Is 2013 a repeat of 2007??

Question

I'm starting to hear about great deals from Taxi drivers, hair stylists etc. Lots in my areas are going up 20% and home prices as much as 25%. Sorry, but I'm a realist and this seems a lot like 2007. Are we in for a second recession? Low interest rates going up, fiscal cliff etc? I just want to hear other thoughts since we're all in this economy and arena together. Rich

Albert Hasson · Answer

It should be pointed out that the rise in home prices we have seen recently is despite exceedingly stringent lending requirements the past few years.  While taxi drivers and hair stylists may be talking real estate they aren't buying unless they are good credits risks. 
Home prices may rise or fall from here but there is no way we will see a repeat of the foreclosure crisis that precipitated the last recession.  I believe that we are in about the 3rd inning of the housing recovery and the same housing recovery will insulate us from another recession in 2013.  Of course, i would feel even better if those jokers in DC would get their act together but I predict some sort of fiscal cliff resolution will come either before the new year or very shortly thereafter

Account Closed · Answer

hey will.. u wouldn't happen to know where n how I can find the source that can shed some light on who n  how much inventory has been taken in by the hedge funds in the last x period would u?  would b interesting to see where they r buying..

Account Closed · Answer

I know this is dated, but In hindsight, it appears Obama and his admin have a different idea n plan .. especially contrary to this quote:

it'd b nice to see some fiscal discipline n even spending drop from their all time highs!

bummer bout the continual printing of money.  whoevers next in line for pres is gonna have a huge mess to deal with..

James Hamling · Answer

Well all know the national economy as a whole is sucking wind. Any true realized substantial grounded recovery is constrained by that.

Now to the contrary I am specializing now in micro markets where I have seen nearly 30% increases in 12 months, and it is a direct result of the "rubber band effect". There was a panic, HUGE marketing of a doom and gloom prospect to all real estate with hit the market as a whole, and not all areas and homes are the same. There are many areas that have seen a bubble effect for devaluation. Cooler heads are coming too, some stocks are being exhausted, and like in my area a very low vacancy rate and greatly increased rental rates have helped these properties market correct.

As a whole, someone with a say needs a good proctologist to dislodge the national economy's head and to get back to a solid economic grounding. One example, kinda tough to have a strong economic flow when we are outsourcing our manufacturing base, which by the numbers is the founding of the dollar flow. Need proof, North Dakota. Kinda hard to have a strong consumer economy when there is nothing being sold to generate the income to buy.

Jake Kucheck · Answer

The problem with comparing REIT buyers and the 2007 credit bubble bursting is an question of capitalization.

Given all that goes into creating a REIT, it is by definition that REITs will be well capitalized.  I think we can all agree that the average home buyer in 2003-2007 was not well capitalized, and certainly not as well capitalized as a REIT.

So, will we see a decrease in prices after the next 2-3 years?  Of course.  But this is due to a market participant slowing and ultimately ending their acquisition process, not due to the liquidation of an asset class that just saw its bubble burst.

Think "soft landing" instead of "Lehman style collapse".

Steve L. · Answer

From my understanding many of the hedge funds plan to establish publicly  traded REITs focused on SFH (and from what I heard we should be seeing this soon).  Waypoint is a major exception, they plan to sell to their existing tenants (who will probably still have a cheaper payment than the rent they paid).

If many of these corporate owned SFH ends up in a REIT, the chances of us ever seeing it on the market again are pretty unknown.

The next couple years should definitely be interesting.

Tom C. · Answer

I wouldn't be surprised if we saw 5 years of deflation.  Q1 will start a national recession caused by the fiscal cliff aka broad tax increase.  I also see some fiscal discipline creeping into congress, so spending should drop from their all-time highs.  So in short, the private sector will have less to spend (taxed away) and the public sector will be shamed into spending less (although still too much).    It seems odd to assume that assets values can rise much with a net negative to revenue across the economy.   Unlike in 2007, the fed has fired all their bullets and the effect has been greatly blunted, recently.  The only positive I see is that home building picked up through 2012.   If that continues in spite of the economic malaise, I would be surprised.   I am no economist, but I am an informed market observer who recently stayed in a Holiday Inn Express.

Rich Weese · Answer

Thanks karen, but not in this life OR in any life still to come...I guess we all see troubles in the future-just the year seems to be in question. Remember, ALL areas to my knowledge suffered price drops. Some started later and smaller dips, but not sure if any that had substantial appreciation didn't falter. Rich
My guess is we'll start to see some areas stop inflating early 2013.

Karen Margrave · Answer

I think areas where unemployment is lower, and the area has a good cross section of employers, the markets are going to continue gaining strength. Southern California is one of those areas. The weather, economy, recreation, amusement opportunities, etc. will always draw people from around the globe, and it will be a pretty solid place to invest.

On the other hand, counties in California that have high unemployment, and no real job base are going to continue to struggle. Many of those areas were helped by rising appreciation in the last go round before the crash, and people sold their properties in So Cal, took their equities and bought in other less expensive areas. Then the market crashed... and now it will be years before those rural areas recover, unlike in the past, when construction and real estate carried them, and created jobs for the local economies.

But... So Cal is alive and well!! Want to come back here Rich?

Will Barnard · Answer

As Joel pointed out, this is not a nationwide occurance like the bubble. Just to be clear, major price increases occured from 2004-2006, 07 was the peak in most areas and prices started to drop. So if you were comparing the rise, it would be more accurate to use one of the starting years rather than the end year in my opinion.

On to the question, I believe in some areas such as many parts of CA, we will see price appreciation fairly rapidly in the FHA lloan limits and if you check where all the hedge funds are currently buying, you can expect these increases in most of tjose areas. Then, when they decide to cash out (likely 2015), they will do so with the help of wall street and have every sucker buying into these at peak, then . . . .crash. I think 2015 and beyond will be like 2007-2009 (the crash) only for slightly different reasons.

The "talk" and the rise have just started, so as long as you get out before the crash, no worries.

Is 2013 a repeat of 2007??

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