Housing prices are still inflated.
By Daniel at 31 January, 2010, 12:02 pm
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There seems to be disagreement here over whether low interest rates and the Fed purchases of mortgages can reinflate the housing bubble. I watch real estate closely and my own opinion is that housing prices are still inflated. The problem, if you want to call it that, is that residential real estate cannot be sold for less than what is owed without the owner taking a significant hit to their financial well-being. So, voluntary sales of homes must be priced at still-inflated levels. In some cases, this can be done, while in many cases homes owned by people who are still employed and not under dire financial stress are simply not put on the market.
In my own searches for residential real estate, in Denver, Grand Junction, Del Rio, Corpus Christi, Hot Springs, Little Rock, and near Branson, as well as my searches for office property in the Denver area, the big problem is pricing. Sellers, whether they are selling voluntarily or selling distressed property, are having a very difficult time setting a price. Buyers such as myself can’t figure out pricing either. Comparable sales figures are either way too high, from the past several years, or they are wildly inaccurate if based on speculation in the REO and other distressed market.
I’ve come to the conclusion that residential property across this country is still priced too high because it is too high relative to income, especially in fly-over states where income has not gone through the extremely high inflation characteristic of the east and west coast. Wages and real estate inflation in fact seem tied together on the coasts. Wages had to rise in order to attract people during boom times because of inflating real estate prices. Then, because real estate loans prevented deflation of real estate prices, wages were similarly held high too long.
- William
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