The next three years house prices will drop . Why .....????

So many people ask me if and when house prices will rise again.



When I talk with people who are "trying" to sell the house I perceive that hope for a recovery in prices in the very short ("I heard that next year ....", "You see the signs of recovery", but where ?! ?), but inside they know very well that there will be.



And what amazes me the most is that most of the "realtors" I talk to hopes for a recovery in the market, and in the meantime is passively waiting for the houses are sold alone or with the usual two ads as you was 3/4 years ago, but how do these to help people sell their home if they are waiting for the first "market recovery" to sell?



The problem is that in most cases neither the owners of the house nor the "realtors" because they know there will be a recovery in the short, and do not even know how long this decline in property values




I do not have a crystal ball and do not use magic formulas. I do not foresee the future and I do not have the truth in his pocket.



But I manage quite well in analyzing the data of the real estate market in which I work for many years, certainly much better than someone who makes predictions and has never sold a house in his life, and does not even know what it is far from an Analysis Specification market (I put in too prestigious institutions, and big name politicians);-)


That's why home prices fall and continue to fall over the next three years (minimum).


As everyone knows the market is made by supply and demand, and then you wonder how they are going to supply and demand?


The "demand" (ie potential buyers) is influenced by the following indicators:

- Availability of access to credit, that is able to access a loan / financing for the purchase: how do you feel is going to this indicator? Positive or negative? .... Surely you know the difficulty in obtaining a mortgage, increasingly stringent criteria adopted by banks, of the need to have an important percentage of the price in cash, poor liquidity and hence the unwillingness to provide the majority of lenders;

- Development of the national economy: we know how it's going the economy, and therefore I ask you directly: it is possible that a potential buyer to purchase the house aspects having to face maybe 25/30 years of the loan, and not even having the security that the 'company he works still exist in the next 4-5 years?

- Purchasing power: here is known as the purchasing power according to average wages is decreasing ("there are those who struggle to make ends meet")


L '"offer" (and therefore the price of real estate) is influenced by several factors, and the most important is the number of homes for sale: the higher the offer (the number of homes for sale in fact) more prices decrease.

Now I ask you: the number of houses for sale (and unsold) is expected to grow or decrease?

The answer is to increase exponentially!

First, because all the houses that to date have not been sold are being added all those that are offered for sale to those who want to move house or just want to get rid of it (see the case of all second homes and real estate purchased years ago and put income, which are offered for sale because the owners have become a burden passive).

Second, there are all the houses that will be auctioned in the coming months and years as a result of failures and executions (and they will go at bargain prices).

Third, there are all properties that will be sold by organizations, Boxes of Security Professionals, Companies, etc., That to create liquidity will have to sell their property quickly.


These above are all factors that, together with others, heavily influence housing prices, and as you see are all negative indicators.


At this point the question that I ask myself is: who speaks of recovery is based on what? On signals that?!?


In reality there is no signal in this sense: it is only a hope, not a rational thing, it's simple emotion, and emotion in business you care.



It is very simple and involves a limited period of time, but gives a good idea: observe the line of the number of trades (violet) and note that the maximum number of residential sales in Italy there was in 2006; now look at the trend in average prices (dark blue) and you'll see that continued to grow until 2008, ie for two years after which the number of sales had already started to decline.


You'll then have noticed that while in a very fast market prices react almost instantly to a major shift in the number of sales, in the real estate the reaction occurs on average with a couple of years late.


Consequently, given that in 2013 the number of residential sales in Italy is still fallen and also for 2014 is likely to continue the downward trend, if in positive light 2015 was the year of recovery as the number of sales, prices stop off not before 2017.


As I stated, in this optical positive, that is, assuming that this cycle repeats that of recent years, and therefore the reaction delay of prices is of a couple of years, but we must also take into account other factors that instead can lead to elongation of this reaction period of prices:

1) it is very likely that we'll not return to 110% mortgages, which are those that have influenced the growth of the number of sales (and therefore price);

2) when the market will resume builders will leave with new real estate transactions and consequently the properties used that will unsold at that time will compete with new buildings constructed with the latest technology, and then: those who want to buy real estate used by the onerous and point of view of energy saving if you sell them to him at a discounted price compared to new ultra?

3) people have been burned by the drop in prices, which is practically never seen before in Italy, and as a result will be very cautious before ributtarsi headlong in the investment property.


We still want to be positive and think that prices will continue to go down only until 2016? And that again start to climb from 2017? I ask you: if you're one of those people who wants to sell their home to 200,000 euro, while from an Analysis of Market Specifies that the price actually feasible for that house today is 150,000, and saw that the real price (ie 150,000 ) will drop the next three years (2014-2016), and from there we imagine that it goes back and then it will take another 3 years minimum to return to the actual current values (ie always 150.000), how many more years after 2016 it will take to get to 200,000 that you ask?


And who tells us that the price recovery also applies to properties used? It makes sense to gamble the value of your home waiting 6/7 years to sell it hoping all the best from just seen all the negative indicators?


Or it makes more sense to realize the maximum price possible at this time before the market drops again, and cuts further value to your home?



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