Duck! Watch out for falling home prices! By Les Christie CNN Money 02-25-2010

Joe thanks for the nice post, but it gives me a little fear for I am just starting out.

First, Todd - Fear not. There will never be a better time in the lives of the DG.com family (regardless of the age spread) to be a real estate investor. Just keep studying and applying what you learn. In a few months, you'll be far away from that fear you mention.

Joe - thanks for the article. I was at my REIC meeting last night in Beverly Hills. The investment pros our club president brought in all agreed that prices will be falling by at least another 15% this year. Now, these were 8 guys who have made themselves millionaires a few times over so I tend to believe they know what they are talking about. Plus, I already had the same sense of the market from all the reports I've been reading. I'm also now thinking, contrary to something I posted a couple of months ago, that the homebuyer credit may be extended again - at least one more time. There is potential for an even deeper plunge if the credit goes away, all those foreclosures finally start hitting the market, and the job picture remains as bleak as it has been. The closer we get to April the more the experts are stating their dismal belief that whatever progress we've made toward recovery will disappear if the credit ends. Washington is reading the same reports. And in an election year, they may want to take whatever steps they can to make their electorate happier.

This article found at: http://blogs.wsj.com/developments/2010/03/01/buffett-predicts-housing-pr...

By Emily Friedlander
Warren Buffett with the Geico gecko in New Jersey.

Saturday we got this forecast from the Oracle of Omaha.

[Within] a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious. Prices will remain far below “bubble” levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means because the bubble burst.

These remarks were included in Berkshire Hathaway chairman Warren Buffet’s 2009 annual letter to shareholders. Mr. Buffet is known for bucking the conventional wisdom with great success: Anyone who held a $10,000 stake in Berkshire Hathaway at the start of 1965 has about $80 million today. Part of his secret, as he lays out in the letter to investors, “Don’t Buy When Everyone Else is Buying.”

That seems an apt nugget of advice in the post-housing boom environment.

We’ve charted a range of predictions on housing over the past few months. An analyst with Credit Suisse last month cautiously predicted that home building would return to profitability this year, but he offered up five “headwinds” to progress, including the usual suspects: expiration of the home buyer tax credit, unemployment. At UBS David Goldberg offered 10 predictions for the coming year, and also said we’d see recovery in 2010. Some predictions have been more dire: Last September Meredith Whitney said we’d see another 25% plunge in home prices. Nope.

Readers what are your predictions on housing? What are you seeing on the ground where you live?

...This also can raise perspective.

Published: Thursday, 4 Mar 2010 | 2:09 PM ET
By: Suze Orman found at: http://www.cnbc.com/id/35707791/

It’s the eighth anniversary of the Suze Orman Show on CNBC. And I am ready to celebrate. I know, I know, if you compare 2002 to 2010 it might look depressing at first glance. But I think we’re in much better shape today than we were in 2002.

From a statistical standpoint it’s easy to think that we’re so much worse off today.

* Even though we were in a recession in March 2002, unemployment was 5.5% compared to 9.7% today.
* The median price of an existing home in March 2002 was a $183,400 a 10% increase over its March 2001 level. Today the median price is $172,900 (as of year-end 2009) having fallen 4% over the past year, and more than 20% since 2007.
* Even after the deflation of the Internet stock bubble that began in 2000, the five-year annualized return for the S&P 500 as of March 2002 was a still strong 7.8%. The 5-year annualized return for the S&P 500 right now is 0.5%.

So why in the world do I think we’re better off today?

Suze Orman
"The Suze Orman Show"

Because eight years ago so many of you were living a financially false life. Oh sure, everything looked great, but it was all a façade that was built on shaky money habits.

Who needed to bother with building a real emergency cash fund when you were convinced that your home was the best ATM in the world. Hey it was even better than a bank account because you could deduct the interest payments.

And who needed to stuff much into their retirement savings. You figured your home was a better investment, or at the very least you were expecting the stock market to regain its momentum from the 1990s when it posted an annualized gain of 18%.

And who needed to think about delayed retirement; between your home equity and your still-plump investment accounts you were counting the years to early retirement.

Right?

RELATED LINKS

Current DateTime: 02:22:09 04 Mar 2010
LinksList Documentid: 35710408

* The Suze Scoop
* Quiz: A Healthier Wealthier You
* Suze's "Out There" Outfits
* Quiz: Back to Cash

Well, now you know better. As the renowned investor John Templeton once said, “The four most dangerous words in investing are This Time Is Different.” Back in 2002 you were still convinced that it was different. That homes could appreciate at a 10%+ annual rate—and never, God forbid, lose value. You thought there was a new investing paradigm that make P/E ratios of 40% a good value. You thought none of the old rules applied to you.

And the more you believed all that the steeper the price you have paid.

What We Know in 2010

I appreciate it has been a painful time, but where we are now is much healthier than where we were in 2002. I don’t have to explain why an emergency fund is vital. I don’t have to tell you that exotic negative amortization loans are dangerous. I don’t have to explain market risk. And you sure have been schooled in how dangerous it is to live well beyond your means by tapping HELOCs and running up massive credit card balances.

You get it.

And that makes me feel so hopeful about your future. Sure, many of you may still have some digging out from past financial missteps. But the point is you are focused on doing the digging. You are committed to living a more financially honest life, and you know what is real vs. what is just a tempting bubble. No more spending more to impress others. You are focused on what works for your family. What will make you all safe and secure. And I am focused on helping you continue your transformation. Happy Anniversary to us both!
© 2010 CNBC.com

I believe this is correct.

The coming fall in prices will largely be due to the fact that many homes that probably should have already been in and through foreclosure were somehow "band-aided" by government intervention. Mortgages were revised and deals were struck to keep people in houses they should not have been in before the renegotiations ever took place. The ineviatable was only pro-longed. If it helped a few then great. However, the "new" bill has come due and then past due again.

We are here to do the right thing and truly rescue some of these folks by negotiating them OUT of a bad situation, not RE-NEGOTIATING them into the same terrible situation.

Don't be afraid, now is the greatest time in history to take action with real estate. Learn you target market area and you will have confidence as you locate and lock up the deals. Good luck with real estate investing. Believe and Achieve! - Joe

Thanks for the additional informatio nand insight. It is always good to listen to others and forulate our opinions and strategies based on the information. I always say the more info the better. One key is if you are making money now, the porice drops ay not hurt. Or if you buy and hold and have nice positive cash flow each monthg the price fluctuation will not matter as well. I also believ come Fall and Winter 2010 in the Miodwest and other areas ther will be some even greater deals based on the tax credits ending, and availability of financing in the market. All excellent points. Good luck with real estate investing! I know the Midwest market is different than the southern California market (especially the average price of a home). If your looking for deals out this way, just let me know. Believe and Achieve! - Joe

Thanks for the additional insight and information. The thing I like about this market is it is a good learning experience to see what factors are driving the market up and down and understanding current and future cycles. This is key for today and in the future. Believe and Achieve! - Joe