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June 18, 2008

Economists mirror consumer survey: "Housing prices apt to fall much more"

Blitzsurvey_1q2008_5yrs_v1(Turn off pop-up blocker, and click on table for larger image.)

An AP story hidden on page four of the Boston Globe business section, entitled "Housing prices apt to fall much more," reports that:

"A group of 10 economists says that home prices in the United States are only halfway through their fall."

"...and most of the further erosion should occur this year."

Those predictions are consistent with consumer surveys conducted by The Real Estate Cafe and Boston Bubble six months ago (December 2007 & January 2008), which revealed that consumers expected housing prices to bottom out sometime in 2009 or 2010. 

When consumers in Greater Boston were asked to graph housing prices over the next 5 years (through 2012) in their local city or town, the composite pattern above emerged.  A comparison of that table to the results of the same question asked two years ago (January 2006), reveals that consumer price expectations have taken a sharp downturn. 

A recent report from the Federal Reserve Bank of Boston projecting that foreclosures may not peak in Massachusetts until the 2nd quarter of 2010, could send housing price expectations even lower.  What's your prediction as we end the 3rd quarter of 2008? 

Bill Wendel | 11:55 AM in Consumer surveys, Housing forecasts, Real Estate Bubble, Timing the market | Permalink


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I personally think the wheels have come off of the entire housing industry, and we have a long way to go before prices even stabalize... never mind rise again.

I am thinking 2012 to level off and have some stability with 2015 giving the industry back the historical inflation hedge of a 2% - 3% gain per year. In my life time I am certain I will never see this type of run up again, and I am not all that old.

Grab some popcorn and stay on the side lines and watch this one unfold.

Only a mad man enters the belly of the beast when he is still chomping at the bit!!!

Posted by: Stu | Jun 18, 2008 1:23:46 PM


Thanks for your comment, but hold the popcorn ;-)

We're eager to begin hosting Bubble Hours again, for cautious home buyers, and insightful bubble watchers like you to share perspectives off-line locally.

We'd be glad to buy the beer or to host a wine-tasting, at one or more locations in Greater Boston each month. Is Arlington (Rt, 16 and Broadway near Cambridge line convenient? Our next Bubble Hour will most likely be at http://www.TogetherInMotion.com, so parents can bring their children. Anyone interested should send us an email or call 617-661-4046.

Posted by: RealEstateCafe | Jun 18, 2008 1:58:07 PM

I also believe that talk of any kind of 'rebound', ever, is foolish. Remember, over the long term, adjusted for inflation, home prices rise less than 1% per year.

So the only thing that is going to happen is that home pricess will decline and then they will stop declining. Any future increases will be insignificant.

As for when they may stop declining: I'll say 2012.

I would be very interested in attending a Bubble Hour.

Posted by: Donald McHattie | Jun 18, 2008 11:35:27 PM

Thanks, Donald, for your comment and interest in attending a Bubble Hour. Is Arlington convenient for you, or would you prefer another location?

Posted by: RealEstateCafe | Jun 19, 2008 12:12:10 AM

Hard to say how long it will take to see a full settling of prices and most likely they will be on the rise long before the general public realizes they are no longer falling.

Looking back at my notes, the media in Arizona didn't begin touting the burst until late 2005 and more fervently in the 2nd quarter of 2006.

The real stats show the market began it's dip, in the Greater Phoenix area, in August of 2005. OOPS.

Predicting the actual end of the fall will most likely be achieved long after the fact.

Posted by: Gene Urban | Jun 19, 2008 11:32:36 AM

It's not all bad news especially for buyer, because this is the best time to buy real estate, and I've been telling many of my Commercial Real Estate investors the same thing, and not to wait until the real estate market prices start to rise again, the opportunity is now when prices are low! "BUY LOW & SELL HIGH" that's how you make a profit! For instance, my Commercial Real Estate investors have had many opportunities but financing was a problems like many other buyers because of the Subprime lending industry that kept them from buying, but I informed them like many others to keep in mind there are other alternative Real Estate financing options, e.g.. Real Estate Investment Trust(REITs); Bond Offerings; Real Estate Hedge Funds; and Private Hard Money Investors that can finance deals that banks and traditional lenders won’t in this present market.

Commercial R.E. Funding

Posted by: Joe | Jul 2, 2008 2:43:14 PM

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