From the Wall Street Journal:
The Shifting Calculus Of Buying a House
By JAMES R. HAGERTY and ANJALI ATHAVALEY
Home buyers have another reason to sit on their hands.
In the latest news from the slumping U.S. housing market, a report released this week says that median house prices are likely to decline more than 10% over the next few years in 20 metro areas, including Las Vegas, Tucson, Ariz., and Washington, D.C.
…
The proliferation of headlines about a weakening housing market is encouraging some potential buyers to hold off until prices look like they’re near a bottom.Nillani McClain, a 35-year-old human-resources manager who lives in an apartment in Brooklyn, N.Y., has been looking at condominiums and townhouses in New Jersey with her husband, David. But given the recent slowdown news, the McClains are leaning toward waiting until next spring — and then looking in Manhattan, a market they had originally thought they couldn’t afford.
“We are taking into consideration the option of finding something in the city and not having to move out to Jersey if prices drop considerably,” Ms. McClain says.
…
For sellers, the real-estate news adds to their headaches. Laurie Siegel, a 62-year-old retired nurse in West Orange, N.J., is trying to sell a three-bedroom house so that she can buy a condo. The house was listed six weeks ago at $449,900, and Ms. Siegel hasn’t had any serious offers.“If I don’t get enough for the house, how am I going to buy the condo?” Ms. Siegel asks.
So far, she has refused to lower the price of the house. “I think it’s all a gamble,” she says.
If you read Zandi’s quotes in various articles about Moody’s RE report, you can see that he is hedging on the side of them being wrong on the upside. When he’s talking about conditions worsening since the time the study focused on, it’s because he thinks its going to get worse.
The Anderson Forecast people did the same thing last week when they reported on California.
From the Chicago Tribune:
“Nonetheless, Lereah agreed that broad price declines in some regions are unavoidable.
“I don’t think I would use the word `crash,'” he said. “When you use a word like that, it’s almost a self-fulfilling prophecy in the housing market. These are people’s homes. Their retirement is depending on it.”
Lereah may not want to say it, but that doesn’t mean it’s not happening. Saying crash doesn’t create a self-fulfilling prophecy, excess capital (created through mindless debt creation) chasing a limited resource to the point where costs are not alligned value to the point where it is not possible to get a positive ROI does that.
http://www.chicagotribune.com/business/chi-0610050109oct05,1,1050563.story?coll=chi-business-hed&ctrack=1&cset=true
I doubt their retirement is depending on it. Say you want to retire at age 65…did you not plan financially? Real Estate has only been nuts for the last 5 years, so you mean to tell me that you were 60 when you realized you could retire on your house. Gimme a break!
I think those numbers are too low. I realize that they are solely for single-family, but look at the numbers for Bergen County posted on this blog, and look at Housing Tracker. That shows a larger decline in medians in some areas than is shown on the above table – and those are LIST prices. Miami’s 12 month is over 8% down, and Boston’s 12 month is 3.8% down. DC’s 12 month is 6.1%. Tampa is 8.8% down. SD is 7.4% down. Sacramento is 6.0% down. Milwaukee is 2.4% down.
In a declining market, list prices generally are higher than closing prices, and certainly the MRIS is showing that in the DC area.
My guess is that Moody’s report is not worth the 4K!
With demographics against the market, and with high median prices causing record unaffordability ratios in many areas, thus shutting out a great many would-be borrowers, it’s hard to see inventory excesses clearing quickly. The wave of baby boomer retirees will mostly be looking to sell and downsize. It does seem as if many of them already bought their next home, too.
I would not focus as much on the magnitude of the drops in price and instead looks at the projected timing of the trough [i.e. bottom].
Cross off 2006 [2007?]
Beware the false bottom
look – Ocean City NJ – Spring 2010!!!!!!
“The house was listed six weeks ago at $449,900, and Ms. Siegel hasn’t had any serious offers.”
It’s likely she HAS received serious offers, but doesn’t know it yet.
In another six months, those ‘non-serious offers’ she received will be a distant memory, a daydream of better days.
“I don’t think I would use the word ‘crash,’ ” [Lereah] said. “When you use a word like that, it’s almost a self-fulfilling prophecy in the housing market. These are people’s homes. Their retirement is depending on it.”
Their retirement is depending on it? Irrelevant to what the market decides a house is worth. (Also, Greater Fools buying over-priced houses should consider retirement as well.)
But Lereah clearly just admitted the following: “I’m a liar, and can’t be trusted to convey reality.”
Is that a %/quarter until the bottom that they are predicting, or is this only 1 quarter’s prediction at a time, and they’ll come out with more numbers as time goes on?
Even though this doesn’t have to do with NJ real estate values directly, I thought I would share this. According to the University of Floriday, following are land values (per acre) over the last several years for Southeast FL (within 5 miles of Major City):
Year ended:
5/2000 $34K
5/2001 $40K
5/2002 $45K
5/2003 $59K
5/2004 $62K
5/2005 $137K
Yeah, nobody could have saw that bubble coming!
OC numbers seem inaccurate. I don’t see it peaking in 1Q07. No one can sell a house down there near asking price. New construction is just sitting idle. Developers stopped buying knockdowns and empty lots. I think it already peaked sometime in ’05. It may therefore rebound sooner than 2010.
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