"Whatever it is prices are going to be WAYYYY lower than today. I think."

Approximately how much Deepak?

Hey your guess is as good as mine. I think we're going to levels of 2002 again, perhaps even lower. This is goign to be messy, opaque and very depressing for home owners.

Well the builder lobby is greatly connected , no wonder they speak like our politicians in power!

I agree with ur analysis and updates and congratulate u on catching the trend very early,
As it gets more difficult to get a home loan, the builders will try everything to push people to buy.

Hi Deepak,
In mumbai the rentals have not decreased but remained same as compared to last year.I believe it takes some time to percolate down that depression mood to broker/owner level.
Its not like money drawdown of future trades.

Deepak a question ver here,i understand futures and trade in mini nifty often,could you please explain a bit abt options,call,puts,couldnt ever understand it,u hav a habit of telling things in simple terms may be i will understand.

rgds.

http://www.business-standard.com/india/storypage.php?autono=339834
something interesting worth a visit

yar..i agree with deepak shenoy. we are standing on the dark cloud. we can not predict any thing at this time but waiting. :(

The basic issue is affordability which has gone through the roof. For an investor the scope of further appreciation is -ve from the present levels.
End user anyway cannot afford to buy at the current prices (with his job at risk and banks not ready to leverage).
The basic issue is fundamental valuation which is absurdly bloated. With the risk aversion that has crept in (esp wrt real estate) both on the buyers and banks side, buying is absolutely out of question without a 50% correction from here.

I think the problem is of fundamental valuation. At some point people stopped looking at whether it was better to remain in their rented houses or buy their own for living. Every where panic buying (both individuals for homes and developers for land).

Over last 2 weeks I did little bit of survey/thinking:

I looked at people around me including various education levels, incomes levels, living small towns as well as those living in big towns. Every one (believe me) has taken a loan. Let it be for buying a House, Car, or some thing else. People have even taken education loans if they could not find any other reason for taking a loan. The balance sheet for my sample of people showed net "debt". Many people are stretched. Some people are over stretched.

Second I was wondering where all the money has gone. This is my theory: People like me or my friends/relatives took loans and bought homes or spent it. The real estate developer bought more land and developed more sq feet. The land owners who sold their lands bought cars, build (or re-modeled) their houses, some part they would invested into buying land at far away (speculative) places, some might have put it into real estate development. Some people who do not have expertize would have parked their money with real estate developers for some say 20% or 24% interest (I do not think money comes into Banks). I am not sure if any body has kept the cash, I guess they would prefer their black money grow along with real estate prices, obviously invest some where related to real estate. If I look at this at every stage money has transfered hands. Some part of that money would have spilled out of real estate area (e.g. cars, cement, steel, gadgets, spending on other things). This has actually created more jobs and transfered the money to new job holders as well as increased salaries to existing guys. This is a big cycle went on for last 4 years.

This is one of the (many) reasons we have seen a better than average growth in last 4 years. (there may be other things similar to it).

This means we come to an end of the cycle and taking stock of net worth and profitability/sustainability at each level (individual or corporates). Started controlling expenses at individual/company level.

What is going to happen is really painful adjustment of all the low interest regime as created. We are in all likely going to see good rental yields in next 2 years. Note that rentals are falling, meaning real estate prices have to fall more than rentals for the yields to be meaningful.

My 2 cents ..

Today i see a news stroy appeared in The Times of India which talks about government provding fiscal sops to real estate ompanies and cheaper refinancing options to them. With inflation coming down we could see another rate cut soon, in fact we might see interest rates going down to 8-9% level with slowdown lurking ahead. Such a sharp fall in interest rates not only can provide relief to debtors but might also encourage people sitting on periphery to go for fresh mortgages if builders provide a small correction in prices.

Though i agree with Deepak's premise that property prices will come down. But still to say that prices will crash to 2002 level is a bit pre-mature. As Templetree points out, most people have taken loans, especially for homes, so unless people start losing their jobs they won't default on loans. Nevertheless, everything depends on if another round of credit crisis erupts in US soon or not.

in response to TT 2 cents, my 2 penny....