Ahh yes, more wonderful news regarding the valuation of homes in ‘overvalued’ areas. Check out this article, and look at the percentages.
Home prices too high in 71 cities
Pretty scary, isn’t it? Could you imagine just buying a home in Naples only to find out you paid double what it’s worth?
Single-family homes in 71 U.S. cities were extremely overvalued in the first quarter of 2006 and at risk of price correction, with the costliest properties clustered in California and Florida, economists said Monday.
…
Naples, Fla., Salinas, Calif., and Port St. Lucie-Fort Pierce, Fla., were the three most overvalued markets, according to the report, while College Station, Dallas and Fort Worth were the most undervalued. The median price of $383,000 in Naples was a 102.6% overvaluation, for example, while College Station homes, at a median price of $94,000, were 24% less than the market could bear, it said. Overall, 17 of the 20 most overvalued markets are in California and Florida.
Everyone expects a downward trend right now, although no one seems to want to take a guess at how much…
-Richie
Everyone expects a downward trend except Freddie;
http://news.yahoo.com/s/nm/20060613/bs_nm/financial_freddiemac_dc
Freddie Mac sees no crash in housing market
By Sudip Kar-Gupta Tue Jun 13, 9:36 AM ET
PARIS (Reuters) – U.S. mortgage finance company Freddie Mac said on Tuesday that rising interest rates would lead to a slowdown in the U.S housing market but added it did not expect the market to crash.
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“Rising interest rates will lead to a slowdown in the U.S. housing market,” said Chief Executive Richard Syron, speaking to Reuters in Paris where he was on a business engagement.
“What we’re ultimately driven by is mortgage debt outstanding. That’s the total amount of mortgages which are generated in any year in dollars in the United States. That grew a little close to 13 percent last year. We think … the rate of growth this year will be substantially less, it will be in the 8-10 percent range, my own view is that it will be toward the low end of that,” said Syron.
Stock markets around the world have tumbled in recent weeks on fears that interest rates may rise amid inflationary pressures.
Syron said, however, that the U.S. housing market was unlikely to crash, despite fears of the effect of higher rates.
“We do not think that there will be a crash. We think that by and large, overall, nationally, there will be a material slowing of the rate of appreciation of housing prices, but not an absolute decline,” he said.
Syron added that higher rates would not necessarily have much of an impact on Freddie Mac, which is recovering from a multibillion-dollar accounting scandal.
“In terms of our current book, we don’t think it will have much of an effect. We’ve been very cautious in how we’ve guaranteed obligations over time. Our loan-to-value ratio on a typical mortgage that we’ve guaranteed is around 55 percent, not much over 50 percent,” he said.
“There’s a lot of equity in these properties. We don’t think we’re very vulnerable from a credit position,” said Syron, although he added that 2006 was likely to be a “slower growing year” than 2005 in terms of Freddie Mac’s retained portfolio.
KEEN ON OVERSEAS PRESENCE
Freddie Mac is a federally-chartered, shareholder-owned financial institution. Freddie Mac and larger sibling enterprise Fannie Mae are tasked by the U.S. Congress to support housing by keeping money flowing in the mortgage market.
To do this, they sell debt and use the proceeds to buy mortgages from lenders, giving lenders money to make more loans. They then securitize or repackage those loans into securities for sale to investors.
They also hold some loans and securities in their portfolios.
Syron said Freddie Mac aimed to maintain a solid presence in European financial markets and that the company could do more transactions in Europe in the longer term.
He added he would travel to Moscow later this week.
“What we want is to be sure we have a well diversified source of finance outside of the United States as well as inside the U.S.,” he said.
Freddie Mac’s earnings have not been current since accounting problems in 2003 led to a $5 billion profit restatement and management overhaul.
Syron reaffirmed that Freddie Mac hoped to report 2006 numbers in the first quarter of 2007.
“We are hopefully approaching the end of our accounting saga…. (But) we still think we have significant progress to make in the control area.”
Syron added that Freddie Mac’s capital position was strong and was expected to remain so for the near future.
“We have an extremely strong capital position. We have 45 percent excess capital over what’s required by law.”
“Our dividend has increased 81 percent in the last two years. We would hope that, consistent with getting our financial house in order, and generating strong earnings, that we would continue to increase the dividend over time.”
I don’t see how any responsible organization, or individual, can hope that housing prices remain at their current insane levels (or worse yet, move higher).
Fortunately, they’re all spitting into the wind, as the data proves with each passing week.
It gives me some small pleasure that the town that we almost bought in before moving here – Asheville, NC – is listed as being even more overvalued than NNJ.
I better adjust my meds
yes, Delford adjust them..
I would say ,,, what you on
two, three different .
Perhaps ,, you smoke a little
medical M.
Have a nice evening.
what a bunch a wacko’s
New Jersey
No wonder the States in the Shape its in.
Well you got CNBC over their in
Englewood Cliffs, another wonderful
NJ town. Low taxes, lots of clubs
and then we got Fort Lee,or Fort Ree . Home of the Friars Club Boys.
if the CPI numbers are way on the upside tomorrow we could be looking at a stock market rout. we could be staring at 10,500 by end of week. all those investors who didn’t like the market due to its dismal returns years ago won’t be running back to the housing market for re-investment. that puppy has clearly stalled.
so, where will the next big thing come from? doesn’t appear to be commodities or overseas investments either.
Note that in the report, Vineland, NJ is listed as 30% overvalued. This is surprising, because Vineland is down route 55 in South Jersey in the middle of nowhere. Anyone else find this interesting? There really aren’t any fundamentals there to justify the rampant price appreciation. Looks like the Northern and shore areas aren’t the only parts of the state due for a painful correction.
Who, in their right mind, would actually consider being a first-time buyer in these grossly overpriced locals?
It seems the only numbers going up now are inventory and foreclosures.
Yikes.
Richard, If you own oil stocks would you sell now?
i would sell anything in the stock market now. everything collectively continues to and will head down more. there was an article today that says in the last 2 weeks the global stock markets lost $2 trillion in value. yikes! the best place to be right now is cash and short term instruments, at least until the dust settles and we head back up.
NO MAAS to RIPOFF HOME PRICES!
Why should you have to pay 7-8-9 times your salary to buy a home?
DON”T DO IT!
Make some retireee comfortable in retirement while you are dbe laden and a monthly slave payor.
BOOOOOYcott Houses!
Bob
Financial Times Business News: Housing boom will not end in a crash, says Harvard – MSN Money
An Excerpt:
….So why will non-home-owners be deprived of the crash they have been waiting for?
The strongest underlying support for the market comes from accelerating household formation. Demand is being driven not only by population growth but by household fragmentation, as couples divorce or children leave home.
Immigration has been a still stronger force – over the past decade 12.6m new households were formed in the US. Over the next 10 years the pace of household formation will accelerate to 14.6m, according to the Joint Center for Housing Studies.
“Even if America decided to close the borders now, we would still see the lagged effects of previous waves of immigration,” said Mr Retsinas. “Many of those that came to America earlier are only now in a position to buy property. As it is, we don’t believe there will be any slowdown in immigration.”
The Harvard study also argues that there are fewer points of vulnerability than during previous housing market downturns. The macroeconomic outlook for the US is uncertain but no mainstream economists are predicting the kind of surge in unemployment or leap in interest rates that would prick the housing bubble. In spite of the shift towards flexible rate mortgages, 75 per cent of mortgage holders have 30-year fixed rate loans and are therefore largely invulnerable to rising rates. A third of households own their homes outright.
Nor are many likely to suffer from negative equity should rising interest rates or unemployment drive up defaults – about 94 per cent of home-owners have equity of more than 10 per cent.
Over-development has also been less of a problem than in the past, the study says. Price declines associated with episodes of big job losses alone average 4.5 per cent, while those occurring around periods of over-building alone average 8.3 per cent, it says.
Not everyone concurs, however. Many economists say national figures are deceptive, since they obscure pockets of extreme over-valuation in property prices and greater vulnerability to rising rates. Others point to evidence of overbuilding in recent years. Residential investment has risen to 6 per cent of gross domestic product – its highest level in 50 years and much higher than the average of 4.75 per cent.
The Harvard study concedes that even a slowing housing market could take a heavy toll on growth, as Americans become less able to use their houses as ATM machines and less employment is created by homebuilding. Provided the slowdown is gradual, as Harvard expects, this could help rebalance the US economy, reducing demand for imports and so stemming the growth of the trade deficit.
Copyright 2006 Financial Times
anon After reading your posts, I now finally appreciate it when some one say some dumb a—hole from Jersey.
I suggest you start to educate your self, start with reading, and no People Magazine does not count.
RE investor, you’re late to the game (no pun intended).
Check out the previous thread for a list of parties who contributed to that report (it includes the ‘National Association of Realtors’ and the whole gang).
RE investor, thread see thread title “State of Housing 2006” from earlier today.
“RE investor, thread see thread title “State of Housing 2006″ from earlier today. ”
oops. Thanks for pointing that out. I inadvertently posted the excerpt in that string as well.
Oh well…..
Nassau is 40% overvalued but Manhattan or the Jersey City Waterfront is not??
I was shocked to see that median or mean income in Many Manhattan neighborhoods is under $100,000 a year.
To anyone living in Manhattan, $100,000 is barely enough to make ends meet or live without at least one roomate.
What about Jersey City?? Median Income is about $50,000 a year (household income), but on a $50,000 a year income you couldn’t even find a studio apartment in any but the worst parts of Jersey City that you would qualify for let alone make a purchase.
Who are these people that are spending $600,000, $700,000 or more for a condo when the condo boards require 20% down to purchase???
The NY Times thinks that everyone in this region is a six figure single white collar white professional making $200,000 a year or more.
My favorite flipper:
17 Mount Ararat Road, 07078
Listed MLS 2237332
Jan 21, 2006 – $759,000
Mar 24, 2006 – $698,999
May 10, 2006 – $698,998 (dropped price $1)
Relisted MLS 2281275
May 23, 2006 – $639,000
Jun 13, 2006 – $625,000
http://www.realtor.com/Prop/1060522933
Some comps:
10 Mount Ararat Rd Aug 04 $495,000
19 Mount Ararat Rd Aug 04 $375,000
15 Mount Ararat Rd Dec 03 $415,000
10 Mount Ararat Rd Nov 03 $445,000
{{{I don’t see how any responsible organization, or individual, can hope that housing prices remain at their current insane levels (or worse yet, move higher).
Fortunately, they’re all spitting into the wind, as the data proves with each passing week.}}}
These are the same people who spend $2,000 a month for clothes, & spend $300 for a new pair of jeans every few days.
‘Insane’ levels is a relative term. Many people think spending $2,000 or more a month on clothes is insane, but for most people in the NYC metro area, it is perfectly normal.
Same thing with rent. A studio in any of the five boros for under $2,000 is a steal, but paying $2,000 – $5,000 a month in rent like most Manhattanites do is probably considered insane.
Thanks for your insights……
Steve @
http://www.lifeincome.org
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