More pain for home prices

Everyone wants to know what the future holds for real estate home prices.

Usually I tell homeowners I’m not a psychic and that home prices can go up … or they can go down.

After studying this chart, I changed my mind.

Real estate home prices will go down … by as much as 25%.

The good, the bad, and the ugly

This prediction is not something any of us wants to hear. And it’s not for the war weary. But take a look for yourself.

It was an eye-awakener for me, and I’ll bet it’ll be an eye-awakener for you, too. Not to mention discouraging!

While real estate is always about ‘location, location, location’ … and some areas of the country won’t be affected as much as other areas … we must prepare ourselves for the worse.

We must also base our decisions regarding our future homeownership plans on the very real possibility that the real estate can get much uglier.

Attribution: Graph created by Steve Barry and originally published at The Big Picture.

Bummer

Although urban legend has it that home prices began to skyrocket in the mid-2000s, actually the bubble had its origins in the late 1990s.

Residential real estate market values climbed on a straight trajectory from the 90s until July 2006. Then it plummeted straight off a cliff, made a half-hearted attempt to recover around 2009-10 (due to the IRS tax credit incentives), and started down again.

According to this chart, the correction is far from over.

Headed for a fall

Can the real estate market sustain another 25% drop? Maybe the more important question is, Can we?

We may have to, so buckle your seat belts. We could very well see more blood and gore from now until the end of this decade.

Wait it out ... or get out

If you’re a homeowner planning to wait out the downturn for a couple of years before trying to sell, it looks like you’ll have to wait much longer.

Once we hit bottom, who knows how long it will take to start an upward trajectory. Maybe only take a few years. But if we go by the last major upheaval down-heaval to the real estate market (during the Great Depression), it may very well take more than 3 decades.

After all the bloodletting, the correction could take less than 10 years or more than 30. Right now, I’m betting on more than 30 years.

I hope I’m wrong.