Helpful notes on Real Estate

Those of you who know me also know that I remain extremely bearish on real estate. There are a number of reasons for this pessimism. Briefly, the primary reasons are:

• By most price measurement standards, we are not currently back to the pre-bubble price level in most cities, and we are still not there in Portland, Oregon, where I live. 
• If we are not back to pre-crisis levels, but the economic situation is also dramatically worse off, and there is significantly more inventory of housing on the market relative to the population, then we should expect price declines ceteris paribus to below pre-crisis levels. 
• The economic situation now is far worse than pre-crisis levels, meaning we should expect a further drop still. 

Some counter this by arguing that interest rates now are lower than in the past. Of course, the important point when you're buying a home is not what the interest rate is, it's the real interest rate. Right now, we are in a period of substantial uncertainty with respect to interest rates and inflation. Many believe now that we are in for a massive inflationary spiral, perhaps even hyperinflation, due to the actions undertaken by the Federal Reserve. However, economic history and much of economic theory indicates that we are in greater danger of low inflation, or perhaps even deflation now. Given where inflation is presently, it's quite possible that real interest rates are, and will remain higher than they have been over the past decade. It remains to be seen, therefore, as to whether today's rates are a good idea for people making a purchase of their first home (it's likely still a good idea to refinance if you have an existing mortgage).

So, having laid out my view, I wanted to share some interesting and helpful web resources on the real estate market.

The NY Times Buy vs. Rent Calculator

If you want to decide whether it's a good idea to purchase a home or not, this is a great tool. You can evaluate whether it is cheaper to actually rent a home at the rates prevailing, or to purchase a home, given your financial situation, and relative home values in your area. Give it a shot! The advanced settings are particularly interesting.

Google Maps

There is more than meets the eye here now. Google has used public records to incorporate listings of homes for sale on their maps, and homes in foreclosure, or that have been foreclosed upon. If you want to be a buyer today, opportunistic buying can be done using this tool. Knowing Google, there is a good chance that the features only get better over time.

To use the maps, go to a location, and then click on "more" on the map, to the right. You'll see a list come up, and you select "real estate". Then, in the new menu, select "foreclosure", and you're on your way. Happy shopping!

The Case-Shiller Index

This is one of the better indexes of national home prices. Importantly, it tracks the variation by city market, so many of you can see how far your own city moved, and whether it has moved back, and how far.

I hope those few of you who read this find this helpful. Feel free to share with friends, and suggest other sites that might be helpful.