobody wants to buy the debt because they don't trust the banks having just been screwed by them big time.

The banking industry right now is really, really broken. Until it gets fixed, credit is going to become increasing hard to come by. It will take years to fix because of the magnitude of the problem, and because right now so few are admitting to their exposure and still trying to hide losses. They do this hoping things get better so they don't have to admit how bad they are screwed. Think of a little kid breaking something and trying to fix it before his parents find out. Until the banks and other organizations come clean, the people who used to buy debt are going to stay away. Fool me once, shame on you, fool me twice, shame on me.

Ok well now I feel really stupid. If the Fed keeps lowering the rate to help the economy but the banks keep raising their rates for loans (small business, mort etc.) because of risk - then just who is being helped by lowering the rates?

"Ok well now I feel really stupid. If the Fed keeps lowering the rate to help the economy but the banks keep raising their rates for loans (small business, mort etc.) because of risk - then just who is being helped by lowering the rates?"

Under normal circumstances, they are related, except this is somewhat of a unique situation. So why is the Fed lowering the rate? Mainly because that is knob they have. Japan has lowered their rate almost to zero for years trying to fix the damage that was done during their assert bubble in the 80s.

This credit crunch has already spread to municipal bonds. For example, Pennsylvania and Michigan have canceled student loan programs because nobody will buy the bonds that fund them. Interest rates are shooting up and ARS (auction rate securities) bonds are having failed auctions which result in very high interest rates. There are those in the debt business that believe that because of the huge amount of money involved in the mortgage mess, the credit crunch will affect all types of credit and it will become increasing hard to get. I don't know how true that is, but it certainly is true for mortgages.

None of this is very simple. That Fed rate that keeps getting slashed affects short term borrowing by financial institutions. In the recent past (10 years), those institutions would use that short term borrowing to finance mortgages until they were packaged and sold to GSEs and Institutional Investors with long term investment horizons. Hence the Fed rate effecting the liquidity and expense of the mortgage market.

Now that the Institutional Investors are puking up those mortgages, lenders aren't doing the short term financing before sending them elsewhere, they have to hold them longer term, and might never package some types. So that Fed rate is having no effect on mortgages.

It still helps businesses that have short term and revolving debt needs... but can cause inflation if left unchecked.

What's the average 30yr fixed today? Around 6%? That's still on the low side of historical averages, if you ask the learned people on this site. Will we see sub 5% again? Of course, but who knows when. Will we see 10%. I sure hope not.

I'll echo what people have said on the Real Estate Market Correction.
1. Overspeculation
2. Inflated Demand from improperly used mortgage products.
3. Increased Demand from very low interest rates.
4. Increased Demand from low or no underwriting standards.

Now that those 4 things have dissappeared, we have a glut of homes for sale... or more supply than demand. Price and Time will work things out. The more the price drops, the faster we get out of the slump, the more people refuse to budge on their price, the longer the slump lasts. Econ 101.

Thanks for the lesson. I hope mortgage rates don't go up either. Just for once I'd like to be one that buys when they are lower:)
As for prices, well here there isn't much appreciation, 2-3% has been typical though less last year, with a little bump to 5-6 in the mid 90s, no bubble and so people seem to be staying fairly stubborn on prices. Hard for me to tell if inventory is up, probably some and it takes longer to sell though they seem to eventually, 9 months or so? I think rentals are picking up a little. I.e. people here don't lower prices, they just end up renting. Pricing here seems to be, take what you bought for, add on "standard" or "historical" appreciation rates for x years and that's your price. Extra for basements. Houses that have been maintained sell first (because its a not as usual as you might hope)