The 10% crash of course doesn't include the extra 10% in incentives that go unreported... But if we get a 10% crash in 2006 from peak and an extra 10% in 2007, that 20% shave is not only historic and unprecedented, but when you look at the 100% to 125% leverage out there, enough to create a sea of foreclosures and bankruptcies.
Welcome to Housing Panic, 2007 style.
NEW YORK (MarketWatch) -- Home prices will fall 10% on average in 2007 and it will likely take three years to clear out the huge inventory of empty unsold homes currently in the market, according to a UBS report released Monday.
A surge in new construction and a pullback in demand led to the inventory glut that's currently plaguing the sector.
UBS analyst Margaret Whelan estimated that the industry overbuilt to the tune of 900,000 homes between 2003 and the first half of 2006. "Most of those homes are vacant," which means they'll rely more heavily on price discounting to get sold than if they were homes with people living in them, she said, during a conference call Monday.
"It will take about three years to shift all of that excess inventory," said Whelan. As a result, she expects housing starts to fall 15% in 2007 from 2006 levels.
November 08, 2006
UBS predicts 10% house price crash in 2007, and three years to clear dead housing inventory
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22 comments:
well i think i have that 20% haircut already. my builder was selling the same home as mine for 550k in July, now he has a spec home for 439k. i paid 210k. wow.
Notice that the analysts predictions depend on the fed lowering rates. It will be even worse if rates don't come down.
I like how everyone bases all their assumptions on the fed lowering interest rates. Haven't many of the FOMC been blaming Greenspan for leaving interest rates too low for too long? If Jeffrey Lacker doesn't think rates are coming down, and he's actually on the board, then why does everyone else think they will fall?
We're still over 2% core inflation (even using the biased official estimate), which is above the feds supposed goal. There is no downward trend to inflation, as Lacker has pointed out. It seems to me like it would be pretty irresponsible to cut rates in the near future. Especially considering the additional unwanted side-effect of low rates: asset bubbles.
A million empty unneeded homes and David Lereah was saying how real estate was a can't lose proposition just a few months ago?
keith can teach you to buy gold high and sell it low.
10% is more than optimistic.
3 years to shift the excess inventory...oi...next up, let's get a realtor in here to say "it's never been a better time to buy!"...except, ya know, 3 years from now....
It seems like the ideal thing for the country is gridlock. Meaning Democratic house and senate and Republican Pres, or Democratic Pres and Republican house and senate.
Nothing happens under Gridlock which means that things like Bush putting through all those bills can't happen.
up 100% down 20% freaking big deal!
let say u idiot ve $1
it doubles to $2
down 20% to $1.6
keith, r u british born with ur A$$ in ur mouth?
Are you kidding? We are already down 9.7 percent year-on-year nationally. Not sure how big of a prediction this is.
Throw in a bunch of race riots in the cities and housing prices will go down for sure! Can't wait!
I hope that Bernanke can engineer the Greater Depression starting in 2010.
Love the house:
When can I move in?
I think the 10% house price crash estimate will really be 25%. I am posting from Connecticut and I am seeing a huge surge in foreclosure suits. All you need is a lender who wants to unload a property and will slash the price. Connecticut also recognizes strict foreclosure which streamlines the process.This will impact the market big time!
I also think it was disgusting that NAR spent $40 million on that ad campaign last Friday. What a waste.
What are the Repuglicans left with in the House? 195?? HAHAAHAHHA
Could you imagine if EVERY house seat was up yesterday??!??!
They would be happy to keep 20.
10% nationwide. What does that mean
in bubble central ? 25% ? 30 %
I think it will be less of a drop
in the short term, but last longer.
My guess for Southern California
is -15% in 2007, -8% in 2008,
-5% in 2009, then a pan bottom
in 2010 and 2011. Not adjusted
for inflation.
Let's make this a good thread about the UBS report - and what % the reported (understated) median us price will fall in
2006 from the peak
2007 total year
2008 total year
10% a year seems like a starting point. That would be historic, devastating and a good start. housing deflations take time
That 10% assumes interest rates stay where they are. If they rise we can expect even further drops in housing prices.
Peak Oil in 10 years? It is already here. So says Ken Deffeyes of Princeton U. and Matt Simmons of Simmons International. We have finally reached a point where we can no longer keep up on the maintenance of our infrastructure. Why do you think EVERY government institution in the U.S. has a budget line item called deferred maintenance. Too expensive to proceed, too expensive to fix.
Farm Girl
The CEO of HOV just admitted to 10% incentives, and also admitted to huge margins.
Prices 10% down nationwide? A simple average for selling prices across the country.
As predicted, the market is showing substantial variance here both between and within local communities. Yes the big economic picture is critical, but when you get estimates for house prices nationwide its not exactly all that meaningful to the typical homeowner.
anon 4:17:21 AM: Every house seat WAS up yesterday. They are only two year terms.
Osman said...
Prices 10% down nationwide? A simple average for selling prices across the country.
As predicted, the market is showing substantial variance here both between and within local communities. Yes the big economic picture is critical, but when you get estimates for house prices nationwide its not exactly all that meaningful to the typical homeowner.
Thursday, November 09, 2006 4:41:10 PM
I agree with you. I see the same thing. Some areas show declines, others increases. Some areas flooded with to many homes for sale and others a shortage. Markets, like people, can't be lumped into one box.
As Ben's blog had posted the other day the article showing Phoenix's market and it wasn't as dismal as people think. As I posted a comment here about that that 57,000 houses sold in 2006 isn't a bust when in recessions Phoenix with a much lower population still sold 24,000 houses a year. A meltdown to me would be a repeat of the Anazasi when the vanished leaving empty cities. Until home sales drops below 30,000 units a year there is not meltdown in Phoenix, just a return to the norm. A meltdown is when you go below the historic norm.
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