Any homedebtor in America with little or no equity has to be entering panic mode right about now, wouldn't you say? No more housing ATM, no more "real estate always goes up" nonsense, and no more "can't lose" investment opportunities.
And anyone considering buying a new home has to be reconsidering right about now, wouldn't you say? Why buy today when it'll be cheaper tomorrow? Why buy now when it's so much cheaper to rent?
Amazing thing about this article (amidst a sea of "home sales soar" deception yesterday) is the quote from the new TCDL, the NAR Sr. Economist Larry Yun who admits that there's been an "investor driven collapse". Yes, he said the C word - "Collapse". Wow. Someone's not gonna get a good performance review this year at the NAR. Naughty Larry!
Big drop in home prices predicted
Some economists see steeper drop in store for home prices.
Some economists see steeper drop in store for home prices.
NEW YORK (CNNMoney.com) -- Most industry watchers agree that home prices will continue to slide before they recover, but now some economists say they've got a long way to fall before bouncing back.
David Wyss, chief economist at Standard & Poors, has forecast a price drop of about 8 percent for the 24-month period through the fourth quarter of 2008.
His prediction came during a general economic outlook session at the Mortgage Bankers Association's (MBA) National Secondary Market Conference & Expo in New York this week.
Housing prices will suffer from a "significant increase in defaults and foreclosures," he said, with affordability still a major issue. Wyss worried how hard the slump will hit already highly inflated housing markets.
Housing prices will suffer from a "significant increase in defaults and foreclosures," he said, with affordability still a major issue. Wyss worried how hard the slump will hit already highly inflated housing markets.
He said its impact on areas like South Florida, where much of the buying is speculative investment in second homes, could be big. "You don't need a second home," Wyss said.
Overall, he said he expects the U.S. economy to slow this year to a growth rate of about 2.25 percent, down from 3.3 percent last year.
Celia Chen, Moody's Economy.com's director of housing economics followed Wyss' lead. "We also have an 8 percent decline in median house prices [for the 24-month period ending March 31, 2008], which is consistent with what David Wyss had."
"That is quite a bold forecast," Lawrence Yun, economist at the National Association of Realtors, speaking from his Washington, D.C. office, said of Wyss's prediction. NAR is predicting a much less severe total decline of 1.4 percent through the slump - prices have already declined three straight quarters - and that a recovery will start to take place in early 2008.
"The run up," Yun said, "was an investor-demand driven boom, and it was followed by an investor-driven collapse."
83 comments:
I don't think he's exactly going very far out on a limb with that prediction. The big question is, is something worse going to happen? Is there going to be a full-blown recession?
""You don't need a second home," Wyss said."
Well, unless you are a wannabe Baby Boomer who's careless about the future of your family.
It's been hard to keep up: housing bubble, China bubble, M&A bubble, Web 2.0 bubble, currency bubble...
I haven't seen so many bubbles since I invited those two Russian hotties for a jacuzzi bath at my beach condo.
Nah I 'd say any hobedebtor in America who a) has to sell or b) is about to reset on an ARM.
If you're not in those categories, it sucks that your home's value is decreasing but I don't think you're in panic mode.
BTW where's this recession already, it's been predicted for 2 years now.
Real estate clerks just want this news and this blog to go away!
A note about investor driven. This was not just investors buying second and third and and and more homes. It was also an investment mindset that you better get in as your house value will keep rising and you can keep buying a continual bigger home because your home is an investment. If homes were not rising alot of regular non investor people would not have bought the house they did.
Celia Chen, Moody's Economy.com's director of housing economics followed Wyss' lead. "We also have an 8 percent decline in median house prices [for the 24-month period ending March 31, 2008],
8%? That's it. That's the great housing crash. After 5 years of 10%+ gains, an 8% drop. WOW. You guys were freaking geniuses for renting all this time.
And for those that sold in 2005, even bigger geniuses, given the 6-8% cost of selling plus moving expenses to move into an apartment while riding out the "crash". So in 2008 you will buy back in at an 8% discount after having paid close to 10% to sell, move, buy and move again, not to mention the cost in time and effort involved in moving twice.
Brilliant strategy HPers, absolutely brilliant.
Yeah, wow look at that...stocks are upa nd rents are still high and real estate is still expensive..
yeah, sure looks like a crash to me!
IDIOTS!
>> I haven't seen so many bubbles since I invited those two Russian hotties for a jacuzzi bath at my beach condo.
You mean the ones with the gastrointestinal dysfunction, hairy legs and hairy armpits?
>> BTW where's this recession already, it's been predicted for 2 years now.
Right - predicted for 2 years now to be happening right about now. Dumbass...
Yawn.
We all know the slide is going to be slow, unless something unusual happens.
Wake me a hurricane hits Florida. Should happen in late July or early August.
"BTW where's this recession already, it's been predicted for 2 years now."
That recession IS ALREADY here!
The recession arrived over a year ago. Where have you been?
Geesh, are you actually waiting for the bimos on teevee to tell you this or what?
I guess Mr Yun already got a big part of his expected decline this morning. Next shill please...
Anonymous said...
I haven't seen so many bubbles since I invited those two Russian hotties for a jacuzzi bath at my beach condo.
"I hope that beach condo is in Santa Monica and not Miami"!
RayNLA
Why would lower home prices be such a bad thing? Are we supposed to spend 80% of our gross income to pay PITI? Will eating Ramen noodles be the new norm for homedebtors? I say let the prices drop to increase the standard of living for the average American. Speculators be damned
Another Anon poster said...
BTW where's this recession already, it's been predicted for 2 years now.
Go to Wal-Mart, Circuit City, or any car dealership (even Toyota) and you will see that we are already 3 months into the recession. The question now is will we see another De-pression.
GOT LIQUID?
RayNLA
The drop in sales was accompanied by a big jump in the number of unsold homes left on the market. They climbed to a record total of 4.2 million. It would take 8.4 months to exhaust that supply of homes at the April sales pace.
Analysts are concerned that the glut of unsold homes will further depress prices in coming months.
But Lawrence Yun, senior economist for the Realtors, said that the small year-over-year price decline of less than 1 percent was still modest compared to the 50 percent rise in home prices that occurred during the five boom years that ended last year.
Home prices fell 2.6%. Oh no, what will I do, what will I do. After increasing in value by more than 100%, my home is now worth 2.6% less than last year. The horror of it all is too much for be to bear. Better go get the gun, my life's over.
But....but....but it came back like crazy last month? Didn't these guys get the memo? In a startling news development a retraction was made to the title from "big drop" to "big rainbows and unicorns and dancing fairies as the markets shoots through the stratosphere to new heights!!"
OK...what happened to that idiot troll who kept posting on this blog that home prices have only gone down 3%...then he modified it to 2%?
I expect him to chime in any time.
Larry Krudlow recently (this week) disabled anon posting on his "Money Politic$" blog, apparently because a couple of threads go threadjacked by Ron Paul supporters!
I urge the frequent bloggers to post on Krudlow's neocon-spin blog as much as possible. You have to register a username now, but that present a tiny obstacle.
http://www.kudlowsmoneypolitics.blogspot.com/
"It's been hard to keep up: housing bubble, China bubble, M&A bubble, Web 2.0 bubble, currency bubble..."
Bubbles are for bathtubs
Ooopppsss....
http://tinyurl.com/2xk4zm
What a difference a day makes.
Just for the hell of it I sent emails to 10 people selling 2005 or newer BMWs on craigslist with lowball offers of 15% below asking price. Polite emails simply saying I'll give you $xx in cash for the car and I can pick it up this weekend. The theory of course is that these are desperate FBs needing to sell the heloced BMWs in order to make next month's mortgage.
Well of 10, 8 replied. 7 said thanks but no thanks. The 8th simply told me to fuck off with such a low offer.
I don't think the situation is as dire as some of us might like to think it is. You'd think at least one would be desperate enough to take 15% less than asking price.
0.8% decline in prices....ok that's a nice start
"WOW. You guys were freaking geniuses for renting all this time."
Again, you are a douchebag. It is not necessarily that all those renting had the ability to get in before prices went apeshit. Some were in school at the time or just beginning their careers. However, now that prices have gone apeshit, those people who have good jobs and make a decent amount of money are now priced out of the market. So, there is now no base of first time buyers to buy "starter" homes and the pyramid scheme falters. Add to this the fact that prices are falling, such people (hopefully) are not going to be so stupid as to buy a depreciating asset with a suicide loan (which here in DC is really the only way a first time buyer could afford anything). So, it may be gradual or it may be quick, but nonetheless, it's going to happen because there are no fundamentals to support the existing scheme. Game over, asshole.
I am a bitter renter, but for the trolls here that claim an 8% drop is nothing, 8% equals over two years equals a 20% loss (because that money could be in a bank account earning 6% interest.) If you are a speculator, and it's not going up, your are losing.
If the house is the biggest asset that you have... well...
I am completely confused. Weren't there a bunch of articles that came out yesterday that claimed the number of home purchases went up last month? Or were they using some skewed comparative measure for that? Seems like things are still on the decline, as expected. So what was the deal yesterday? Just a bunch of BS before the official numbers were released?
Why so difficult to get straight answers :-(
Huh, CNNmoney.com is publishing confusing reports. Yesterday I read "New home prices plunge, sales soar" - http://money.cnn.com/2007/05/24/news/economy/new_home_sales/index.htm?postversion=200705241 and today I read "Weakest home sales since '03 hit values", - http://money.cnn.com/2007/05/25/news/economy/home_sales/index.htm?postversion=2007052511
The first report was about new homes while the second was existing homes. There is a big difference there, and the second would better reflect the total market, as it includes a greater quantity of market activity.
I see the 16% rise in new sales as hiding the truth about a slowing market and being negated by existing sales.
"The run up," Yun said, "was an investor-demand driven boom, and it was followed by an investor-driven collapse."
So he's saying the collapse already happened and is now over - thanks NAR
Maybe someone can explain to me how come Zillow is still posting price increases in the bay area?
See this Bloomberg report:
"Existing home sales drop to lowest in four years"
http://www.bloomberg.com/apps/news?pid=20601087&sid=agxKazDf_Z7U&refer=home
The best time to buy is when everyone and their mother is saying that real estate is the worst possible investment you could ever make. We're not there yet. But I'm saving my money. My buddy caught the first wave, sold his house last year and walked away with $250,000 cash. Through investments he has already added another $50,000 to that total. I would love to be in that postition but wasn't ready for this past run in the market. I'll be ready for the next. Hang on to your cash!
Anon May 25, 2007 5:13 PM wrote:
“Ooopppsss....
http://tinyurl.com/2xk4zm
What a difference a day makes.”
-----------------
Thanks Anon!
There’s a link on this site that allows you to vote on the question - Has the housing market bottomed out? The results (out of 509 votes cast) as of 1:00 PM PST Friday 5/25 are:
- Yes, and a rebound is
coming soon – 4.3%
- Yes, and there will be a
slow revovery – 10%
- No, but it is close – 23%
- No, and there is still a
long way down – 51%
- I have no idea, and anyone
who says they do is kidding
themselves – 11%
-Mammoth
QUOTE:"Home prices fell 2.6%. Oh no, what will I do, what will I do. After increasing in value by more than 100%, my home is now worth 2.6% less than last year. The horror of it all is too much for be to bear. Better go get the gun, my life's over."
It is 2.6% since last month, you dufus. And remember and 8% drop wipes out a 16% gain. Seriously, math education in this country must be so bad now.
Ok #1 - I am a Realtor.
#2 I love this blog. All the Realtor insults make it fun.
#3 8% in the next 24 months? Oh, the sky is falling, the sky is falling...
#4 I am getting tired of all the "bubble-philes" calling everything a bubble. Hell, in life there are ups and downs in EVERYTHING. So is every upswing "irrational exuburance" and every downswing "a popping bubble?"
Frankly after an extended up swing in value we have been way overdue for price adjustments and with huge run-ups in pricing, the downward adjustments will also be big. Possibly bigger than the next 8% over 24 months. The problem is people gotta stop thinking of housing as a huge value building investment. A house is a home, security, shelter - IF you can afford it. Housing is not (over time) the get quick rich vehicle it was "pushed" as being the last several years.
There were bad mortgage guys pushing loans on people that never should have bought a home in the first place. Those guys should be hug out to dry. Fact is, they are probably looking for other jobs now. During the run-up I was actually telling some people not to buy - because their financial terms did not make sense. Some idiots went somewhere else and bought, and now they lost their 100% financed on a teaser rate house. Hopefully they learn from their mistakes.
And for the speculators who did not know enough to monitor the market cycle and bought at the wrong time - well, you are paying for your stupidity. Don't make risky investments unless you are fully prepared for the consequences.
Get real guys!
"Home prices fell 2.6%. Oh no, what will I do, what will I do. After increasing in value by more than 100%, my home is now worth 2.6% less than last year."
You do realize that it only takes a 50% drop to wipe out your 100% increase, right?
Bernanke Warned by Real Estate Analysts: Housing Collapse Is Much Worse Than You Say
May 22, 2007 (EIRNS)—A real estate investment and analysis firm, John Burns Real Estate Consulting, said on May 21 that it is "going public with our concerns" that the national sales information for both new and existing homes, is misleading and covering up a deep plunge of the housing sector. "The housing market has softened much more than is being reported" by the Fed, and the National Association of Realtors (NAR), says JBREC.
The firm reports that having purchased and compiled actual home sale closing data for 55% of the country, it finds existing-home sales down, not 9% as NAR reports, but: 22% in May 2006-April 2007, compared to May 2005-April 2006; and much more than that on a simple year-to-year comparison of the past couple of months. It found that existing-home sales have fallen every bit as much as the new-home sales of the biggest homebuilders D.R. Horton and Lennar, which are down 37% and 27%. It found that home brokerage transactions by Realogy Corp., the nation's biggest realtor company which owns Century 21, Coldwell Banker, and ERA, fell 18% from 2005 to 2006. And that mortgage applications for home purchase have fallen 18%, even though many buyers now have to fill out several applications in order to get a mortgage.
Taking the states with the worst housing sales/foreclosures crises, JBREC found Florida home sales down 34%, not 28% as NAR reported; Arizona sales down 38%, not 28%; and California's down 37%, not 24% as NAR reports. This strong underreporting of the collapse by NAR, the firm says, only dates from the middle of 2006; it doesn't claim any intentional misrepresentation by NAR.
As for new-home sales, JBREC reports the Census Bureau is continuing not to subtract cancellations from reported sales, giving sales figures which are much rosier than the grim reality, and are reported publicly by the Federal Reserve.
"In summary, we believe that the Fed should know that the housing market correction has been quite steep, and is also not showing signs of bottoming out," concludes JBREC.
Separately, a Wall Street firm reported May 18 that the foreclosure "shock cone" is widening: While total foreclosures, at all stages, are up 60-70% over last year so far, foreclosure notices—the front end of the process, when a mortgage is typically 90 days delinquent—are 127% higher so far than in 2006. It said that foreclosed homes being resold by banks or lenders, are hitting the housing market with an average price drop of 30% nationally.
There is no recession unless Katie Couric says so.
"Home prices fell 2.6%. Oh no, what will I do, what will I do. After increasing in value by more than 100%, my home is now worth 2.6% less than last year." - Anon 1:42
"8%? That's it. That's the great housing crash. After 5 years of 10%+ gains, an 8% drop. WOW. You guys were freaking geniuses for renting all this time." - Anon 3:39
You two are idiots or trolls. Look up what median means. It's not the average.
What is the first part of a real estate market to freeze-up? I'll answer the question for you: entry level. Why? Lack of loans, lack of affordability, lack of quality buyers.
What's the result of this? I'll answer the question for you: median prices can actually go up in a market that is crashing. It's so bad right now that median is actually still going down.
What happens to all the move-up-buyers after entry level houses stagnate and don't sell without huge price drops? I'll answer the question for you: they go away. Real Estate crashes flow up-hill rather than downhill. How's the condo market doing now? How about 2-3 bd/2ba units in places like CA, FL, CO, AZ?
What happens when most move-up buyers disappear? I'll answer the question for you: It starts flowing up hill and all hell breaks loose. Nothing sells without huge price drops.
This stuff is common sense.
Congrats to the HP crowd that sees this coming because they can think logically!
Bernanke Warned by Real Estate Analysts: Housing Collapse Is Much Worse Than You Say
May 22, 2007 (EIRNS)—A real estate investment and analysis firm, John Burns Real Estate Consulting, said on May 21 that it is "going public with our concerns" that the national sales information for both new and existing homes, is misleading and covering up a deep plunge of the housing sector. "The housing market has softened much more than is being reported" by the Fed, and the National Association of Realtors (NAR), says JBREC.
The firm reports that having purchased and compiled actual home sale closing data for 55% of the country, it finds existing-home sales down, not 9% as NAR reports, but: 22% in May 2006-April 2007, compared to May 2005-April 2006; and much more than that on a simple year-to-year comparison of the past couple of months. It found that existing-home sales have fallen every bit as much as the new-home sales of the biggest homebuilders D.R. Horton and Lennar, which are down 37% and 27%. It found that home brokerage transactions by Realogy Corp., the nation's biggest realtor company which owns Century 21, Coldwell Banker, and ERA, fell 18% from 2005 to 2006. And that mortgage applications for home purchase have fallen 18%, even though many buyers now have to fill out several applications in order to get a mortgage.
Taking the states with the worst housing sales/foreclosures crises, JBREC found Florida home sales down 34%, not 28% as NAR reported; Arizona sales down 38%, not 28%; and California's down 37%, not 24% as NAR reports. This strong underreporting of the collapse by NAR, the firm says, only dates from the middle of 2006; it doesn't claim any intentional misrepresentation by NAR.
As for new-home sales, JBREC reports the Census Bureau is continuing not to subtract cancellations from reported sales, giving sales figures which are much rosier than the grim reality, and are reported publicly by the Federal Reserve.
"In summary, we believe that the Fed should know that the housing market correction has been quite steep, and is also not showing signs of bottoming out," concludes JBREC.
Separately, a Wall Street firm reported May 18 that the foreclosure "shock cone" is widening: While total foreclosures, at all stages, are up 60-70% over last year so far, foreclosure notices—the front end of the process, when a mortgage is typically 90 days delinquent—are 127% higher so far than in 2006. It said that foreclosed homes being resold by banks or lenders, are hitting the housing market with an average price drop of 30% nationally.
Wow, when the banks resell the home its a price drop of 30% Yeah, I would call that recessionary and delinquent notices are up 127% over last year. Not bad, I sense some real bargains coming up. Especially since we've got some major inventory on hand.
Yun said the big rise in unsold homes on the market could be an indication that sellers are testing the market in the early spring in hopes of selling their homes and moving up to larger units, which he said would be a positive sign of a rebound in housing.
Spin,spin, spin. Same big shoes and red rubber nose, different clown.
Suzanne, you bloody bitch!
You screwed up, and you sold your soul to Satan at the same time!
i work at the post office a big one and i have noticed that for a while there was only foreclosure notices from title companies but now they are starting to crank out paperwork for new home owners. well i can only look at addresses and names to and from that is it but when i saw a japanese name on a foreclosure today i knew this was ugly. when i saw asian names (chinese) i was a little curious but that japanese name threw me. asians have a tendency to be very good with hording money, but not enough to keep that over priced house. i process mail for a wide area and i feel sorry for all the people who bought in new neighborhoods next door to hispanics because for every 1 ethnic name (and i see them all) there are like 10 hispanic names all in foreclosure. i used to be really jealous that i couldn't get one of those big new houses in a new and upcoming neighborhood. i was jealous because i couldn't figure out how they did it. i have been on my job 28 years and i felt what did i work all those years for and still couldn't afford one of those brand new houses with a 3 car garage with that new look and high ceilings. i wondered how could these people only in the country for a year or two do better than me cadillac escalades and ford expeditions always shopping farting out money. what was my problem. now i know i don't have one. they do. and everything they have is fake, all that i own is real. i too can loose everything i am not perfect but i think i have put in the time and years to deserve what i have. this is all so ugly and if they can't sell houses now what will happen when all these foreclosures sit around empty. low income section 8 the people you tried to run away from (the clampets remember the beverly hillbillies)move in next door and you can do nothing about it and then you try to sell your house with 3 broken cars, toys all all over the yard, barren yard scraggly bushes dirty house (how can someone make a house dirty)over flowing garbage cans living next door. yes this is going to get ugly.
So is that $500K house in Compton worth it now that it will be depreciating instead of appreciating? Have fun "owning" that shithole in the middle of gangland while I rent a nice beachfront home in Newport for half the price
What goes around comes around.
I'm sure that every real home buyer (vs. speculator) would rather have a lower selling price to meet his requirments for a reasonable and affordable mortgage payment than an ARM with a teaser rate that can blow up in his face.
Thank got for busting bubbles.
Troll Central today. BTW Anon and his 100% appreciation, you won't see any of that money until you decide to sell it. And I bet you are the type of lousy turd who will complain when the assessor puts a big number on the house, and three years down the road, when you have lost a 100k in value, and he won't move that number.
Don't gloat too much trolls. 8% YOY adds up real fast. Ask the Japanese. It took them 17 YEARS to get back to P/E norm.
King of the Bitter Renters
Don't put the drop in home price out of context. We are talking dollars too. If you really think the value of the home is going to tank beyond expectations, then you are also advocating a stronger US $.
I bet its going to be a moderate combination of factors. Collectively, they'll create a nasty situation. Dollar will decline further. We'll get $1000 gold, $6 gallon gas. But then the home price will not drop as steeply because its being masked by the dollar problems. No doubt home values will go down -- especially in the lemvestor areas like Phoenix. But they'll be an inflation cushion.
Way to cover your asses.Big media,Big Joke.Wanna know whats worse-Big Population of Amerkins swallowing the bait.All this after the fact stuff is so helpful.Report your OBITUARIES before hand,I will be looking forward to it.Nice thoughts of baseball bats,and sharpened bear traps come to mind.Not really overboard when you consider the fact that these clowns helped destroy a wonderful place like America,and other beautiful cultures.Have fun everyone.
I kept telling people and posting here that ground zero would be South Florida. They (developers) bet that thousands and thousands of retirees and eurpeans would flock to Ft. Laud, Miami and Palm Beach. What they did not figure on was cab drivers getting no money down liars loans to buy and flip 4 condos. Also, once the music stipped the basic underlying reality is who with any sense would want to go retire to an area with a pop of 5 million, hurricanes, high crime, horrbiel traffic, bad service, and hords of 3rd world low lifes? Just who would want to spend their lives there? Beaches are nice and weather is warm, but besises that S FLA is expensive, the people suck, crive is out of control and get this the whole area is experiencing white flght.... Ah the 500k condos will soon be occupied by waiters and puerto rican single moms........I bet ya! Tom Tancredo was right-Miami is a third wold nation--ready for collapse. Think about it Mish, in S Fla you have the convergence of a real estate bubble--the biggest and hordes of low skilled illegals and corrupt government--what a mix and lets hope it does not presage other U.S. cities....
What morons post here Mish! They take the national aggregate declies in price and assume that is true for every city. In So Flad the meadin price has dropped 13% in the last year, and inflation has been conservatively estimated at 3%. Thats a 16% drop in real value and its only starting--the fall here. At the same time prices are up in Dallas, San Antonio and New Mexico--non-bubble areas. Yeesh, talk about knucklheads out there....
Bernanke Warned by Real Estate Analysts:
Housing Collapse Is Much Worse Than You Say
http://www.larouchepub.com/pr/2007/070522warn_bernanke.html
May 22, 2007 (EIRNS)—A real estate investment and analysis firm, John Burns Real Estate Consulting, said on May 21 that it is "going public with our concerns" that the national sales information for both new and existing homes, is misleading and covering up a deep plunge of the housing sector. "The housing market has softened much more than is being reported" by the Fed, and the National Association of Realtors (NAR), says JBREC.
The firm reports that having purchased and compiled actual home sale closing data for 55% of the country, it finds existing-home sales down, not 9% as NAR reports, but: 22% in May 2006-April 2007, compared to May 2005-April 2006; and much more than that on a simple year-to-year comparison of the past couple of months. It found that existing-home sales have fallen every bit as much as the new-home sales of the biggest homebuilders D.R. Horton and Lennar, which are down 37% and 27%. It found that home brokerage transactions by Realogy Corp., the nation's biggest realtor company which owns Century 21, Coldwell Banker, and ERA, fell 18% from 2005 to 2006. And that mortgage applications for home purchase have fallen 18%, even though many buyers now have to fill out several applications in order to get a mortgage.
Taking the states with the worst housing sales/foreclosures crises, JBREC found Florida home sales down 34%, not 28% as NAR reported; Arizona sales down 38%, not 28%; and California's down 37%, not 24% as NAR reports. This strong underreporting of the collapse by NAR, the firm says, only dates from the middle of 2006; it doesn't claim any intentional misrepresentation by NAR.
As for new-home sales, JBREC reports the Census Bureau is continuing not to subtract cancellations from reported sales, giving sales figures which are much rosier than the grim reality, and are reported publicly by the Federal Reserve.
"In summary, we believe that the Fed should know that the housing market correction has been quite steep, and is also not showing signs of bottoming out," concludes JBREC.
Separately, a Wall Street firm reported May 18 that the foreclosure "shock cone" is widening: While total foreclosures, at all stages, are up 60-70% over last year so far, foreclosure notices—the front end of the process, when a mortgage is typically 90 days delinquent—are 127% higher so far than in 2006. It said that foreclosed homes being resold by banks or lenders, are hitting the housing market with an average price drop of 30% nationally.
Anonymous said...
Just for the hell of it I sent emails to 10 people selling 2005 or newer BMWs on craigslist with lowball offers of 15% below asking price. Polite emails simply saying I'll give you $xx in cash for the car and I can pick it up this weekend. The theory of course is that these are desperate FBs needing to sell the heloced BMWs in order to make next month's mortgage.
Well of 10, 8 replied. 7 said thanks but no thanks. The 8th simply told me to fuck off with such a low offer.
I don't think the situation is as dire as some of us might like to think it is. You'd think at least one would be desperate enough to take 15% less than asking price.
May 25, 2007 5:34 PM
------------------------
No, it does not surprise me. People will hold on to their "precious" until the bitter end when circumstances pry it from their cold dead hands (fiscally speaking that is).
Economists Weigh Homes Data
And When Correction Will End (WSJ Online) 'nuff said
Existing-home sales retreated in April, dropping to the lowest pace in nearly four years in another negative sign for the slumping housing sector. Home resales fell to a 5.99 million annual rate, a 2.6% decrease from March's revised pace, the National Association of Realtors said Friday. The median price for a home previously owned was $220,900 in April, down 0.8% from $222,600 in April 2006, but up from $217,400 the month before. Read reactions from economists and others to the data, and how they interpret the numbers in the wake of Thursday's more upbeat new-homes data.
* * *
Existing home sales peaked during the summer of 2005 and fell hard between then and September 2006. Between September 2006 and February 2007 it appeared that sales had stabilized but the last two months have seen another sharp decline that is broadly unaffected by weather. This recent weakness may have been aggravated by the turmoil in the subprime market although the evidence is weak. Sluggish sales have kept inventories of unsold homes at very high levels. This, in turn, has pressured prices, which have been falling for the past nine months. The housing correction is definitely not complete … . – Steven Wood, Insight Economics
* * *
We had expected a modest weather-related bounce in existing home sales in April -- since resales are recorded at contract closing, the data tend to lag reality by a month or two -- reflecting better weather in March. However, we are not at all surprised that home sales would be weak in April in particular and most likely all spring, as uncertainty surrounding the subprime mortgage situation definitely appears to be encouraging potential buyers to sit on their hands a while longer to see what the market will look like when the dust clears. -- Stephen Stanley, RBS Greenwich Capital
* * *
Housing data for April have been mixed as housing starts and new home sales were stronger, while existing home sales and building permits were weaker. … While the conflicting data for April make it difficult to assess the trend in housing activity, it appears that the adjustment in this sector is still ongoing. – Bear Stearns Economics
* * *
Housing demand appears to have bottomed, but two housing headwinds still loom: The impact of tighter lending standards on demand is only beginning to appear, and there is still a mismatch between housing demand and supply. The upshot: The intensity of the housing recession is fading, but it is far from over. – Morgan Stanley Research
* * *
We just got our second report on the state of the housing market in April -- existing home sales. The big story is the inventory/supply glut. We have set a new high in homes on the market, and that's going to keep the pressure on prices. … Until sellers get realistic and start cutting prices aggressively -- like the new-home builders clearly are -- the market will remain oversupplied. That, in turn, will keep the pressure on sellers and give buyers the upper hand. -- Mike Larson, Weiss Research
So far this year I have bought several large groups of valuable chattel at pennies on the dollar so that sheeple can make their payments.
In the boom years, the chattel were secure.
Signed, Devestment
friendly neighborhood chattel dealer
80 million baby boomers will be retiring and buying second homes. some will have three homes.
But Greenspan said the worst appeared to be behind us several months ago.
.
This should be no surprise to anyone, since NAR (and the rest
in the housing industry) *must* support the false-positive percentage figures since their income is tied to this market.
They have to keep the lie going
as long as possible - they have
no alternative.
Since the barrier of entry to enter
the realty business is low, the market is flooded with all these people now - who must now find other jobs to support themselves.
What are most of these people going to do that pays a decent livable wage, being that many
are not qualified for much more?
Without a strong work force in this country, we'll have much worse
problems to deal with then the price of over-inflated homes.
Anonymous Said ...
I Love Broadband over PowerLine said...
Bernanke Warned by Real Estate Analysts:
Housing Collapse Is Much Worse Than You Say
http://www.larouchepub.com/pr/2007/070522warn_bernanke.html
May 22, 2007 (EIRNS)—A real estate investment and analysis firm, John Burns Real Estate Consulting, said on May 21 that it is "going public with our concerns" that the national sales information for both new and existing homes, is misleading and covering up a deep plunge of the housing sector. "The housing market has softened much more than is being reported" by the Fed, and the National Association of Realtors (NAR), says JBREC.
The firm reports that having purchased and compiled actual home sale closing data for 55% of the country, it finds existing-home sales down, not 9% as NAR reports, but: 22% in May 2006-April 2007, compared to May 2005-April 2006; and much more than that on a simple year-to-year comparison of the past couple of months. It found that existing-home sales have fallen every bit as much as the new-home sales of the biggest homebuilders D.R. Horton and Lennar, which are down 37% and 27%. It found that home brokerage transactions by Realogy Corp., the nation's biggest realtor company which owns Century 21, Coldwell Banker, and ERA, fell 18% from 2005 to 2006. And that mortgage applications for home purchase have fallen 18%, even though many buyers now have to fill out several applications in order to get a mortgage.
Taking the states with the worst housing sales/foreclosures crises, JBREC found Florida home sales down 34%, not 28% as NAR reported; Arizona sales down 38%, not 28%; and California's down 37%, not 24% as NAR reports. This strong underreporting of the collapse by NAR, the firm says, only dates from the middle of 2006; it doesn't claim any intentional misrepresentation by NAR.
As for new-home sales, JBREC reports the Census Bureau is continuing not to subtract cancellations from reported sales, giving sales figures which are much rosier than the grim reality, and are reported publicly by the Federal Reserve.
"In summary, we believe that the Fed should know that the housing market correction has been quite steep, and is also not showing signs of bottoming out," concludes JBREC.
Separately, a Wall Street firm reported May 18 that the foreclosure "shock cone" is widening: While total foreclosures, at all stages, are up 60-70% over last year so far, foreclosure notices—the front end of the process, when a mortgage is typically 90 days delinquent—are 127% higher so far than in 2006. It said that foreclosed homes being resold by banks or lenders, are hitting the housing market with an average price drop of 30% nationally.
You trolls should pick up some econ 101. It is MARGINAL supply and demand that matter. Every marginal trend is working against this market.
Lending standards reduce demand- eliminates your best customers, $0/ negative net worth lifelong debtors with no financial sense and nothing to lose can't buy
Investors- any fool still investing will be short lived.
New Construction- all the bubble condos conceived two years ago that are coming online
Let me also add that I sold last year due to a job move having bought in my early 20's. Probably wouldn't have sold but for this move. But now I will happily rent a nicer place until the fools leave this market. Add this to diminishing marginal demand- people with financial sense and real resources who want to move up.
Real estate is a mediocre investment that enables an average joe to leverage himself. You are probably finding leverage cuts both ways. If you actually had $500k (rather than a $500k arm and a depreciating condo), you'd probably be pretty happy earning $40k a year and renting.
My anonymous troll friend, there is a social change is underway. Ownership will be associated with poor people, stupid people, and lifelong debtors like yourself.
Right On!
As a friend of mine once said ... we're living in a false-economy ... how true.
Now things are collapsing horribly in-front of our eyes, and like you, I'm concerned of how this will effect what economy we have left here.
So many people - across all income brackets - have lived beyond their means, with money they don't have and can't pay back.
The debt is so large now, that even if tax-payers where forced to help with the bail-out, it
would be useless - and just drive
those who didn't live beyond their
means into poverty themselves.
Anonymous said...
i work at the post office a big one and i have noticed that for a while there was only foreclosure notices from title companies but now they are starting to crank out paperwork for new home owners. well i can only look at addresses and names to and from that is it but when i saw a japanese name on a foreclosure today i knew this was ugly. when i saw asian names (chinese) i was a little curious but that japanese name threw me. asians have a tendency to be very good with hording money, but not enough to keep that over priced house. i process mail for a wide area and i feel sorry for all the people who bought in new neighborhoods next door to hispanics because for every 1 ethnic name (and i see them all) there are like 10 hispanic names all in foreclosure. i used to be really jealous that i couldn't get one of those big new houses in a new and upcoming neighborhood. i was jealous because i couldn't figure out how they did it. i have been on my job 28 years and i felt what did i work all those years for and still couldn't afford one of those brand new houses with a 3 car garage with that new look and high ceilings. i wondered how could these people only in the country for a year or two do better than me cadillac escalades and ford expeditions always shopping farting out money. what was my problem. now i know i don't have one. they do. and everything they have is fake, all that i own is real. i too can loose everything i am not perfect but i think i have put in the time and years to deserve what i have. this is all so ugly and if they can't sell houses now what will happen when all these foreclosures sit around empty. low income section 8 the people you tried to run away from (the clampets remember the beverly hillbillies)move in next door and you can do nothing about it and then you try to sell your house with 3 broken cars, toys all all over the yard, barren yard scraggly bushes dirty house (how can someone make a house dirty)over flowing garbage cans living next door. yes this is going to get ugly.
Right On!
What "Seller" said here is what
will happen, if things continue
in the housing market as they
are now . . . *nothing* sells
without huge price drops.
What amazes me is that there seems
to be some equilibrium-like force out there that always corrects the maddness that we create.
"What happens when most move-up buyers disappear? I'll answer the question for you: It starts flowing up hill and all hell breaks loose. Nothing sells without huge price drops."
Seller said...
"Home prices fell 2.6%. Oh no, what will I do, what will I do. After increasing in value by more than 100%, my home is now worth 2.6% less than last year." - Anon 1:42
"8%? That's it. That's the great housing crash. After 5 years of 10%+ gains, an 8% drop. WOW. You guys were freaking geniuses for renting all this time." - Anon 3:39
You two are idiots or trolls. Look up what median means. It's not the average.
What is the first part of a real estate market to freeze-up? I'll answer the question for you: entry level. Why? Lack of loans, lack of affordability, lack of quality buyers.
What's the result of this? I'll answer the question for you: median prices can actually go up in a market that is crashing. It's so bad right now that median is actually still going down.
What happens to all the move-up-buyers after entry level houses stagnate and don't sell without huge price drops? I'll answer the question for you: they go away. Real Estate crashes flow up-hill rather than downhill. How's the condo market doing now? How about 2-3 bd/2ba units in places like CA, FL, CO, AZ?
What happens when most move-up buyers disappear? I'll answer the question for you: It starts flowing up hill and all hell breaks loose. Nothing sells without huge price drops.
This stuff is common sense.
Congrats to the HP crowd that sees this coming because they can think logically!
DOW is up, home prices are down. FB's have no money to invest in the stock market while renters are flush with cash and making money in their IRA's and mutual funds. How's that $700K RE investment in Sacramento doing?
Anonymous said...
Yeah, wow look at that...stocks are upa nd rents are still high and real estate is still expensive..
yeah, sure looks like a crash to me!
IDIOTS!
-----------------------------------
FAG effing-anon-Goober
Zero down (no skin in game) loans with no questions asked = infestor feeding frenzy = artificially stangled supply = artificially high prices.
And all of us HPers knew it...
And now that which we have predicted for almost 2 years is upon us...
It is only the 2nd inning of this ballgame folks...
Got moosemunch?
To whoever said there will be an "inflation cushion", I am not so sure. People will be so squeezed if inflation increases and we get $5 gas the last thing they will want to do is take on the financial dead weight of a mortgage. The only way we get this effect is if there is hyperinflation, in which case we'll all be so fuct no telling what will happen! Prices of all assets could skyrocket along with the currency, correct. Esp as people start to pile back into hard assets such as houses. Low probability scenarios such as that are hard to assess...and might not occur for 5-10 yrs if they do....
In the near term I am betting house prices drop much more than 8% per year. This is just another of what has become a monthly parade of downward revisions. There will be more to com.
Sam....best post of the day.
Spot on.
This is for the young folks out there, people in their 20's/30's who got kicked to the curb by the obscene run up in home prices over the past ten years.
Hang in there, hold onto your cash, wait for the return of 20% downpayments. Nothing will bring prices back in line with incomes than the good ol' 20% downpayment.
Screw the "innovatve/creative" mortgages whose only purpose is to make you into a debt slave for life.
Here's a fact for you: 15-20 years ago a public school teacher could work for a couple of years and save the 20% DP and buy a home on a 15 year fixed mortgage.
2 -3 time income was the NORM for home prices. There was NO SUCH thing as 5-10 times income.
Now we are seeing the results of this so-called housing boom: torn communities, bankruptcies and foreclosures.
This housing run-up has been the most hellacious socio/economic experiment this country has ever witnessed.
Do not settle for or get sucked into high home prices.
Anon said:
"80 million baby boomers will be retiring and buying second homes. some will have three homes."
Duh, not too many folks on fixed incomes are buying second and third homes. In fact, not far from where I live I know retirees who are stuck and can't move because they can't sell their home and move to warmer climates to live out the rest of their lives.
Economics obviously isn't your strongest subject.
Ann Coulter must be turning over in her grave right now. What? She's not dead yet? Damn!
Just for the hell of it I sent emails to 10 people selling 2005 or newer BMWs on craigslist with lowball offers of 15% below asking price. Polite emails simply saying I'll give you $xx in cash for the car and I can pick it up this weekend. The theory of course is that these are desperate FBs needing to sell the heloced BMWs in order to make next month's mortgage.
Well of 10, 8 replied. 7 said thanks but no thanks. The 8th simply told me to fuck off with such a low offer.
I don't think the situation is as dire as some of us might like to think it is. You'd think at least one would be desperate enough to take 15% less than asking price.
The reality is here. Those that responded know that they always have a company like CarMax to run to if they really want to unload the cars..Check back with them 3 payments later from now and see if they even still have the car..
Hey the RECESSION is already hitting South Florida with 47,000 properties for sale alone..and only 1000 a month closing..and most who do sell are LEAVING the state...
The stcok market is up and homedebtors are stuck with no money to invest or save for retirement. All of their money is tied up in the $500K Compton crapbox where they are surrounded by drug dealers and illegal aliens. Ah, the joys of homedebtorship.
How much money do the FB's have to invest in mutual funds and stocks? Let's see - 70% of gross income spent on housing costs, another 10% on transportation, 10% on taxes, 5% on miscellaneous, 5% on Ramen noodles. That leaves 0% for entertainment, retirement savings and investments. MUAHAHAHAHAHA
See Robert Shiller's real house price data going back to the 1890. Since '01-'02 ("Irrational Exuberance", 2nd edition), the real price rose 80-100% above the long-term trend (199 vs. 100-110 on Shiller's price index).
At the trend rate of CPI of the past 10-25 years, the real US median house price is likely to be "at best" flat in nominal terms for the next generation (20-25 years), with the real price decline over the period of 45-50%.
However, in the worst case, we could see outright consumer price deflation in which nominal house prices converge with real prices, with the nominal price decline of 40-50% over the next 5-7 years or so.
Somewhere in between is the most likely scenario to play out over the next 5-7 years, with nominal prices falling 20-25% (avg. -3% to -4% a year) and real prices 35-40% (-6% to -7% a year much more in the bubbliest areas).
For people who bought before '01-'03, assuming flat nominal house prices and that they did not lever themselves to 100% LTV or higher, the best return they will get from their "investment" in housing in nominal terms will be the amount they pay down their mortgage, which for most mortgagees will be ~2% or so a year (negative in real terms, unless deflation occurs).
However, if prices fall 20-25% in nominal terms and inflation remains at the 2-3% trend rate, mortgagees on avg. will have to pay down their mortgages at a 4% rate or 6-7% in real terms (double their principal payments) to break even.
What does this suggest? Where can one get a better than 0% to deeply negative real return versus putting their money in a house? The S&P 500 is paying only a 1.8% dividend or a negative real yield, not unlike what mortgagees will get from their house "investment".
CDs and US Treasury nots and bonds are yielding nearly 5%. After taxes and inflation, the real total return is 1.5%-2%, far better than stocks and real estate at this point.
Implications: After the Fed panicking and slashing the reserve rate from 6.5% to 1% from '01 to '03-'04, and giving away bank reserves in real terms, causing massive "money-illusion" effects for commodities, real estate, and stocks, the Fed will have to cut the reserve rate again to 1% (or perhaps more eventually) JUST TO KEEP THE NOMINAL MEDIAN HOUSE PRICE WHERE IT IS TODAY.
If the new round of money printing ahead does not result in another reflationary growth cycle of 3-4% real GDP growth and bank credit growth of 10%+/yr., deposits/money supply growth will further slow with Fed monetary base soaring, reducing the money multiplier and money velocity and risking outright debt and consumer price deflation at some point. Stocks and real estate will be dead weights on the economy (including China-Asia and the global economy).
In the meantime, the Fed will be monetizing everything that doesn't move, pushing Treasury yields to Japan-like levels in the next 5-7 years, even as M2 and money velocity slow with falling paper asset prices and decelerating real GDP growth to the 1% trend rate.
Also, Millenials (Gen Y) are entering the labor force en masse with Boomers beginning their exit en masse into their end of life phase in which their composition of household spending will shift from high-GDP-multiplier spending on housing, transportation, and child rearing to low-GDP-multiplier spending on property taxes, insurance premia, out-of-pocket medical expenditures as a much larger share of household income, which will dramatically affect US real GDP growth, household formation, labor force growth, investment, profits, and payroll growth. Discretionary spending will dramatically slow for dining out, recreation, and impulse buying.
The situation will be compounded by the fact that Millennials or Gen Yers are earning far less than their Boomer parents did after taxes and debt service costs in the 20s-30s. Gen Yers have virtually no prospects for inheritances as the vast majority of Boomers will (1) either have nothing to bequeath or (2) will spend down most of their assets for end-of-life care in nursing homes or at home.
Moreover, illegal immigrants make up a larger share of the Gen Y generation than previous generations, thus a larger share of Gen Y is undereducated, have few or no assets, and save very little (or send surplus earnings out of the country), but they are having TWICE as many children as their Caucasian peers.***
The drag on consumer spending from fading Boomers will hurt prospects for Millennials and younger Xers, which in turn will negatively affect China-Asia and the global economy for many years to come.
Add to the Boomer-Gen Y demographics (as well as even worse conditions in Europe and Japan) to the possible effects of "Peak Oil" (peak production of fossil fuels worldwide) with incrementally faster demand from China and India and real global GDP growth is certain to slow, perhaps permanently at some point in the years ahead.
***Hispanics (a growing share of whom are illegals) are having ~22-23 children per 1,000 population versus ~11 for Caucasian women, the latter group of which are having hardly more children than European and Japanese women. IOW, American Whites are having so few children as to see their population plateau between now and the '20s and begin to decline by the '30s-'40s. Not only will real global GDP growth slow significantly in the next 5-7 to 25-30 years, there will be many more poor Hispanics coming of age in the US with aging vulnerable Whites. One can imagine how this might turn out WRT social policy. One outcome might be a mass migration of Whites from the Sunbelt and southern tier of the country to the hinterlands and/or Pac NW, reducing property values, tax receipts, and economic growth in the areas experiencing out-migration.
"Just for the hell of it I sent emails to 10 people selling 2005 or newer BMWs on craigslist with lowball offers of 15% below asking price. Polite emails simply saying I'll give you $xx in cash for the car and I can pick it up this weekend. The theory of course is that these are desperate FBs needing to sell the heloced BMWs in order to make next month's mortgage.
Well of 10, 8 replied. 7 said thanks but no thanks. The 8th simply told me to fuck off with such a low offer.
I don't think the situation is as dire as some of us might like to think it is. You'd think at least one would be desperate enough to take 15% less than asking price."
That is a very interesting experiment, and I would suggest you extend it further. I would suggest some changes though. Firstly your sample size is way to small, if 10% of people are in dire straits, which is a significant number, there is a high chance you will miss that 1 person who might sell for the low ball price. Your choice of BMW is probably not a good idea, I would instead spread to other vehicles, especially American made SUV, you see, BMW are actually very good cars, and I doubt your average desperate FB would have had the smarts to buy a BMW, how many ads on the radio do you hear selling BMWs for huge markdowns? I think an FB is much more likely to be driving some kind of American made truck/SUV. Also, even if a desperate homedebtor did hold one of the BMWs you enquired about, chances are they really believe they can get the kelly blue book price, for a foreign made good car like a BMW. Hell, if they won't lower their house price drastically in THIS market, why would they lower the price of this particular asset, that has no associated bad market news attached.
I urge you to expand/modify your experiment, as the results could be very enlightening. If you have the cash, it could also be a way to make a nice load of money.
Masses of illegal immigrants will ensure that home prices will increase by double digits annually the next 20 years. They aren't making anymore land
not to worry you will get a govt bailout that will protect those gains of hundred of percents, paid for by govt investors who received at most low tens of percent over the same period but it might spend like low single digit percents
Think how poor you will feel if buyers refuse to pay 60% of the assessed values and you continue to bleed the tax on assessed value that doesa not change unless the property is sold, that and the yearly increases of a normal 10-12 percent compounding or the yearly increase of 65% that my hometown politicians are demanding for next year, or more precisely ex-hometown also known as wealth redistrubion to the politicaly correct land theiving shitties
QUOTES: "Masses of illegal immigrants will ensure that home prices will increase by double digits annually the next 20 years. They aren't making anymore land"
Apparently, they're not making anymore buyers.
Let's see - 70% of gross income spent on housing costs
Renter, get a clue. 70% of gross is net income. Nobody spends 100% of net in housing you idiot.
Try craigslist for a Cadillac Escalade with shiny chrome spinner rims.
Anonymous said...
Let's see - 70% of gross income spent on housing costs
Renter, get a clue. 70% of gross is net income. Nobody spends 100% of net in housing you idiot.
May 28, 2007 10:19 PM
----------------
TNTC (Too Numerous Too Count) the number of home-debtors who's monthly mortgage payments exceed their income:
http://www.usatoday.com/money/perfi/housing/2007-05-26-mortgagewoes_N.htm
Markets are up while desperate broke homedebtors are trying to figure out a way to get rid of that $700,000 crapbox investment in Compton. Maybe the greater fools won't notice the "KILL WHITEY" grafitti on the side of the house
I don't know, inflation is a lot higher than the gov says. You use to buy lunch for two at a fast food place for $5, now that buys for one. Gas, adjusted for inflation still isn't at the peak of the oil crisis in the 70s but still 30% higher than a couple years ago. Rents? Rising. Descent places (not ghetto houses or apartments) are not cheap. Sorry, I don't think spending $900 a month for a one bedroom a bargain compared to $1800 a month for a large house with a yard in a good neighborhood. Minimum wage will rise, which will bump up all other wages. If the minimum wage rises $2 then other's will see their wages rise at least $2. For minimum wagers that is a 30% rise so do you really think their rent will drop?
Rents are rising to offset home prices and the cycle reverses as more people rent so rents will go up now that the sub-primers move in to rentals. Home owners will gain leverage to raise rents.
Everything is cyclical. I think that eventually things have to deflate but I've been waiting since 1972! When? Prices surge, show a retreat, surge higher, show a retreat but never return to the prices of ten, twenty, thirty, fourty years ago! I'd love to go back to 2000 prices for everything, salaries, home prices, food costs but I doubt I'll ever see those prices again just like the prices I saw in 1982. During that real estate crash I still thought a house for $62,000 was a stretch considering my income in the military. I couldn't even buy the lot now for that price.
The banks and the government is larger than us and unless they want a collapse we probably won't see it.
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