Fitch: Housing Overvalued

From CNBC:

Home Price Gains May Slow in 2013

Home prices are now rising at their fastest pace since 2005. Housing bulls are running again, pointing to rising construction starts, rising home sales and falling mortgage delinquencies. Fears over the so-called “fiscal cliff” put a damper on some of that optimism briefly, but that quickly dissipated after the deal was finally struck. So why be cautious now?

“Low prevailing mortgage rates, the limited supply of existing homes for sale (either due to the few foreclosure completions or the number of underwater borrowers who cannot sell), and the anemic levels of new home construction are facilitating affordability and feeding demand,” noted analysts at Fitch Ratings. “These factors are offsetting weak fundamentals that would otherwise hinder home price growth, such as high structural unemployment and lackluster wage growth.”

Fitch contends that home prices remain overvalued and that price growth is not being driven by fundamentals but by technical factors that could easily change. As more homes move more quickly to final foreclosure, especially in states that require a judge in the process and have seen huge delays over the past few years, supply will expand, possibly dramatically in some regions.

Fitch analysts admit price recovery will vary widely depending on the local market conditions, but their case seems more bearish than most. Or is it?

“I personally think that a lot of the price appreciation we’re seeing in many markets right now is because the market of tradable homes is thinner than usual because of high negative equity,” said Zillow’s chief economist Stan Humphries. “This condition will change as home price gains pull homeowners out of negative equity and the market becomes more fluid.”

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58 Responses to Fitch: Housing Overvalued

  1. grim says:

    From HousingWire:

    Fitch warns home prices overvalued (click for graphs)

    Despite national home prices increasing by more than 2%, the largest gain since before the market peak, Fitch Ratings believes national prices are 10% overvalued.

    However, during correction, home prices will likely drop by no more than 2% from today due to inflation.

    Fitch reports technical factors behind the appreciation will eventually mute growth in the future, much to the opposition of current market predictions. The latest report from the Standard & Poor’s/Case-Shiller Home Price Indices, for example, revealed that home prices continued to rise in October with prices up 4.3% annually.

    While Fitch agrees that it’s hard to not be upbeat with home prices on the rise, indicating a healthy housing rebound, the ratings company is remaining cautious in its outlook based on the past few quarters.

    “Many models place a high value on price momentum, which can skew long-term projections. Another factor differentiating our model from many in the market is that our projections are in real terms as opposed to nominal dollars,” said Stefan Hilts, director of Fitch Ratings.

  2. grim says:

    From the NYT:

    Manhattan’s Housing Market Ends 2012 With a Sales Rush

    The Manhattan real estate market went out with a bang in 2012, with the number of sales rising by as much as 40 percent in the last three months of the year — mainly because sellers were in a hurry to close deals before new tax laws kicked in with the new year.

    At the same time, inventory across the board has continued to fall, leading those in the industry to predict that the scarcity of apartments will bring higher prices in 2013.

    “The consensus is prices are going up,” said Pamela Liebman, chief executive of the Corcoran Group, which reported available listings down 16 percent in the fourth quarter of 2012 to 6,514 — a seven-year low.

    Corcoran’s report also said sales volume was up 20 percent in the fourth quarter, to 3,200 closings, compared with the same period a year ago, and the median price rose 8 percent, to $827,000. While the rise in prices is good news for sellers, Ms. Liebman said, for buyers, “it’s a very frustrating market.”

    And there is little relief in sight.

  3. Mike says:

    Good Morning New Jersey

  4. Essex says:

    People gotta live somewhere.

  5. Anon E. Moose says:

    More like all those Bernak-dollars gotta show up somewhere. The housing market rest on government paper – the dollars they print to buy the loans that finance it.

  6. Anon E. Moose says:

    Con’t [5];

    Despite the reductions we’ve seen, housing really is the ultimate “Too Big To Fail” — no elected Federal politician will risk the consequences of letting housing find its market price. Channeling JJ from ’08 — don’t fight it, buy C at every Fing dip, because it will never be allowed to go to zero.

  7. Mike says:

    Grim your opinion on today’s article in the Ledger about the Toms River home owners who are being asked to give up some of their property to build dunes, but they fear losing their private beaches.

  8. grim says:

    Even in their worst case scenario, Fitch has prices higher by 2016.

    Bearish? Hardly.

  9. grim says:

    7 – Public funds, public beaches.

    Step 1 – Exchange of easements for replenishment and dunes – beach made public
    Step 2 – Eminent domain – compensation would not be based on buildable lot value however – beach made public
    Step 3 – If the residents wish to keep beach private and not give up land, beach will be rebuilt, no dunes, residents will be required to pay a special assessment for the value of the replenishment, as they gain the full benefit of the work

  10. Essex says:

    I’m planning a new venue in t-minus two years. Hehehe

  11. grim says:

    I suppose an alternate method of approaching this would be to enact legislation to allow homeowners located in the flood path behind the beachfront properties to sue the owners of the beachfront property that refuse the dunes as it was their refusal to allow flood mitigation that put the other properties at risk.

  12. grim says:

    Nuclear option, buy all the beachfront properties, demolish them, turn them into parks, and put parking in their place. No future problems.

    Question here is, do we as taxpayers have the stomach for the cost involved to execute something like this?

  13. Peace, Love, Dope says:

    “Nobody in Washington cares about deficits: During December’s “fiscal cliff” TV show, D.C.’s reality stars told us that they were focused on reducing the budget deficit. But, according to the Congressional Budget Office, the final bill will increase the budget deficit by $4 trillion.”

  14. Peace, Love, Dope says:

    Bah bah

    “Corporate welfare is sacrosanct: For all the effort to make wasteful spending the villain in the “fiscal cliff” TV show, Congress ultimately refused to touch that spending. Somehow, defense contractor largess in the bloated Pentagon budget was off the table. Somehow, subsidies to corporate agribusiness were separated from the negotiations and then extended. Meanwhile, as the Roosevelt Institution’s Matt Stoller documented, the final “fiscal cliff” bill included taxpayer handouts for everything from NASCAR racetracks, to Hollywood studios, to a new Goldman Sachs headquarters.

    If you find these facts more depressing than the fantasies that dominated the public version of the “fiscal cliff” drama, then you appreciate why so many Americans prefer reality TV over genuine documentaries. A shrink-wrapped “reality” hyped for maximum titillation is, indeed, more pleasant to watch than actual reality. Congress and the political media know this, so they give viewers what they think we want.”

    The problem is that the real story gets lost in translation, leaving us at once totally disgusted, occasionally entertained and permanently fleeced … just as Washington wants.

  15. Mike says:

    11 never thought of that one

  16. Ernest Money says:

    yome, why don’t you start using Marvel comics as a source of information?

  17. Ernest Money says:

    Any article that starts with “Paul Krugman knows his shit” is as porous as a colander.

  18. Ernest Money says:

    Krugman, Bernank and Geethner should be turned into a human centipede.

  19. yome says:

    Clot which information is offensive to you? IMF chief admitting mistake or the name Krugman?

  20. Ernest Money says:

    The IMF is a sophisticated loansharking operation. Krugman is an asshat, and the Daily Kos is a bolshevik rag. Other than that, great info.

  21. yome says:

    Zerohedge , Roubini any better? Still waiting for their prophecies 6 years later. Just like tke Why does it rain when the Indian does the rain dance.They never stop. One of this years their prophecies will come true

  22. Ernest Money says:

    Uh, yeah.

    “Zerohedge , Roubini any better?”

  23. Anon E. Moose says:

    Dope [14];

    Bah bah

    Says the person quoting religiously from Slate. The irony is rich.

    Thanks for the name change, Dope. I couldn’t have picked a better one for you.

  24. joyce says:

    (15)

    Iceland is the only country that actually had “austerity” they b.s. that EU countries did was just bondholder bailouts, that wasn’t austerity

    Look at the actions and results, do not let them change the definition of words.

  25. Anon E. Moose says:

    Joyce [25];

    do not let them change the definition of words.

    But that’s the only way they can win the debate. [TIC]

  26. joyce says:

    (22)
    yo

    Papering over a depression is improvement? Inflation is high (and lied about), unemployment is not improving (people are leaving the workforce), the wealth disparity continues unabated, the middle class continues to die…

    …what is getting better?

    According to our geniuses in charge, all we needed was QE and we would be all better. I believe zerohedge among others forecasted QE-infinity as soon as the first began.

  27. joyce says:

    Moose,
    I’d appreciate your comment more if you stop blaming the “democracts, liberals, and left” for EVERYTHING that’s wrong.

  28. relo says:

    You mean just saying austerity won’t work? You actually have to implement it? That’s always the rub.

  29. POS cape says:

    12 grim:

    That is a viable solution. Long beach got hammered, but does anyone ever hear of the damage at neighboring Jones Beach? That’s because there was none – no one lives at Jones Beach. Keep the boardwalks and rides, but no one should be living in these areas.

  30. Comrade Nom Deplume, plotting his moves for 2013 says:

    One thing I think that the GOP should have tried to slip into the tax bill was a change to raise the current bracket thresholds for the lower tax brackets. It would have offset the effect of hikes on the top end earners and demos would have gone along with it since it would give he most benefit to lower bracket residents. In the future it would also benefit retires and those able to defer income, both key constituencies.

    I’m all about fiscal imprudence now. Raise the debt limit, juice the bennies now, and give the bill to the kids. They wanted this, they can pay for it.

  31. joyce says:

    The kids wanted it? The ones who aren’t legally able to vote yet.

  32. joyce says:

    29
    relo

    touche

  33. yome says:

    We have debated this subject already.Iceland did not do Austerity they pardoned mortgages and sticked it to the banks.They printed money because they can other Euro countries dont have that option.

    “Iceland is the only country that actually had “austerity” they b.s. that EU countries did was just bondholder bailouts, that wasn’t austerity”

  34. yome says:

    Nom

    Do you think GOP will do better than 2011 pushing for their agenda in the debt limit? I think they have nothing just like the last 2.All they will do is push this to deadline and they have nothing to show for the 3rd time.
    1 Trillion Platinum coins?

  35. Brian says:

    Obstructionist alert:

    http://mobile.nj.com/advnj/db_102382/contentdetail.htm?contentguid=BE8Jz1Vr

    Someone should tell the Sierra club that the power lines were there before the parks were.

  36. Comrade Nom Deplume, plotting his moves for 2013 says:

    [35] yome,

    I no longer care what the GOP does. They’re finished. Nothing can stop the ship from hitting the iceberg and going down. I want to keep or take enough so that I can give my young’uns life jackets, if not a lifeboat.

    [32] Joyce,

    I propose to start earlier. Raise the SS and medicare eligibility age by one month every six months, until it hits 69, starting for those born 1987 and after. And means test for the same cohort.

  37. Comrade Nom Deplume, plotting his moves for 2013 says:

    [34] yome,

    Iceland also stuck it to the Brits, who provided crisis financing. More or less comparable to us defaulting on the Chinese.

  38. joyce says:

    34
    yo

    They pardoned some mortgages, yes. Besides that, they stuck it to everyone equally (a.k.a. actual austerity). The people who were underwater (which was mostly investors who claimed their paper investments were actually worth somethign) actually went bankrupt.

    All the extend and pretend in US, EU, Japan is not to help the little guy… it’s to help the bondholders.
    But please, keep your head in the sand, and keep begging for more HARP, HAMP, etc.

  39. joyce says:

    Oh, and they also prosecuted some banksters. What a novel idea.

  40. joyce says:

    They’ve been finished, or should I say, complicit for decades.

    Comrade Nom Deplume, plotting his moves for 2013 says:
    January 5, 2013 at 3:56 pm
    [35] yome,

    I no longer care what the GOP does. They’re finished. Nothing can stop the ship from hitting the iceberg and going down. I want to keep or take enough so that I can give my young’uns life jackets, if not a lifeboat.

  41. Ernest Money says:

    Chuck Schumer has a conceal carry permit.

    Bloomberg has a phlanx of armed guards around him at all times.

    Some animals are more equal than others.

  42. Ernest Money says:

    The value of one liberal politician’s life is > than yours or mine.

    Get with the program, joyce.

  43. yome says:

    That’s what Gary King and Samir Soneji tell us in a NYT column this morning. The gist of the piece is that the authors, two demographers, have assessed trends in mortality rates from a variety of factors and concluded that the Social Security Administration is underestimating life expectancy. Therefore the program will cost more than is projected, meaning that the long-term funding gap is larger than projected.

    Before dealing with the scary prospect of living longer let’s first address some trivia. The piece tells readers:

    “For the first time in more than a quarter-century, Social Security ran a deficit in 2010: It spent $49 billion dollars more in benefits than it received in revenues, and drew from its trust funds to cover the shortfall.”

    That’s not exactly right. The program spent more than it received in payroll taxes, but Social Security also earned more $117 billion in interest on the government bonds in the trust fund. This means that the program actually had an annual surplus and the trust fund grew in 2010.

    But let’s get to the crisis of living longer. Based on their projections of life expectancy, King and Soneji calculate that in 2031 Social Security will cost about 0.65 percentage points more than the trustees currently project measured as a share of taxable payroll. This comes to 0.25 percentage points measured as a share of GDP.

    Should we be scared by this? Well, the amount is certainly not trivial, but the increase in defense spending associated with the wars in Iraq and Afghanistan came to 1.7 percent of GDP. So, we have dealt with much bigger expenses without too much disruption to the economy. So if king and Soneji projections prove accurate, Social Security will not exactly be breaking the bank.

    However there is a bit more to the story. They only dealt with the impact of improving health on life expectancy. There are other ways in which better health can be expected to affect the finances of the program. For example, the disability portion of the program currently accounts for almost 18 percent of the program’s cost. If better health reduced disability rates then this could go a substantial portion of the way toward offsetting the higher costs associated with a longer period of retirement.

    The second way in which better health could affect Social Security projections is by allowing people to work later into their life. A substantial portion of retirees are forced to retire due to poor health. If these people were in better health, many workers might put in more years of work before retirement, thereby improving the finances of the program by increasing tax collections.

    Better health might also mean slower growth in health care costs. One drain on the Social Security system is the money paid to workers in the form of employer provided health insurance. This money, which has been a rapidly growing share of compensation, is not subject to the Social Security tax. If better health reduces the rate of growth of health care costs, a larger portion of compensation may be subject to the payroll tax, which would also improve the program’s finances.

    Finally, improved health would likely reduce the cost of other government programs like Medicare. This could means that we will be paying out more money in Social Security to retirees but paying less for their Medicare and Medicaid expenses.

    All these effect may not be entirely a wash, meaning that our longer lives will mean more net expenditures from the government, but we would want to look at all these factors before we hit the panic button.

    Dean Baker

  44. 30 year realtor says:

    Real estate over valued? Tell that to the sellers I represent!

    Have a seller with a home listed for $299,000. Five months on the market. Receive an offer for $230,000. When I present the offer seller tells me he wants to net $290,000. I try to explain that a full price offer wouldn’t net that much. Never mind that house won’t appraise high enough for buyer to get a mortgage.

    I love my job!

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  46. McDullard says:

    #Clot 42… Seconding your point…

    Kerry put up his luxury yacht out of state to save on taxes. Bono tried to dodge taxes in Ireland. And there are plenty that advocate for gun control while owning guns themselves. And most of those people talk in terms of for or against, instead of in terms of risk/benefit.

    Like the joke about northern vs southern racists… The southern one doesn’t mind “[insert favorite slur]” living nearby as long as they don’t get uppity. The northern one doesn’t mind them getting uppity as long as they don’t live nearby.

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  49. Fabius Maximus says:

    #48 McDullard
    “And there are plenty that advocate for gun control while owning guns themselves”
    What is the problem with people who own guns advocating for gun control? For me they are the ones that make the most realistic and vaild arguments. You can’t say that someone who owns a gun is automatically against gun control. Advocating for gun control is not about removing people’s ability to own a weapon, it is about having to restrict gun ownership to responsible citizens with reasonable limits as the current system is not working.
    I keep hearing this BS arguments that that “people need to defend themselves against these criminals with illegal guns” and “Guns don’t kill people, people do”.
    Well, why don’t those gun manufacturers stop making all those illegal guns, then we wouldn’t have a problem! Oh wait ….

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  51. joyce says:

    51
    Fabius,
    The gun manufacturers are making LEGAL guns. It is the government (in some areas) which says the guns are illegal. If you’re referring to fully-automatic weapons, they are making them for military use. Please find me a manufacturer & store that is making/selling automatic weapons for an individual to purchase…

    Yeah, you’re right the “current system is not working.” Have we been adding more gun control laws to the books or less? More restrictions or less? Yet, the problems continue.

    Is it not a fact that violent crime is MUCH MUCH higher in the inner cities where access to firearms are very restricted as compared to a lower crime rural areas that have (some) unlicensed/licensed open & concealed carry?

  52. Fabius Maximus says:

    #53 Joyce

    That’s the whole point, the manufacturers are not doing anything wrong, it is how those arms are falling off the legal radar and into the dark.
    For me, it comes down to three areas, dumb owners, owners that let their weapons go off grid deliberatly and lax state control on sales.

    What is your response to this classic. For me I want to see a large find and law on the books for losing control of a weapon.
    http://www.fayobserver.com/articles/2013/01/06/1228738?sac=fo.crime

  53. Fabius Maximus says:

    find = fine

  54. McDullard says:

    Fabius, I worded it a bit badly. The point was about those that keep ranting about how guns are bad, but still have guns and pretend they don’t.

    Re, the stolen weapon case… Shouldn’t we see it in the context of a stolen vehicle used in crime (which happens a lot)? What about the case of the woman who shot a burglar recently — after hiding in the attic with her two kids?

    I never expected to find myself on this side of the argument, but, I think sensible regulation is needed addressing both guns and mental illness [simplified chants of “30 bullets bad, 6 bullets good” is what seems to be going on for now].

  55. Comrade Nom Deplume, plotting his moves for 2013 says:

    [56] s,

    “A conservative is a liberal who got mugged the night before.”

    Hon. Frank Rizzo, Mayor of Philadelphia, 1972-1980

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