housing market correction coming?

[brick]

"The inventory of unsold houses rose to the highest level in nearly 20 years."

Any thoughts on whether we will have a significat correction in the housing markets vs period of slower growth?

How can I best position myself to take advantage of a correction?

http://news.yahoo.com/s/nm/20051128/bs_nm/markets_stocks_dc

in bubble areas you will see correction, in others, slow growth most likely

[BarkingMad]

I have a friend whose opinion I value highly when it comes to stuff like this. He's an economist who got his degree from the London School of Economics, he own real estate here in Seattle, and trades stocks for a living from his home in Alki.

I asked him this very question over beers awhile back and he thought that Seattle RE was susceptible to a market correction (not just slow or no growth).

The good news is that (in his opinion) some of the hotter markets like LA & the SF Bay area will be a leading indicator for the rest of the country if a RE correction does hit. His thought was that there would be a lead time of about 6-12 mo. from the time LA RE starts sliding south to when we will feel it here in Seattle.

How to best profit from a correction, I suppose, would be to sell all your RE and get into a mutual fund like ProFunds RE Inverse fund.

I don't know what exactly I'm going to do if things go south, but I'm keeping an eye on California.

From north of the city,

BM

[Scotty O]

[ QUOTE ]
"The inventory of unsold houses rose to the highest level in nearly 20 years."

Any thoughts on whether we will have a significat correction in the housing markets vs period of slower growth?

How can I best position myself to take advantage of a correction?

http://news.yahoo.com/s/nm/20051128/bs_nm/markets_stocks_dc

[/ QUOTE ]

Bubble should have popped a long time ago...
Hold onto your seats New England

actually best way imo to profit from possible correction would be to buy deeply discounted foreclosured houses if you can get them and flip them for below mkt prices to ensure a quick sell.

[NoTalent]

puts, lots of puts

growth in my area is rediculous, i got my place feb 04 for 267k and if i wanted to could probably get 550k for it, tho i love the area and don't want to move.

[cdxx]

[ QUOTE ]
The good news is that (in his opinion) some of the hotter markets like LA & the SF Bay area will be a leading indicator for the rest of the country if a RE correction does hit. His thought was that there would be a lead time of about 6-12 mo. from the time LA RE starts sliding south to when we will feel it here in Seattle.

[/ QUOTE ]

some areas will start sliding ahead of california, because california is also a desirable place to live, so the bubble accounts for only some of the growth. for example, DC Metro is already sliding. many (myself included) think that particular area is almost all housing bubble. there's population growth, but it is my understanding that the same people who were renting a loft apartment with three roommates only a year ago are now speculating by owning 2 or 3 houses and renting the rooms in order to make the mortgage payments. that's practically the definition of bubble. also, 6 months ago a house would be on the market for an average of 1 week, and is now longer than a month.

draw your own conclusions.

another key statistic to look at is the affordability index, which is rediculously high in some areas.

[Uglyowl]

[ QUOTE ]


Bubble should have popped a long time ago...
Hold onto your seats New England

[/ QUOTE ]

Awfully big area you are concerned about when only the Boston area is insane right now.

[AceHigh]

[ QUOTE ]
in bubble areas you will see correction, in others, slow growth most likely

[/ QUOTE ]

You should be careful how you use the term "bubble". Bubble's imply a massive loss of value, unlikely to be regained in a persons lifetime. House and Homebuilders have too much value to see that kind of loss most likely. Most Homebuilders have relatively low p/e's.

The housing market is slowing and some places it is no longer growing, but it's not a "housing bubble".

welcome to the HOUSE of pain

15% arms and 24% interest only jeez.....also watch for the interest rate deduction on your taxes be removed for residential investment properties and second homes in the near future.

http://www.courant.com/business/hc-apcrunch3.artnov30,0,6865338.story?page=2&coll=hc-headlines-business

the statistic i love the most is the affordability index where i live is 88% and 65%(really bad)for new home buyers.

[AceHigh]

I like that "HOUSE of pain".

[12AX7]

Hi AceHigh,
I agree with what you are saying here. Historically there have been few real RE price corrections in a truly down direction. At least that I can think of in my lifetime. I believe the CA market did do this once?

However, it *does* need to burst, bubble or not. If american workers are going to have to start competing with world labor costs dollar for dollar the prices for goods in the local american market have to come back in line with incomes. Or else we can become a truly two class place, like say Brazil?

[ QUOTE ]
[ QUOTE ]
in bubble areas you will see correction, in others, slow growth most likely

[/ QUOTE ]

You should be careful how you use the term "bubble". Bubble's imply a massive loss of value, unlikely to be regained in a persons lifetime. House and Homebuilders have too much value to see that kind of loss most likely. Most Homebuilders have relatively low p/e's.

The housing market is slowing and some places it is no longer growing, but it's not a "housing bubble".

[/ QUOTE ]

[DesertCat]

[ QUOTE ]
Hi AceHigh,
I agree with what you are saying here. Historically there have been few real RE price corrections in a truly down direction. At least that I can think of in my lifetime. I believe the CA market did do this once?

However, it *does* need to burst, bubble or not. If american workers are going to have to start competing with world labor costs dollar for dollar the prices for goods in the local american market have to come back in line with incomes. Or else we can become a truly two class place, like say Brazil?


[/ QUOTE ]

American workers don't have to compete dollar for dollar, the higher amount of capital historically invested in the U.S. typically makes the U.S. worker much more productive than his competition. Which is why the U.S. worker has always earned higher wages, and likely will continue to. The only way this will change if we have a massive capital outflow over decades.

There are exceptions, like the US Auto industry where strong labor has been able to bargain for wages about 3x what "free market wages" would be. Those are likely going to be rolled back, worst case to the $35 per hour level (wages + benefits). But for relatively unskilled labor, that's still very high wages anywhere in the world.

[AceHigh]

[ QUOTE ]
If american workers are going to have to start competing with world labor costs dollar for dollar the prices for goods in the local american market have to come back in line with incomes. Or else we can become a truly two class place, like say Brazil?


[/ QUOTE ]

America won't become a 2 class society like Brazil because we need local carpenters, electricians and plumbers, etc. We may lose some of our better blue collar workers jobs because it will be cheaper to manufacture products in foreign countries and ship them to the United States. But this is offset by all the white collar jobs in areas like software development.

[Uglyowl]

While there may be minimal wage pressure, the price of products declining as a result more than makes up for this.

[12AX7]

I just spent 5 years at IBM Level 2 software support...

White collar work is going to India too...

[Czech_Razor]

[ QUOTE ]
How can I best position myself to take advantage of a correction?

[/ QUOTE ]
Hedge Street (http://www.hedgestreet.com/) lets you bet on housing prices in six U.S. cities.

[AceHigh]

[ QUOTE ]
I just spent 5 years at IBM Level 2 software support...

White collar work is going to India too...

[/ QUOTE ]

Yep. Different skills will be exported and new ones will be created, hopefully.

Also, the Chinese and non-English speaking countries are blocked out of these jobs.