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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (51994)	4/12/2006 11:56:31 PM
From: XoFruitCake	Read Replies (1) \| Respond to of 306849

"A 20-percent drop in sales is not "massive" when you consider that sales were going through the roof at record levels which could never, in anyone's wildest dreams, be sustained." I will beg to differ. HB has been building flat out and has not slowed down yet. If we have 20% drop in sales, that would translate to 20% of the new house builded for the next few quarter (until HB can slow down or stop building) get into the market without buyer and increase the inventory further. Similar story on the existing house side. People are buying a lot more house thant they need for the last few year (investment house, second home, vacation home etc.) and speculate on the market. Now that they house is not appreciating (or actually declining), it will better to cut price and sell rather than doing the slow death ritual (neg. cash flow). House price is set on the margin, we can easily see 10-15% price drop because of all the sellers competing for buyers this year. HB are already doing 10-15% discount through rebate/incentive in a lot of communities. A lot of people who bought houses in the last few year will see their paper equity vaporize. Those who took out HELOC will has trouble refinance or taking out more equity and the general economy will be impacted (not necessary recession but consumer spending will slow down). In my neck of wood (N.Cal, Fremont), house price dropped 20-25% in the 90-94 time span. I think we will at least see this much price drop this time round.