Are Even Lower Prices Ahead for Single-Family Homes?

Home > Real Estate
Are Even Lower Prices Ahead for Single-Family Homes?
No recovery 5 years after the housing bubble burst. Should you expect one soon?

By Bob Stokes
Fri, 11 Nov 2011 17:30:00 ET

Get investable insights sent to your inbox at least once a week – for free. Challenge the way you think about investing with The EWI Independent.

Privacy

A long-time friend just finished making cosmetic improvement to his mother's home because she's selling it.

He proudly showed me each room, and I was impressed with his handy-man skills.

Then my friend told me the price his mother would be happy to get for the place. But then he said that her real estate agent wants to price it 25% above that amount for "wiggle room"!

I told him that "wiggling" too high means some potential buyers might not make an offer at all, and that an asking price closer to what his mother wants may be the best way to go. He nodded his head "yes," but said the agent wants to try selling at the higher price for three months. He told me he'd let me know when the house sells, so we'll see.

I couldn't help but wonder if that real estate agent is still living in the days before the housing bubble burst.

My newspaper recently ran an article about a local high-profile person who lost his job. They quoted him saying he plans to start over as a real estate agent.

This brought to mind some other people I knew, who left their first profession a few years ago to pursue real estate. The fellow quoted in the paper apparently still had those days in mind.

In real estate -- as in stocks -- the psychology of big money outlasts the opportunity. In the case of real estate, it's been five long years since prices topped.

And no doubt, I'm sure there are many sellers who wait hopefully for the real estate market to bounce back. But they may be waiting longer than they anticipate:

"According to Fiserv...a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices."

CNNMoney, October 31

The same article goes on to say that more foreclosures and sustained high unemployment will work against the housing market.

And real estate website Zillow just reported third quarter numbers: 28.6% of single family homes have negative equity. That's up from the second quarter.

Will more home owners slip into negative equity in the months and years ahead? Well, here's what the second edition of Conquer the Crash stated (p. 157):

"At the bottom, buy the home...of your dreams for ten cents or less per dollar of its peak value."

As you know, real estate values have already taken a major tumble in many locales; that decline is part of a larger deflationary trend.

You can read our latest analysis in the "Economy and Deflation" section of our recently published November Financial Forecast. Moreover, get our latest thinking on stocks, gold and silver, bonds, the U.S. dollar and more.

Save 57% on our flagship service and start reading risk-free in moments. Just follow this link>>

Learn More about the Economy and Deflation with a Risk-Free Special Offer

For a limited-time, get our flagship Financial Forecast Service for only $99 for an entire 3 months!

This Special Offer includes complimentary copies of the second edition of Conquer the Crash and the Wall Street classic -- Elliott Wave Principle.

Follow this link for your 57% Savings>>

Tags: deflation, Elliott wave, housing prices, investor psychology, Robert Prechter

Stay Ahead of the Trend in U.S. Stocks

EWI's Financial Forecast Service equips you to think, trade and invest independently from the crowd. Here's what you'll get, risk-free:

Short Term Update -- Intensive forecasts and analysis3x/week for U.S. stocks, gold, silver, bonds and the U.S. dollar.
Financial Forecast -- In-depth,intermediate-term perspective on U.S. stocks, gold, silver, bonds and the U.S. dollar.
Theorist -- Bob Prechter's monthly big-picture insights.

Put the Financial Forecast Service on your screen in minutes, risk-free>>

Most Read

Highest Rated

Free 50-Page eBook

Learn to Think Independently

The Independent Investor eBook can help you to challenge conventional notions about investing and explain market behaviors that most people consider "inexplicable."
Download your free Independent Investor eBook

Real Estate

CLOSE [ X ]

The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.