RBC: HOUSE PRICES TO DROP UP TO 30% IN 2012

Via CNBC:

“Tom Porcelli, chief US economist at RBC Capital Markets, says he is not buying the recent positive data on US housing. He sees US home prices dropping another 10% – 30% in 2012.”

 

Source: CNBC

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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. Ok. So we know which way he is in his book. You might want to consider individual markets. I sold a home 2 years ago in Irvine, CA and today the same home sells for the same price. Meanwhile, I bought a shortsale home this last January in Arizona and it’s up 20% since then. Price will depend on location. Quoting average price across the nation is only marginally useful.

  2. No, the housing will be stable. It will not move up or down significantly. The banks will work out the bad loans in long period of time, but they are not in any hurry. So the interest rate will remain low. Fed already told you that.

  3. Dead cat bounce in AZ- National Housing numbers by NAR were inflated they admitted recently for the last few YEARS… oops. All data points lowero robosigning delayed inventory, jobs are no better, delinquenciwes are going back up and virtually no demand… housing is in a multi year retrenchment.

  4. Ok so we have all these homes that are not being serviced. No cash flow support for bank assets as these assets continue to fall. So of all these pension funds and other investors owning the CMO’s that are underperforming, who is going to true up this shortfall in cashflow?? Have the actuarials adjusted for the underlying asset depreciation? Have tehy adjusted for the shortfall in cash flow that services the future retiree’s?

    Can anyone assist in clearing up these questions? The latest housing data as pointed in this video was interpreted market as bullish. Example of analytical malpractice broght on by cognitive dissonance. Exactly how does the rational mind interpret adjusting historical numbers down then compare a sub par number against the historical adjusted numbers and rally?

    So Europe and the US continue to interpret data as if nothing is wrong while economic performance is sub par ie vulnerable to recession. Our political powers are not putting forth policies that lead to efficient deployment of resources. In other words the tail is getting fatter while the markets are getting increasingly complacent.

  5. In any individual market, you have to ask yourself how much bad news is already priced in. In Arizona, the residential home market is down 55% from it’s peak. The dogs of the last 5 years are starting to show signs of stabilizing. If you believe as I believe, then the Macro number influence on prices will start to diminish and
    individual markets will be judged on their own merits. Look at local affordability, price to income ratios, rent vs own comparisons,local job market, replacement values, foreclosure stats and raw land values. In other words, do a fundamental analysis on any land purchase as you would a stock. In many cases, you will find compelling reasons to purchase now.

  6. Over the past year, I have purchased 5 single family homes within a single metropolitan area. I also own the single family home I reside in. I would have to say that in my area, the bottom came last spring. Since then, prices have rebounded somewhat.

    I find that sellers are generally not willing to give much on price now. They would rather stay put than sell. This includes individuals as well as institutions. Which is frustrating to me, as many of the foreclosures in need of extensive repair are not priced appropriately for the amount of investment needed. Yet the sellers are not willing to entertain lower bids.

  7. I agree, the housing market is very much by “location”. Oklahoma never had the incredible “up” move in house pricing and never participated with the FED socialist push to give everyone and their dog a house. Therefore, Oklahoma is not suffering the repercussions of those insane actions. Yet another lesson in letting true demand and supply work, instead of dictated FED intervention. But they NEVER seem to get the message!

  8. Seems most people buying houses are not listening to videos like this or prices would drop faster. ‘2 years inventory if u include houses like those in moratorium on foreclosure’

  9. If you think prices will only 30%, you’re deluding yourself.

    If you think “we’ve hit bottom”, check in to the psych hospital now because you’re going to be stunned in the coming years.

  10. The Fed has pushed interest rates to historic lows. If mortgage rates returned to their historical average of 7% or so, that would create a significant negative impact on housing prices. That home prices have dropped (on average) even as mortgage rates dropped tells you how weak the market is.

  11. Mr. Smith,

    How would you know what the price of either of those houses you mentioned would sell for? ZEstimate? I write Minyanville’s Housing Market Report and articles which Cullen used to post. I dig very deeply to find what’s really going on in major metro housing markets. I can tell you that your estimates are nonsense. Prices are still falling in every major metro. The median prices you read are totally misleading because the banks and GSEs have cut back on REO sales. This automatically skews the median price of all homes sold upward. Go to clearcapital.com to see a confirmation of this.

    You and others need to get reliable sources of home prices and the shadow inventory or you’re going to make bad decisions.

  12. Tell me Mr. SpotOn. If sellers are not dropping their asking price enough, why did you buy 5 investment properties this year? Tell me what you paid for them, how many square feet and what metro and I’ll tell you whether you got a good deal.

  13. Keith,

    I’m not using Zillow. I’m using post bubble actual sales comps for the respective neighborhoods. I know what I sold my home for in Irvine and I know what it would take for me to buy it back. I’ve been as surprised as anyone about what has happened. In the downturn, prices have fallen at different rates based on segment not just location. That’s were your analysis can go wrong. I’m not saying every home in every market is a buy. In any market, there’s going to be winners and losers. In any market, you have to do your homework to determine fundamental value. In today’s market, that is key. You have to look at the marginal prices to determine value. Also, in real estate investing, the stats don’t always tell the full story because so much depends on quality and tastes. Without digging into your purchase on a micro level you risk losses.

    If you think were headed for armageddon, because of Europe or whatever, then don’t buy now. But if we avoid total collapse, there are real bargains to be had if you dig for them.

  14. Since when is an Economist an Appraiser?

    another overpaid idiot
    REPEATING
    the same tired arguments

    TELL US SOMETHING WE DONT ALREADY KNOW!

  15. “Mook” hits the proverbial nail on the head. With interest rates at near historical lows, housing prices, in general, continue to be either flat or trending downward. The time is coming when interest rates, for a variety of reasons, will be forced higher. When that happens, it will eliminate more buyers out of the buying market which will in turn have further negative effects upon prices. Along with that, there remains a huge number of homes in the “shaddow inventory,” and that number continues to grow. As this “jobless recovery” slugs along, I look for an increase in forclosures which will only add to that already bloated inventory. The picture for the near future is extremely bleak. The world wide credit bubble and its disasterous effects will be felt for years to come.

  16. Why not +100% to -100%? There. I know I’ll be right by this time next year.

    10% to 30%. hehehehe. Too funny.

  17. Smith,

    So according to you analysis with the exception of Armageddon which might not happen everything will be fine and your assets will go up in value.

    Let me ask this, what about a severe depression if Europe goes bust(aside Armageddon), do you think that this is still a good time to buy?

  18. Now I finally understand the mantra “Bubble, bubble, toil and trouble”. The solution ? I’ll keep it to those who can actually hear with their hearts. –> In 1971, the pursuit of loosening the most desirable real-time genie allowed the evil debt genie to escape the same bottle at the same time. The irony is that the real-time genie holds the esoteric key in getting the debt genie back into the bottle.

  19. Ben,

    In India, they having a saying, in the end everything will be all right.

    I’m shocked how paralyzed with fear we as Americans have become. We fear economic collapse in Europe, we fear our real estate market, we fear China growth, we fear too many of us getting old. It’s no wonder that prescription drug use is at an all time high.

    Let me ask you a question. How difficult would it be to solve the above issues, if you just removed fear from the equation?

  20. Smith,

    1. we cannot remove fear from the equation, it’s part of our mammalian nature
    2. even if we could remove fear, the US alone still has about 15 TRILLION in debt – that’s only what the federal gov owes, not including SS, medicaid, nor state, local, corporate, and private debts. I don’t see how anything can be solved until that debt implodes and we start with a clean slate
    3. I think housing prices are going back to where they were in the 70’s/80’s so at least 50% or more decline from here, EASILY

    also, the gov does not “set” low interest rates, this is ignorance on the part of 99% of the public. Rates are at historic lows for Tbills due to exceptionally high DEMAND for the safest interest-bearing store of value. Housing rates low due to very LOW inflation expectations and LOW DEMAND from investors for new mortgages (opposite of Tbills – we PAY interest to banks). most people are surprised that low mortgage rates occurred alongside a housing collapse, but the collapse in new mortgage demand CAUSED prices to fall AND mortgage rates to fall. the 70’s rates went the other way due to hyperinflation. This is not the environment we’re in now. good luck

  21. Also, I might add that mortgage rates for most people will begin to rise, while Tbills stay at 0% and 30-yr UST’s stay at 3-5%. This will be because banks will be too scared to lend to people in a depression environment. So although demand will be low for mortgages, banks will charge higher rates due to fear of default on mortgages.

    That will coincide with the 2nd phase of the housing bust- but high rates aren’t the root cause of the problem, just a secondary effect of a credit implosion which will also force down prices of housing, stocks, etc.

    stay safe

  22. Tech Analyst,

    As a technician, don’t you have to remove fear from any chart analysis? Yes, fear is an evolutionary response for survival in humans, but once a problem is identified how useful is it?

    Fear can be used as a weapon. The MSM is doing it everyday. If it bleeds it leads. In your statements, your using it as a weapon. Lets focus 90% of our time on solutions, and only 10% of it on problems.