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

To: ChanceIs who wrote (58862)	8/2/2006 12:08:49 PM
From: Jim McMannis	Read Replies (1) \| Respond to of 306849

At first, the developers and contractors will simply have to shrink their rediculously high margins. Thats what's happening now. That's why the flipper is in deep sh%t. They bought when the price was so over inflated. That's relatively painless part for home prices compared to the bump and grind down of land and building material costs that will occur later.

To: ChanceIs who wrote (58862)	8/4/2006 11:52:11 AM
From: Don Earl	Read Replies (2) \| Respond to of 306849

RE: "What you say is true, and untrue at the same time.... If we have a recession, then material and labor prices will drop, and therefore any new house price will also be offered at less, based both on direct costs and the changed market for new houses. If salaries are down, then the price of used houses will drop." Actually, that's about what I said. For housing prices to come down, construction costs have to come down. Used homes for the most part are marked to market on a replacement cost basis, minus something for wear and tear. The "new car vs. used car" analogy doesn't apply, although you'd get clobbered on closing costs if you tried to turn a new house quickly. For a rough ballpark estimate, you can figure about 10% of the sale price for closing costs. While I'd tend to agree with those who see a closing of the speculative window for quick profits, I don't see anything that would justify theories of a near term crash. Most people in the business (not WSJ analysts) see prices more or less flat over the next 5 years or so. Instead of year over year increases of 20%, it's more likely to be around 2-3% as prices flatten out. Obviously not all markets are the same, and you'll have pockets that are better or worse, but overall that's what the big picture is most likely to look like in the near future.