Real Estate… June 24, 2008

How we get these Future News Predictions


The problems with real estate have been bad and will be getting worse.  Many people, who got in over their heads with a home they couldn’t afford are now losing that home and being foreclosed on.  Many people who bought more than one home, hoping to flip them quickly, got caught in the credit downdraft.  The fact that anybody’s home gets foreclosed on is bad enough, but when that home is part of a community, the problems can multiply.  Some people are walking away from their homes and leaving them in disrepair.  This makes it difficult for the lender, who now owns the home, to sell it at a fair price.  When people leave their swimming pools, these pools are now becoming a health hazard.  These pools are becoming breeding grounds for mosquitoes and mosquito-borne illnesses.   There is not much the neighbors can do about it.  These problems are further driving the home prices down in that particular neighborhood. (NEWS proof)  Soon, home prices will take another big correction.  Some areas will decline by another 30%.  Other areas that shot up quicker than others may take another 50% correction

Housing prices are readjusting to the levels where working class people could afford them.  If a house doubled or tripled in value quickly, then it could just as easily correct by the same amount bringing it back to the original sales price.  What is compounding these problems are the huge amount of adjustable rate mortgages that are now resetting and the owners cannot make the new payment.  Some are only able to make the new payment by cutting out other things.  With the high price of gas compounding the problem also, the owner must make some tough choices about what and where he cuts back.  Many are cutting back on travel and will not take a vacation this summer.  Many are trading a gas guzzling automobile for a more efficient one and losing on that front also.  They took a loan on a car with down payment money from the equity that was in their house.  Now, all the equity is sliding backward and the well is dry.  Next, the homeowner that is still able to make their payment will cut back on food expense.  They will not go out to eat and will only buy groceries that are on sale.  One of the last items to be paid will be HOA dues.  With people not being able to pay HOA dues, the homeowner’s associations will not be able to offer as many services as they could in the past.  Community pools and recreation centers will be closed down, and people will have to pay for services that the HOA used to pay for.  As the problem of not receiving HOA dues gets worse, some HOA’s will go bankrupt.  Entire communities will be left without the services that the HOA used to provide.  When the homeowner has to pay for the services they used to get through the HOA, more will be unable to remain in that community and will walk away.

QUESTION: What is the new paradigm when it comes to neighborhood involvement to protect themselves and their properties?

ANSWER: The day is here when you may have to be your brother’s keeper.  It will take the involvement of all to sustain a community spirit.  As building of new homes has slowed, the revenues that cities got from permits has disappeared.  Cities relied on that money to continue with improvements that were needed in the city.  When one house gets foreclosed on, it starts a snowball effect that can eventually destroy an area.

QUESTION: What is this ultimately leaning toward on a humanitarian basis?

ANSWER: People will have a renewed sense of cooperation and dependence on one another.  This is the way it used to be.

QUESTION: What communities will fail the test?

ANSWER: Communities where speculators bought many homes will not have enough people to fix all the problems.  Eventually, some of these types of communities will become ghost towns.  The speculators who came from California and went to Nevada and Arizona will end up losing many of their homes.  The middle-class neighborhoods where people bought a home that cost more than five or ten times their incomes, will also turn into ghost towns.

QUESTION: Because of the falling dollar, many foreigners have shown an interest in buying houses in these popular resort type areas. Will that hold up in the ensuing housing recession?

ANSWER: You will see many foreigners and foreign corporations buying in expensive areas.  However, some countries like the UK and parts of Europe will have a severe housing downturn there.  By next year, the UK will be in a major housing slump.

QUESTION: When will the bottom be seen in these once popular destinations?

ANSWER: The housing market will start to make a comeback, but in the downtown areas, with young couples.  (NEWS proof) The suburbs will be hardest hit because of the amount of foreclosed homes and the increasing costs of commuting from the suburbs.  The outlying areas may not start to come back for four or five years.

QUESTION: When will these downtown areas start to revive?

ANSWER: You will see new companies setting up operations in the old downtown areas.  These could be call centers or think tank centers run by universities or large corporations putting in support functions for their operations around the world.  This influx of new business opportunities will draw the younger workers to the revived downtown areas.  This will start happening in the next 18 months.

QUESTION: Are gas prices going to go down and stay down?

ANSWER: Gas prices will not go backward.  The increasing demand for fuel in developing nations will cause a never ending spike in demand.  The fact that refineries cannot process oil fast enough is another factor that will keep prices high. 

QUESTION: What will be the ultimate destiny of U.S. car manufacturers, airlines, and commuting in general?

ANSWER: People who cannot afford to commute will be forced to work from home.  The companies will allow many more workers to work from home and set them up to do so.  The major car manufacturers will have huge amounts of unsold inventory over the next few years, and will not be able to retool their existing plants fast enough to build smaller cars.  They will be forced to buy small cars from foreign manufacturers in China and India to compete.

QUESTION: How much more can houses go down when the cost of replacing them is so high, and the fact that mortgage interest rates may rise?

ANSWER: That is a complex question.   If you bought a house 5 years ago and paid $200,000, it was worth $200,000.  If that same house went up to $400,000, it still only had $200,000 worth of materials in it.  Everything above $200,000 was speculative fluff that the craziness of these markets created.  If you wanted to build a $200,000 house today, you would find that it would be much smaller than the $200,000 you bought 5 years ago.  This is due to materials and labor increasing in price.  People will have to get used to living in smaller houses because the competition for materials is worldwide.  Also, increasing mortgage rates will keep another wave of speculators out of the market.

QUESTION: What kind of HOA’s will be the most vulnerable?

ANSWER: Suburban upper-middle-class developments where people are just walking away from their houses will be the most vulnerable.  Many empty houses will be there and many of the residents left there will not be able to pay dues.


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