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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (104628)	8/24/2009 5:34:16 PM
From: Elroy Jetson	1 Recommendation Read Replies (1) \| Respond to of 110194

I'm expecting an additional decline in my local area of say 30% on homes and another 40% on condos. So far home prices are down ~30% and condos down 40% to 50%, which sounds quite bad but I'm fairly certain it gets worse. What is the magic solution which avoids this? This same delayed decline in real estate prices also occurred in Los Angeles in the decline of 1989 to 1996. The major price decline did not take place until 1993, a full three and a half years into the decline. The final price decline in my local area, based on the price of foreclosure sales, from 1989 to 1993-5 was 50% for homes and 70% for condos. The reason is the number of foreclosed homes which have not yet been placed on the market. In addition there are three times this number of homes in default leading to foreclosure. Typically home owners in trouble lower their price to the amount of their mortgage, far above market price. After months of no action the smart ones stop paying their mortgage, while uninformed owners or extremely wealthy people offer their home as a short sale. Most of these attempted short sales end in foreclosure. In 1993 banks finally gave up waiting, as prices continued to decline, and sold for what ever price finally attracted a bid. In my local area homes which sold in 1989 for $750k sold in 1993 through 1995 for $350k and in 1989 2 bed 2 bath condos which sold for $425k, sold for $125k in 1993. At the recent peak of the bubble these same homes sold for $1.3 million and are now down to $900k and the Condos peaked at $850k and are down to $425k. I anticipate a decline similar to 1993 of $600k for these homes and $250k for the condos. Since the inventory of foreclosed and soon to be foreclosed homes is far larger this cycle there is every reason to expect even lower prices. .