2006 may well go down as the year Pluto was suddenly just another big rock, Brad and Angelina had a baby and the real estate market slid from great to miserable in a few short months.
In data released Tuesday, prices declined in more than 61 of the 275 cities tracked by the Office of Federal Housing Enterprise Oversight. And the deceleration has been fast: The agency reported that the decline in quarterly appreciation was steepest in more than three decades.
Everywhere you turn, articles abound with titles like “When Homeowners Are Desperate to Sell”, “What To Do If Your House Isn’t Selling”, and “Sharp Home Price Pullback”. Agents are trying new gimmicks like “free” leases on a new BMW with a successful close of escrow. Short sales and bankruptcies are at all time highs.
Were I a betting man, I’d expect that we’re nearing the time when some suckers — er, I mean bargain hunters — will come out of the woodwork to purchase real estate. But if the price appreciation has been as overblown as I believe, they’ll soon end up owning more than the place is worth, too. Speculators in this kind of real estate market aren’t going to fare any better than those who tried the same thing with day trading. I wonder how many of those guys are still playing the market.
I hope real estate continues to fall for quite some time. It’s actually healthy, despite the pain. Much like the stock market in 2000, the longer the insanity went on, the worse the fall was going to be. When people are happily skydiving without a parachute, something’s amiss.
It’s time to flush out the idiots who think real estate can never depreciate, that interest rates are at historic highs (they may be right — as long as your definition of “history” doesn’t go any further back than the 1990s), or that a $395 a month payment on an $850,000 loan is perfectly normal.
In the words of George Costanza: flame on!