From the NY Post:
The housing market has not hit bottom yet and probably won’t until sometime in 2008.
Yep, there it is in black and white. And while no one really wants to hear it – except, perhaps those out in the market hoping to buy their first home – there is plenty of evidence to dispel any notion that the housing slump is over.
Most experts – and the statistics – indicate that housing prices still have a ways to fall.
To start, we’re completely overextended. According to data gathered by the FDIC from the end of 2001 to the end of 2006:
* Loans secured by real estate are up 76 percent to $4.51 trillion.
* Residential mortgages for one- to four-family homes jumped 57.7 percent to $2.18 trillion.
* Commercial real estate loans rose 58.8 percent to $904 billion.
* Home-equity loans are up 203.4 percent to $559 billion.
And, no surprise, foreclosures are up too. National foreclosure filings were up 47 percent last month from a year ago to 149,150, according to RealtyTrac, an online marketplace for foreclosed properties. That’s one foreclosure for every 775 households.
Sure, you can blame the subprime market for some of it. Those loans are defaulting by the minute. Moody’s projected that average losses on pools of subprime mortgages from 2006 would be as much as 8 percent – that’s one-third higher than what they expected just six weeks before.
The bigger problem is that the price of a home must ultimately correlate to what individuals can afford, notes Mark Grinis, a partner in Ernst & Young’s real estate, hospitality and construction group. “If prices advance significantly ahead of wages, over time there will be a price correction.”
And clearly, our wages have not kept up with the inflated housing prices, so we’re due for a fall. And – contrary to popular belief – it hasn’t happened yet.
“The typical cycle is about four years, and we’re only a year and a half in,” notes Grinis. “It will be late ’08 before the dust settles and you can call a bottom.”
“And if foreclosures snowball, that affects homeowners’ psychology. If you live in an area with $400,000 homes but your neighbor had to foreclose on his home and sell it for $250,000, that’s a huge chunk of equity that just vanished from the neighborhood. ”
whew …. 38% hair cut.
Too early to call bottom.
IMHO- I think we have to see some steep declines from 05 tops before can come close to calling a bottom. We have seen declines, but that have really been “signigicant”.
Sellers, forget it, you market time is off. Reduce quickly, or you will never get that POS sold.
SAS
Apart from actually giving a timeline for bottom – which is difficult to do – a nice, clear and concise article.
I think the real story here is how real estate is getting treated in the mainstream press. A year ago, could you imagine the NY Post running an article titled, “HARSH REALTY: HOUSING SLUMP IS FAR FROM OVER”?
Housing Recession Taking its Toll on Toll Brothers
watch http://www.paperdinero.com/BNN.aspx?id=177
CNBC segment recounts the truly ugly preliminary results from Toll Brothers for Q2 2007. Spotlights the $90 – $130 million in additional write-downs for Q2 pushing the current year total exceptionally far beyond Toll’s expectations as well as easily surpassing the full year 2006 total.
Originally aired on: 5/9/2007 on CNBC
Running Time: 2 minutes 12 seconds
And while no one really wants to hear it – except, perhaps those out in the market hoping to BUY their first home – there is plenty of evidence to dispel any notion that the housing slump is over.
BUY? If I’m a first time home buyer I look at today’s prices and say “drop more” I definitely don’t want the slump to be over, I want the slump to drop further. I want it to be sooner rather later, but why wouldn’t I want the slump to continue and get a lower price.