“No bottom in sight” for housing

From Reuters:

Home prices to keep sliding with no bottom in sight

The U.S. housing market’s skid is nowhere near over and could extend for another five or even 10 years, according to one of the most-watched housing economists.

Robert Shiller, a Yale University economist and co-developer of Standard and Poor’s S&P/Case-Shiller Home Price Indices, told Reuters that declines in home values in the most vulnerable markets could well double the losses recorded thus far.

What’s more, Shiller, who is also co-founder and chief economist of the financial firm MacroMarkets LLC, said predictions for a bottom within the next year or so are probably wrong, with price declines in 2008 possibly worse than those seen this year.

“There is a probability of a continuing decline for a period of years, bringing prices in many cities down in the 10s of percent,” Shiller said in an exclusive interview.

“The bottom is hard to predict,” he said. “I do not see it imminent and it could be five or 10 years too.”

Shiller is famous as author of the best-selling book “Irrational Exuberance,” which sounded alarms about overblown stock market valuations just before the dotcom bubble burst in early 2000. More recently he has been a leading voice of worry about what had been a red-hot residential real estate market until 2005, saying the market for houses had become infected with “an investor psychology.”

“The housing situation that we got in is unique in history because there was an investor psychology that developed that was stronger than we have ever seen before,” Shiller said. “We have seen housing bubbles many times in history, but they have been much more local than this one.”

The S&P/Case-Shiller Home Price Indices showed further declines in the prices of existing single-family homes across the United States in August, marking the eighth straight month of negative annual returns and the 21st of decelerating returns.

The 10-City Composite index’s annual decline of 5.0 percent in August was the biggest monthly drop since June 1991. The biggest on record was an annual decline of 6.3 percent recorded in April 1991. In August, the 20-City Composite recorded an annual decline of 4.4 percent.

“Based on the futures market for the S&P Case-Shiller Composite Index, we are looking at home prices down another 5 percent in 2008,” Shiller said. And that might be on the low end.

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38 Responses to “No bottom in sight” for housing

  1. Essex says:

    5-10 years….well on the bright side…I love my house. But damn. If you ‘had’ to move or sell–you might be in trouble. This thing will squash consumer spending like a bug….things are going to get really ugly. We might see a spike in firearms sales tho.

  2. Essex says:

    Oh, and here is some bright sunny predictions…..http://www.nysun.com/article/66268

  3. gary says:

    OMG, hurry! Don’t wait as this charmer won’t last!! Call now!! With $120,000 down this one will only run you $3,900/month in PITI. WOW!! What a bargain!

    http://homes.realtor.com/realestate/woodcliff+lake-nj-07677-1089410201/

  4. njpatient says:

    evenin’ fellas.

  5. scribe says:

    Gary, #3

    I think what’s for sale there is the land, with a new house to be built:

    Great value, 1.4 acres (approx. 1/2ac Woodcliff Lake 1ac Saddle River).
    Terrific opportunity to live in Woodcliff Lake.
    Owner/contractor will build up to 5,000sq. ft. new home (see MLS#: 2730459).
    Owner is licensed real estate agent.

    Most of the photos are of the land. They’re emphasizing the land and location.

  6. Essex says:

    #3 Offer to take the dump off his hands for $250k, it’s probably better built than the POS particle board unit he’ll build for you.

  7. Essex says:

    *evenin’ NJP

  8. will says:

    Anyone know where to get Long Island tax records online, similar to the Morris County tax records link that’s on this site? I’m interested in the sales history of some houses in Suffolk county.

  9. gary says:

    #3,

    Oh, I get it. Buy it for 589K, get it knocked down for more money, get a McMansion built for another 750K and when you’re sitting there in your underwear at the closing, you’ll realize you just signed papers that sentences you to 30 years @ $7,500/month.

    “I’m sorry Timmy, there will be no Christmas this year…. or next….. or next…… or ever.”

  10. mr potter says:

    can you even get a mcmansion built for $750k ?

  11. waslooking says:

    speaking of records, would anyone be able to post last 2-3 years of 42 Hartly in Summit? My wife did a walkthrough of this in 06 or so and noted the sign back up. was curious as to price flux etc.

  12. mikeinwaiting says:

    Essex What ever they’re smokin on that one I want some!
    Could’t link to sunny news,is that because they’s none!

  13. Essex says:

    http://www.nysun.com/article/66268

    A Wall Street superstar this year who runs Balestra Capital Partners, Jim Melcher, says he’s “worried about a recession. Not a normal one, but a very bad one. The worst since the 1930s. I expect we’ll see clear signs of it in six months with a dramatic slowdown in the gross domestic product.”

    Balestra Capital, a $350 million New York hedge fund, was up 3% for the past three market sessions, when the Dow Jones Industrials, spearheaded by widespread declines in financial stocks and fears of more billion-dollar-plus asset write-downs, tumbled more than 677 points, or about 4.5%. The Nasdaq fared worse, skidding about 7%, triggered by across-the-board declines in those fast-stepping technology stocks.

    Balestra has increased in value by 175% so far this year, Mr. Melcher tells me. A 9-year-old fund, it has posted compounded annual growth of about 30% since its inception.

    Mr. Melcher, a market bear, had some pretty discouraging words. “What I think is not good for the country, but good for me.” he says. His basic advice to the country’s roughly 80 million stock players: Run for the hills — the worst is far from over. An investor’s stock portfolio now, he believes, should be only about half of what it might normally be.

    With the housing market in a state of collapse — and he says he believes it is far from over — Mr. Melcher argues that average homeowners will not be able to withstand the kind of recession he sees, given the added burdens of rising energy and food costs, and continued deterioration in the credit markets.

  14. Everything's 'boken says:

    ‘stupidfilter’

    Another pipe dream.

  15. mikeinwaiting says:

    #14 New in NJ Go easy,life is short in NJ.Have a laugh you’ll live longer.
    Shiller preaching to the choir.As I have posted before this down turn will be worse than anyone would want.It’ll be real ugly for along time in US.Great for all of us waiting to buy,very bad for country as whole.I don’t think even the dems will be able to bail out this one, but they will try.
    I know corrections are good,but I still say be careful what you wish for you might get it.
    I wonder how some of the bright well payed young
    men here will post when they’re out of work.The train town will not matter so much then.Not bitter have no reason to be.Good times are over get ready for a long bad one.Just call them as I see them.

  16. Essex says:

    As a life long DEM…I gotta say I am turning into a true conservative on fiscal matters. Irony, Bush turned me into a conservative.

  17. scribe says:

    Gary,

    Here’s the other MLS ad they mention in that ad – the $1,195,000 McMansion to be built.

    They talk about how the existing house is available to be rented during the construction phase.

    http://homes.realtor.com/search/listingdetail.aspx?mlslid=2730459&ml=3&typ=7&sid=12058792f8264ece859b4b2f42b5be08&lid=1086148370&lsn=3&srcnt=3

  18. scribe says:

    Gary,

    I would guess the first price is for the land with the existing structure, and the second is the package deal – land plus new house.

    But it’s not completely clear, either.

  19. scribe says:

    From Fortune:

    Wall Street’s money machine breaks down

    The subprime mortgage crisis keeps getting worse-and claiming more victims.

    By Shawn Tully, Fortune editor-at-large
    November 12 2007: 12:13 PM EST

    (Fortune Magazine) — Two things stand out about the credit crisis cascading through Wall Street: It is both totally shocking and utterly predictable.

    http://money.cnn.com/magazines/fortune/fortune_archive/2007/11/26/101232838/?postversion=2007111210

  20. RentinginNJ says:

    Great value, 1.4 acres (approx. 1/2ac Woodcliff Lake 1ac Saddle River).

    Do you get 2 property tax bills?

  21. Clotpoll says:

    gary (3)-

    Is that a home, or a murder scene?

  22. Clotpoll says:

    sx (19)-

    No irony there. Bush isn’t a conservative.

  23. reinvestor101 says:

    This entire situation is terrible. The hate America first crowd has upended real estate and financial markets.

    I’m sure Osama bin Laden appreciates these efforts. I certainly don’t.

  24. Fencesittingjack says:

    gary Says:
    November 12th, 2007 at 5:44 pm
    OMG, hurry! Don’t wait as this charmer won’t last!! Call now!! With $120,000 down this one will only run you $3,900/month in PITI. WOW!! What a bargain!

    http://homes.realtor.com/realestate/woodcliff+lake-nj-07677-1089410201/

    eeeewwwwwww.
    maybe can buy it and rent out lots in the fron yard for people to rent out with their trailers or store repossed cars or boats for a fee.

  25. Fencesittingjack says:

    reinvestor101 Says:
    November 12th, 2007 at 11:01 pm
    This entire situation is terrible. The hate America first crowd has upended real estate and financial markets.

    =============

    Oh well here we have this reinvestor does not like when prices go down for a change. Maybe some were wise enough to see the fluff and stayed out. Now let the good times roll.

  26. RentinginNJ says:

    The hate America first crowd has upended real estate and financial markets.

    You should stop blaming others for the fact that you made a bad bet. Take responsibility for your own decisions. Get over it. Stop with the “I’m a victim” routine. Dust yourself off and be grateful you live in a country where you can get a second chance. Worst case scenario, you get foreclosed on. You spend the next few years rebuilding your credit and you move on.

    Besides, do you really believe the so called “hate America First” crowd really has that much power? So much that they can “talk” the American economy into a recession? Have you ever stopped to consider that just maybe the housing market is collapsing under its own ridiculous excess? What happened when other bubbles in history burst? Did the “hate America first” crowd cause the Great Depression or the dot com bubble burst or the end to Dutch tulip mania?

  27. trader says:

    reinvestor (26)

    Why do you continue to keep your head in the sand? Do you not understand that prices for homes are running 25-50 times annual rents? With mortgage rates at 6.25%, when you consider the real estate taxes, it costs twice as much to buy then to rent. Things are overvalued because people who don’t understand math or financial contracts took teaser loans and convinced themselves they could afford loans that they could not repay.

    At least do us a favor, if you’re going to disagree come up with something intelligent that at least backs up a different opinion rather that posting your diarrhea here every day.

  28. Lisoosh says:

    I never watch HGTV but looking through On Demand I came across an episode of “What is my house worth?”

    Holy crap I wanted to barf. Couple with 1 year old, baby on the way want to upgrade from their current 4 bed, 3 bath McMansion ’cause they “need more space”. WTF??????? And of course their realtor is telling them they can’t sell in todays market unless they upgrade to……granite countertops.
    Same with the condo conversion … you should upgrade your countertops.

    As the housing market takes it’s last gasp look for granite sales to have a last mad burst as people desperate to maximise “profit” from living in their homes, or desparate for a sale, are encouraged to sink even more money into a depreciating asset.

    I had a full hate-on for these people and I should really be pitying them.

  29. Essex says:

    HGTV….yes, I wonder how those shows can air today with any hope of credibility. Though I do enjoy them as a guilty pleasure of sorts….what about the messages in the Home Makeover show where the disadvantaged kids/family win a new home….Hovnanian was in the last episode. We love to see ‘the home’ that sanctuary that has been elevated to mythology by the media.

  30. Ann says:

    Scary stuff. I think the downturn to going to be made worse and dragged out by all of the crazy prices and building inventory.

    I blame the REALTORS. I believe houses could be moving right now, with or without granite.

    But the REALTORS are too stubborn to advise their clients to do the substantial price reductions it is going to take to sell them.

    It’s simple economics. No wants these houses at these prices.

  31. Tim says:

    If the one million plus is for the land and house package. WHY??? Would you need to rent the little house. Wouldnt you own it if you purchased it as a package. Something is Fishy about this deal. Anyone want to collaborate on this. Weird.

  32. Outofstater says:

    Um, granite countertops are to this decade what harvest gold refrigerators and avocado shag carpeting were to the 1970’s.

  33. Jill says:

    OK, outofstater, I’ll buy that. But if someone is looking to replace their 1970’s yellow laminate, what would you suggest?

  34. Ann says:

    Try concrete or recycled glass countertops. Eco-friendly, about the same price as granite, fresher looking.

  35. Ann says:

    I would try concrete or recycled glass countertops. Eco-friendly, about the same price as granite, fresher looking.

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