Prices are still kinda crazy and unjustified compared to 2005.
Also, the average person can probably not get credit anymore and the wealthy desire only so many 2nd homes.
My sister closed 5 days ago on a house in a very desirable part of Mountain View CA. Through their process they had houses with up to 25 bids.
I'm seeing (anecdotally, in the SF Bay Area) a lot of people buying right now. These are generally savvy folks too, they're putting 20%+ down getting awesome fixed rates, and staying well within their means . We may still see a slight dip in prices but my feeling is that we've bottomed out a bit here and on the way up. We think we'll be able to sell our house in 5-10 years and make a profit. That may be wishful thinking, but I'm fairly confident in that position, especially as the tech sector heats up.
The tricky thing about the SF Bay Area however is its very resistent to outside pressures, it was one of the last places hit and will likely be on of the first to recover. Its very hard to time a bottom in the housing market here.
Can you please clarify what these means?
In most parts of the country, housing prices are roughly comparable to what it costs to build a house, so I imagine they should be at least reasonably stable.
But here, prices are way out of proportion, and this seems to depend on draconian laws preventing almost any sort of development. If people could actually build condo buildings in, say, Palo Alto, prices would be going down in a hurry.
I make a solid income and owning a home isn't a trivial expense to me, so I can't imagine someone making a go at it if they have a family and an income that is half or a third. Prices should drop to whatever their natural un-aided point would be, so that all those people out there who will either never own a home or only do so by getting into unfathomable debt (all over again) will actually be able to own a piece. Imagine what the long term benefit to the economy would be if prices dropped just long enough for tens of millions of people to lock in rates on their own home? It would transform the economy as well as, perhaps, society. Owning a home would be the rule, instead of exception. Being in debt to own a home would be an exception. High rent would be an exception. There would be much more discretionary income to put back into other industries. Or, better, for people to stick into their savings so that they can retire with a home to live in and finances to support themselves.
Energy costs will be the main concern. We need to cool or warm our air, heat our water, refrigerate our food, and mechanically dry our clothing.
If prices were to diminish as you speculate, the real cost of home ownership would be property taxes, utilities, and maintenance.
How many of these homes built in the last 30 years will last another 30 years?
What does it cost to cool a poorly insulated wood-frame 2000sqft house? What will it cost to cool in 10/20/30 years?
Housing around here is not particularly expensive, but the house's gas bill peaks a little over a tenth of the rent in an Upper Michigan winter, and the electric bill doesn't really get near that peak. There would have to be some pretty significant change before energy costs were that much of a concern.
Housing should cost whatever supply and demand value it at. That means that when everything goes belly up because of stupid lending and stupid borrowing, those people should have to sell their homes at a loss and people should be able to come in and buy those now cheap (because of a new ratio of supply and demand) homes on the cheap.
In other words, I want the natural value (free market) of things -- not some artificially inflated value, because government and committees felt obligated to bow to home-owners in saving their asses and maintaining the value of their assets. If I buy a car and then my financial situation changes, I may need to get rid of that car on the quick and someone can get a good deal out of it. Why should the government come in and rescue me by ensuring that I get a solid high value for my car, at the expense of another person who could have benefited from circumstances that otherwise would have made the car affordable to them?
I know we don't tend to have a truly free market much of anywhere, but it seems particularly shitty to artificially maintain a high value in housing at the expense of a huge chunk of society that can't afford ridiculous (artificially so) housing prices.