And remember, their price decline prediction doesn't even include the massive incentives being used to clear dead inventory and sucker new homedebtors. Nice to see someone besides HP talking about the stages of a meltdown too.
Housing Prices Expected to Fall
It may not be the news homeowners, contractors and real estate agents want to hear, but economists continue to predict further declines in home prices will prevail throughout 2007.
Moody's Economy.com, a private research firm, projected that the median home sales price will drop this year by 3.6 percent -- the first decline for an entire year in U.S. home prices since the Great Depression.
"Nationally, the big bang in sales is over and don't expect it to recover until late this year or early next year and prices are not done falling -- they will contract more," Wyss said.
He explains there are three basic phases in a housing downturn and each local and regional market is experiencing various stages of the three-year downturn.
Phase I is "Denial." During this first year prices keep going up despite falling sales, Wyss said.
"People just refuse to sell at lower prices and that usually lasts about a year," he added.
Phase II is "Anger." In this phase, oversupplies build, people can't sell and prices come down while building slows. This can cause further economic fallout when people stop or slow the building rate, Wyss said.
Phase III is "Acceptance." Wyss said this occurs when the unsold inventory is cleared out.
January 16, 2007
Moody's predicts first national home price decline since the Great Depression. Any questions?
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16 comments:
Can hardly wait for Washington Mutual to report tomorrow.
from the article:
"For those who are in still in the market to purchase a home, Wyss said don't wait too long.
While prices are likely to slide a little lower, he predicts higher long-term interest rates will be a reality toward the end of the year."
Why on earth can't these reporters understand that if interest rates go up, house prices will just have to drop that much more.
They always make it seem like the price of the house is set in stone, and the interest rising will just make the payments more.
In a fundamental market, Joe Homebuyer has X dollars to spend. If more has to go to interest, then the price of the house has to come down to what he can afford / borrow.
Am I too much of a simpleton to think that Econ 101 will apply again someday... or are the people who continually present the "interest rates rising are the best (maybe only) reason to buy, buy, BUY NOW!!!!
MSM Shanker
That is a pic of my house!
In a fundamental market, Joe Homebuyer has X dollars to spend. If more has to go to interest, then the price of the house has to come down to what he can afford / borrow.
++++++++++
Well, Joe Homebuyer could buy a smaller home for the same price.
Everyone doesn't have to live in a 3000 sq foot McMansion.
In the current market there needs to be an update:
Phase I: Denial
Phase II: Anger
Phase IIa: Foreclosure
Phase III: Acceptance
In response to anon 3:50:00 PM:
Lets assume Wyss is right about interest rates and affordability. At some point the average Joe won't be able to afford the average house. Average houses will only be sold to recluse billionaires waiting in the wings to snap up property in Middletown America priced out of everyone else's reach. Partially for the 1% rental returns, but mostly to prove their spending power. Unlike many other assets, the real-estate model follows supply side pricing.
;-)
My new motto is to ignore all fear based advice, be it from Bush, my realtor, or my antacid.
Moddy's better get some history books. Median prices declined in 1991 and 1970.
Everyone doesn't have to live in a 3000 sq foot McMansion.
WTF? 3000 sq ft is a McMansion? Man you guys are more wacky than I thought. 3000 is the average middle class home these days. I don't think most builders even build anything under 3000 these days. 3000 sq ft is the Honda Accord of homes.
When I read McMansion I think big, like 4500 sq ft at least. I suppose when compared to your 550 sq ft apartment, 3000 is huge so OK I see where you're coming from.
When I read McMansion I think big, like 4500 sq ft at least. I suppose when compared to your 550 sq ft apartment, 3000 is huge so OK I see where you're coming from.
****
Your an idiot.
Sorry...A little bit of you rubbed off on me. 'You're an Idiot'.
I think 3000sf is above average. Most houses are around 2000-2500sf. McMansions would be over 4000sf. People don't think about heating/cooling costs when buying a super-sized box. My sister insisted her family needed 3300sf. Now they pay $600/mo for heating/cooling for their family of four. I pay less than that for the rent on my nice apartment five minutes away from work. Their total housing cost is $2500/mo while mine is $650/mo. I tried to talk them into 2500sf but it was out of the question. Now the $6300/yr property taxes and energy costs are tearing into them
Your an idiot?
Einsten, how about learning to write properly. I'll give you a hint dimwit, it's YOU ARE an idiot and that is contracted to YOU'RE.
Typical of renters I suppose, uneducated, low class. You probably work with your hands too.
Their total housing cost is $2500/mo while mine is $650/mo.
Yes but they live in a nice home. You live in a decrepid apartment. They have no neighbors on their walls. You have niggers and spics blasting jungle music at all hours of the night. They have a yard. You have a hallway.
You sure do know how to live it up.
Yes, does that question mean anything?
Moving back to Phoenix since my wife foolishly went back to her old job. I'm not happy since Austin is so much nicer and you get more house for your money. Still, price declines? Not where I want to live!
We are going to rent and I have to say the prospect of paying a mortgage payment to rent someone's dump does not make me feel like prices have come down.
I've been searching for a descent rental, and I'm not talking some 3300 sq ft loaded house with a pool in central Phoenix and rents have gone up considerably. Most of the one bedroom or two bedroom places I'm looking at rent from $1,000 to $2,000 a month. That is a bargain? The average rent is running $1300 for a 2 bedroom in central Phoenix and if you want new, modern $1600-2000.
So I looked at homes for sale. I don't see any bargains! They are as high if not higher than when we left Phoenix. I've seen small homes in the Garfield for $400,000 and in 2005 they were only $90,000 and in 2003, $40,000. Even in east Coronado $385,000 for a small house! I've looked in N. Central (expect to pay at least $500,000 for a small place) in Arcadia, Biltmore, east phoenix (44th St area south of Indian School) and can't find anything I'd want to live in for under $350,000...and when I say that price I'm talking a 1200 sq ft 1950s ranch with a carport!
As much as I hate renting, I told my wife we'll rent a small one bedroom apartment (newer) and pay the $800 a month for now and wait and see if prices come down or we can pick up a good foreclosure since she works in a mid-size law firm that has a department that deals with real estate.
I'd like to believe this bubble will end with deflation but all I see is inflation. Went out to lunch for a simple burger today at a mom and pop place and it was $16.50. Even Jack in the Box for a nice combo mean will run you $11-12 for two now.
Went looking at new cars...shock. VW Tourag for $75,000? Please! I know there are still some basic cars out there for $16,000-20,000 but the vast majority now are $28,000 up!
In the Great Depression ALL PRICES FELL and UNEMPLOYMENT soared! Prices are still rising, rents are rising, wages are rising. Sounds more like Stagflation to me.
What's with the racism on here or more to the point, why are you allowing it.
"Yes but they live in a nice home."
In domestic marital bliss, no doubt.
Tee hee.
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