There is concern that the residential real estate market could be facing the dreaded double dip. To those who are not stock market mavens this essentially means that the short recovery we have seen will be followed by another downturn.
The idea was brought up by Brian Taylor of the hedge fund Pine River. And it does align with my observations.
We had a slight uptick in the market in the 4th quarter of the year. This coincided with tremendous incentives offered by the Federal Government for new home buyers. Essentially the government subsidized the upturn not the marketplace.
Now that the effects of the government subsidy have run their course, the market is back in control. And the market does not have confidence we have hit a true bottom. Nervous buyers and sellers do not create a great deal of confidence and lower prices are typically the result.
My bet is with the Pine River team. This year will be one of nerves and concern until the marketplace sees the strong potential of profits.
Hedge fund firm Pine River, which makes big bets on housing, is bracing for a double dip in that market, its chief executive officer said on Tuesday.
“There are still issues in the housing markets and it would not surprise us to see the recovery turn down,” Brian Taylor, who founded the $1.6 billion hedge fund eight years ago, said at the Reuters Private Equity and Hedge Funds Summit in New York.via Reuters
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It is my professional opinion as a Real Estate, Broker-Salesperson, that we are going to see the beginning of the second decompressed economic wave starting in April, 2009, and may last two years before the real estate market bottoms out. We are seeing record low sales the last two quarters compared to prior years, the $8,000 tax credit having little affect with incouraging current buyers to move forward in the NYC metropolitan surrounding suburbs. In New Jersey, my county one of the wealthiest and most populated counties saw 33,500 to 13,500 to less than 7,000 deeds closed in three years, which includes: tax sales, foreclosures, short sales, inheritance, commercial and residential sales. It’s not enough business to keep big real estate office open if the numbers continue to stay where they are or decline. With the expiration of the $8,000 credit at the end of April, 2010, the governement advising it will seriously cut back on buying back FHA loans-80% of the market, higher interest rates on its way, and spiraling out of contral local taxes-some suburban towns seeing 7% increases for each of the last four years, the formula and numbers strongly indicate another serious economic decompression wave on its way. In addition, the government has been looking the other way with enforcing banks putting up the REO’s up for sale within 12 months. The banks are stockpiling these listings and not putting them back on the market to slow down the deappreciation of propertie. At some point the banks will have to release these properties. With all of the above, I see another 10% to 20% decline in property values in the next 24 months in the Metropolitan suburban residential market. Sorry to be pestimistic but the numbers and facts are strong indicators that something bigger is on its way, and just has been put off or slowed down.
I sure hope that were not going in for round two. It is scary to even consider the notion that a double dip is possible. Here’s to hoping we make it out alive.
There will be a second round as both Residential and Commercial are expected to be hit with a wave of foreclosures. Commercial will be hit the hardest though as most commercial loans become due in 5 years instead of 30 years like residential.
Danielle Contreras
This is one of those stories that, as much as it makes your stomach turn in knots, you know it’s very likely. Without getting too political, our government gave the ‘temporary relief’ answer. I would not at all be surprised to see in the next year or so, the housing market go down once again. With interest rates climbing back up in the future, it’ll be hard to say ‘now’s a good time to buy’.
It sounds like it really depends on consumer confidence then. I feel like if people do start spending their money in other sectors of the economy, it will impact Real Estate as well. I think that a lot of people are starting to feel more positive about the economy in general so hopefully that will translate into even more consumer confidence, and then in turn, more home buying/selling.
As a potential first-time home buyer, I have zero confidence that I would be making a smart investment in purchasing right now or anytime before the 3rd quarter of 2011. It is worth it to me to forgo the tax credit to sit for a while longer before deciding on a purchase. I am in an area where people still think they can have an asking price $20,000 above the inflated price they paid for a home in 2006. This leads to a 1400 sq ft townhouse with no upgrades since 1989 to go for over $400,000. $400,000 should be able to get me a sfh over 2000 sq ft with a 2 car garage, yard, with to-date appliances and fixtures. It just SHOULD. I’ve been ready to purchase for the past year and have found nothing that would be worth a third of my income every month. Let alone something that would appreciate at all over the course of the next decade. So I sit. I may end up just going on a mad lowballing spree and offer what I feel a home is worth as opposed to what these banks and sellers are trying to get. During these difficult times in real estate, it is not completely unheard of for a seller to accept an offer that is $200,000 below their asking price. Renting anymore doesn’t seem to be “throwing money away” as a renter these days is not only paying for a place to live, but also the comfort and confidence in knowing that when they’re done living in that place, they’re also done paying for it.
“…I have zero confidence that I would be making a smart investment in purchasing right now or anytime before the 3rd quarter of 2011″
Yeah, some people told me the same thing a year ago about the stock market. Glad I did not listen. I loaded up and made over 80% on average in the last 12 months.
Baa like a sheep. You’re the type that won’t buy until everyone else is and when prices are high again. Or suck it up and stop being such a wimp. Are you buying to flip in 6 months? Or hold long term? Just buy. You will NEVER time it perfectly.
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