Comments on: Sam Zell Thinks Spring Recovery Probable http://www.therealestatebloggers.com/2008/02/26/sam-zell-thinks-spring-recovery-probable/ Real Estate Blog, Mortgage, and Development News Fri, 19 Mar 2010 18:52:41 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Doug http://www.therealestatebloggers.com/2008/02/26/sam-zell-thinks-spring-recovery-probable/comment-page-1/#comment-175578 Doug Fri, 29 Feb 2008 18:39:12 +0000 http://www.therealestatebloggers.com/2008/02/26/sam-zell-thinks-spring-recovery-probable/#comment-175578 I just don't see the turnaround happening this spring. Inventory will be the key. We have many more homes being listed every week versus the number of homes that are selling. There is still much to come with foreclosures and bank owned properties. The other factor is uncertainty. Buyers are still on the fence with a "wait and see" attitude. I just don’t see the turnaround happening this spring. Inventory will be the key. We have many more homes being listed every week versus the number of homes that are selling. There is still much to come with foreclosures and bank owned properties. The other factor is uncertainty. Buyers are still on the fence with a “wait and see” attitude.

]]> By: Allan http://www.therealestatebloggers.com/2008/02/26/sam-zell-thinks-spring-recovery-probable/comment-page-1/#comment-174296 Allan Thu, 28 Feb 2008 00:49:08 +0000 http://www.therealestatebloggers.com/2008/02/26/sam-zell-thinks-spring-recovery-probable/#comment-174296 I too have a more skeptical view regarding the economy and the housing market in particular. The economy was bolstered by easy credit and a "perceived" increase in value and equity. With the largest asset a typical household owns in deterioration, I think we'll see consumer spending slow down dramatically. \ I too have a more skeptical view regarding the economy and the housing market in particular. The economy was bolstered by easy credit and a “perceived” increase in value and equity. With the largest asset a typical household owns in deterioration, I think we’ll see consumer spending slow down dramatically. \

]]> By: idesign http://www.therealestatebloggers.com/2008/02/26/sam-zell-thinks-spring-recovery-probable/comment-page-1/#comment-173187 idesign Tue, 26 Feb 2008 18:17:27 +0000 http://www.therealestatebloggers.com/2008/02/26/sam-zell-thinks-spring-recovery-probable/#comment-173187 Correction to above post. $402,000 is 61% overvalued. Correction to above post. $402,000 is 61% overvalued.

]]> By: idesign http://www.therealestatebloggers.com/2008/02/26/sam-zell-thinks-spring-recovery-probable/comment-page-1/#comment-173186 idesign Tue, 26 Feb 2008 18:14:32 +0000 http://www.therealestatebloggers.com/2008/02/26/sam-zell-thinks-spring-recovery-probable/#comment-173186 I think Zell is dead wrong on this one. Let's take California as an example. Even with the rash of foreclosures and price drops we've experienced in the last 18 months, California home prices are still 61% above historic norms. From the mid-1970s to 2001, the historical ratio of median housing value vs. median household income was consistently between 2.6 and 3.0. What this essentially means is that median home prices were (on average) 2.8x the median household income for the last 30 years. Using this 2.8 formula, it is very easy to estimate what median home prices would be if the most recent bubble never happened. The current median in California using this formula is $402,000, which is 67% overvalued. The "non-bubble" median price, based on 30+ years of history, should be $158,606. In other words, the bubble has just begun to burst, and still has a long way to go. Japan went through a similar wave of housing deflation that lasted 19 straight years. Americans who think it can't happen here had better think twice. Deflation is going to soon become a household word in this country. I think Zell is dead wrong on this one. Let’s take California as an example. Even with the rash of foreclosures and price drops we’ve experienced in the last 18 months, California home prices are still 61% above historic norms.

From the mid-1970s to 2001, the historical ratio of median housing value vs. median household income was consistently between 2.6 and 3.0. What this essentially means is that median home prices were (on average) 2.8x the median household income for the last 30 years.

Using this 2.8 formula, it is very easy to estimate what median home prices would be if the most recent bubble never happened.

The current median in California using this formula is $402,000, which is 67% overvalued. The “non-bubble” median price, based on 30+ years of history, should be $158,606.

In other words, the bubble has just begun to burst, and still has a long way to go. Japan went through a similar wave of housing deflation that lasted 19 straight years. Americans who think it can’t happen here had better think twice. Deflation is going to soon become a household word in this country.

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