How long will real estate prices continue to be this low?

Question

I am hoping it stays low for the next 2 to 5 years. What do you think and why? What are your reasons for predicting it ? Thanks.

Answer 1

Depending on your area, most likely anywhere from 18 to 36 months.  From a financial standpoint, the average American consumer can only afford homes priced at roughly 3.2 to 3.5 times their annual gross income. (I.E. $50,000 annual income x 3.5 = $175,000).  Also, the ratio of payments to potential rental income is too high right now. So, as you can imagine, we still have over-inflated values in most parts of this country.  

Until prices come down to where the median income can support the prices or the payments are low enough to entice investors to buy properties for rental income, we will continue to see depreciation in the housing market.

Right now, we are overpriced due to the fact that too many low-start adjustable rate loans were made and artificially inflated the real estate market.  Now, we are seeing the result of this crazy lending practice.  Coupled with stated income loans, the run on houses was so crazy that home prices went up probably double what they should have.  Maybe more.

Good luck with your endeavors