Thornberg hasn’t been a big cheerleader, so this report is curious – from the U-T:
County home prices, which began to recover last year, will continue rising but at a slowing pace as government stimulus programs expire, Beacon Economics forecasters predicted Friday.
In a wide-ranging review of the local economy at the San Diego Hilton Torrey Pines, the San Rafael consulting firm’s economists said single-family resale home prices will trend upward, from the first quarter’s median of $382,788 to $439,000 over the next four years — a nearly 15 percent rise.
“Home prices in San Diego are great news here,” said Brad Kemp, Beacon’s director of regional research.
But the recent increases occurred with the help of federal stimulus dollars, not because of any underlying economic fundamentals, such as significant job or population growth that would spark long-term demand, the economists said.
With foreclosures expected to increase, home-buying incentives expiring and nearly a third of all homes worth less than their mortgage balance, Kemp said sales and price growth will slow down. The $439,000 median price forecast for 2014 would still be 23 percent below the 2006 peak of $571,580.
“I don’t think it will grow at an exponential pace anytime soon,” he said.
The forecast falls in line with other economists and real estate industry analysts, who have predicted a leveling off of prices or a drop of as much as 5 percent for the rest of the year, after federal homebuyer tax credits and low interest rates end. An expected increase in foreclosure properties also is expected to keep a damper on prices.
This article is odd Thornberg mentions prices have gone down because of job loss, population loss, and loss of gov buyer “teaser” cash. Then goes on to predict prices will go up 15% in the next 4 years. But based on what?
The only thing I can think of is 15% divided by 4 years = roughly 4% per year. Considering that 4% inflation is about average for everything this *might* make sense. (Personally I think 4% per year price loss is more likely to happen.)
I think Thornberg is trying to pull a fast one with numbers to make it look like prices are going up. Using the 4% inflation trick they could have just as easily said home prices will go up 40% in 10 years.
Prices going up 4% a year is flat pricing, no real news there. I expect homes to be up 20% plus here over this period. Just my personal desire so I can retire someday!
this is old news, right? median prices will increase when higher priced homes are selling. the lower priced areas were hit first with foreclosures which decreased the median, and now the problem is just working its way up the ladder. i don’t interpret this article as a sign of good times ahead, just more of the same.
“more of the same”
is my prediction for the next two – three years. It is going to take a whole lot of time to dig out of this mess. Without the home ATM to fuel excess consumption, I think we are going to be getting a good view of the problem our debt-based economy has created. The real estate bubble and the home ATM masked the negative effects of off-shoring jobs for the better part of a decade.
We can’t ignore the man behind the curtain any longer. Government cheese is no substitute for a productive workforce making products in demand by the marketplace.
Considering the current shadow inventory and the job market, this prediction of 15+% price increase to me is like a student do the math problem 3 – 5 = 2. Very funny, and it’s the most stupid thing to say.
Conversely, this sounds like 41% would walk away…..
More than half of homeowners with a mortgage say they would not walk away from their home if it were underwater — i.e., they owed more than the home was worth — according to the results of a periodic survey by foreclosure data company RealtyTrac and property search site Trulia.com.
Harris Interactive conducted the national survey online between May 10-12. The survey had 2,596 participants: 1,690 homeowners (1,137 of them had a mortgage) and 832 renters. Of those homeowners with a mortgage, 59 percent said they would not walk away from their home regardless of how much they owed on it compared to what it was worth.
US is starting to look better than any alternative again (thanks to Greece, the Euro starting to unravel and I guess whatever else is the alternative), amazingly, even though the US doesn’t act like it has any intention of paying off debt.
Maybe some of that foreign money is anticipated to be dumped here in terms of real estate.
We only nationalize companies and not homes yet (well, not many) so in this crazy thing called world economics, we actually are financially a good investment again.
You just got to be better than the alternatives.
Expect massive inflation. We have a worse debt ratio than Spain and Portugal – only Greece is worse. Expect the roiling currency markets to wash ashore as certainly as BP oil in the Gulf.
When that happens, the Feds will have two choices: default on bonds (which they’ll never do), or print money like crazy to pay the ridiculous 12.6 trillion in debt obligations with cheaper money. This devaluation will occur without any admission – expect obsfucation by officials even when directly asked if this isn’t currency devaluation.
Oh, but couldn’t we just slash the deficit and do the same thing without trashing everyone’s savings? If you saw the riots in Greece, you will realize that no politician has the stomach for that sort of thing given their fear of similar results.
So, we may be “better than the alternatives” at this moment, but fasten your seatbelts!
“Of those homeowners with a mortgage, 59 percent said they would not walk away from their home regardless of how much they owed on it compared to what it was worth.”
I’ll go out on a limb and bet that those were the borrowers who bought and live within their means and purchased a home, not an investment.
“Oh, but couldn’t we just slash the deficit and do the same thing without trashing everyone’s savings? If you saw the riots in Greece, you will realize that no politician has the stomach for that sort of thing given their fear of similar results.”
Some how I think shutting down the “war machine” in order to slash deficit spending wouldn’t inspire rioting in the streets. Funny how next to no one ever mentions the alternative.
I’ll go out on a limb and bet that those were the borrowers who bought and live within their means and purchased a home, not an investment.
Dunno, sounds like one of those questions where people give the “right” answer and not the real one.
tj, I really think it depends on the philosophy of the homeowner and the details of the business decision. I wouldn’t walk away from my house if the value dropped way below what my loan balance is – but not out of ethics – out of rational business sense. I can’t rent in this neighborhood for less than my mortgage payment, not even close. The smart business decision is to continue paying on my mortgage regardless since it is the cheapest payment option. It comes down to math – can you rent in your same neighborhood and at your same standard of living for less than what you are paying on the mortgage?
In a normal economic environment 3-5% appreciation is average, but the economic situation we are currently in is anything but normal.
Unemployment, higher interest rates, loan recasts, shadow inventories and foreclosures have not been taken into account here.
The mice have already eaten all the cheese.
Traders in San Diego’s Home Price futures disagree. I tend to think somebody with money on the line is a better predictor then just another generally optimistic economist study.
http://quotes.ino.com/exchanges/contracts.html?r=CME_SDG