From Inman News:
2006 real estate forecaster report card
Last year at this time, NAR chief economist David Lereah was predicting a “modest cooling” in the real estate market in 2006. Like most experts, NAR’s top economist didn’t anticipate that sales of new and existing homes would decline so steeply in 2006, or that housing starts would be off so dramatically.
When all the numbers are in, sales of existing homes are projected to be off 8.6 percent this year, to 6.47 million (which, as NAR is quick to point out, is still the third-best year on record). Looking forward to 2007, Lereah expects existing-home sales to “coast” at just over 6.4 million next year, although he anticipates sales of new homes will dip below 1 million.
| NAR | 2006 prediction | 2006 (revised) projected | 2007 prediction |
| Existing-home sales | 6.86 million | 6.47 million | 6.43 million |
| New-home sales | 1.24 million | 1.07 million | 975,000 |
| Housing starts | 1.97 million | 1.85 million | 1.63 million |
| Median existing-home price | $219,200 | $223,700 | $227,500 |
| Median new-home price | $247,000 | $238,400 | $241,400 |
| Rate on 30-year fixed mortgage | 6.5 percent | 6.4 percent | 6.6 percent |
| Unemployment rate | 5 percent | 4.6 percent | 4.7 percent |
“We are in the midst of an inevitable adjustment following the housing boom of 2004-2005 when housing market activity soared to unsustainable levels,” NAHB Chief Economist David Seiders said in November, when the association released the results of a poll in which 81 percent of homeowners said they believe their homes will rise in value over the next five years. “Housing demand should stabilize in short order, and the downward adjustment to housing production should run its course by mid-2007. The market that emerges from this correction will display good balance between supply and demand, and move to a healthy and sustainable trend based on solid underlying fundamentals.”
| NAHB | 2006 prediction | 2006 (revised) projected | 2007 prediction |
| New-home sales | 1.19 million | 1.06 million | 969,000 |
| Rate on 30-year fixed mortgage | 6.5 percent | 6.4 percent | 6.5 percent |
| Housing starts | 1.94 million | 1.84 million | 1.62 million |
Revised number for exisitng home sales, new home price, new home sales, housing starts, unemployment rate is negative.
Except revised exisitng home price which shows an increase. If that’s not manipulation what is?
And these are the same people who said the prices of homes never drops and this is not a bubble, its a great time to buy. I think they forgot to include the rise of forclosures this year and that the rate will keep on increasing.
If most people in NJ make under 100k, who do these Jidiots think will buy all these 500k+ homes. Thats why the market is crashing now. The people who all make over 100k have a home or are not really looking now. An exotic mortage can only go so far. I dont think we need more fair housing, I think the housing market needs a better structure and needs a better balance of prices, like there was before the bubble.
I dont needs a degree in economics to predict that until there is balance and the prices drop to around 1999-2000 prices than the market will never be correct. Not saying some areas cannot stay a little higher, but there needs to be price levels for the middle class. I guess all the investor, flippers, and new realtors better get used to saying, would you like fries with that.
From Fleckenstein at MSN/Money:
No more bubbles to bail out the housing bubble
Wall Street has a soft spot for the “soft landing” thesis, but to me it’s crystal clear that a serious economic slowdown is under way. What has been surprising: not that the economy is weakening but that so many people seem to expect a soft landing, and therefore remain in denial about the seriousness of the slowdown.
I guess the predilection toward a soft landing is a function of the following: So many folks in the investment business — and in the country at large– haven’t experienced a consumer-led recession in so long that they think this outcome is just not possible. That’s because the Federal Reserve Board has evolved into being a business-cycle suppressor and bubble manager. Consequently, folks just assume that economic weakness is a feature of the business cycles of yesteryear.
…
To review: We had a mindless equity bubble that was precipitated by a complete abdication of responsibility on the part of Fed monetary policy. That bubble popped in 2000, precipitating a recession led by businesses cutting back from their previous misallocations of capital.
Next came our umpteen interest-rate cuts and tax cuts to help fight the aftermath, the result of which was a massive housing bubble — aided and abetted by the utterly irresponsible actions on the part of lenders. The housing bubble topped out well over a year ago, though it’s taken some time for the problems in real estate to begin affecting the consumer.
…
What has, of course, been impossible to determine in advance is the exact timing of when the stock market, the real estate market and the economy get in sync to the downside — i.e., “the next time down,” to quote my euphemistic, forever-and-a-day-in-the-making outcome.
I expect it to occur in 2007 — because everything seems lined up, as never before, for that scenario to play out. To quote a personal motto from my Web site: “Often wrong, never in doubt.” Various areas in the stock market are more vulnerable than others, though in some ways, it’s all one trade. Consequently, I think the chance for at least double-digit negative returns next year is very high.
njrebear,
I got your document, thanks, looking into it.
jb
“Bridgewater thinks the long end of the bond market is distorted because of foreign investors, especially governments, are buying for their own reasons, basically to keep their currencies low against the dollar.
And, Bridgewater notes: “There are early signs that this flow of money could abate …”
First, China is allowing its currency to rise. “This transition to a floating exchange rate will reduce China’s demand for U.S. bonds. A second sign is the accelerated rate of imports by Middle East exporters … The OPEC countries are beginning to spend their money on goods and infrastructure; this spending ultimately leads to the selling of U.S. bonds and U.S. dollars and the distribution of that money to a wider array of countries/currencies.”
“In a nutshell, I believe that we’re in a U.S. debt bubble very similar to that which occurred in 1967-70. However, I don’t believe there’s any reason for it to pop now because I don’t see what will prick it. I think it’s more likely that after a bit slower growth in the U.S. (and no notable slowdown elsewhere) growth and inflation will pick up in the U.S. and interest rates and commodity prices will rise again. I believe that’s likely to be the last upward leg of this cycle and when the bubble will pop … I also don’t think this is a bad time to own gold.”
http://www.marketwatch.com/news/story/bond-bump-upset-santa-rallys/story.aspx?guid=%7BB1B0363A%2D928F%2D4A09%2DB965%2D122E0E3F0149%7D
inevitable adjustment following the housing boom of 2004-2005
Sure. Downplay the housing boom now. Now It was just during 2004 and 2005.
Economist –most of their forecasts are not worth $10 an hour.
“Erick Eschker, Humboldt State University economics professor, said that for the first time in a long time, renting may be the wiser option. ‘I don’t think we’ve ever seen it this bad here. Not since the Great Depression has there been such a difference between (rents and mortgages),’ Eschker said. ‘I would be a fool to purchase a house right now, unless I could find a house at the pre-boom prices. I think we are in trouble and I’m not going to lie about it.’”
Fleckenstein is a charlatan. He’s been bearish for 15 years, and right twice.
Economist –most of their forecasts are not worth $10 an hour.
But an economics professor is worth quoting?
Yes when it is based on facts. Anyone that can do basic mathematics can see that renting residential housing is cheaper than buying.
Unfortunately for the RE clan they do not want anyone that thinks.
Hovnanian, housing starts in focus
BOSTON (MarketWatch) — Traders are looking to quarterly financial results from home builder Hovnanian Enterprises Inc. and other economic data this week to determine if the much-ballyhooed housing market recovery is for real.
…Chief Executive Ara Hovnanian, at a recent industry conference sponsored by the New York Society of Securities Analysts, said the company isn’t overly optimistic about the housing market’s recovery and that it isn’t managing as if “everything will be hunky-dory in 2007.”
The CEO said the latest housing slump is different from previous ones because it wasn’t triggered by an economic shock but by a sharp pullback in the confidence of buyers, who are reluctant to purchase a home “that may be cheaper a month later.”
Builder confidence, housing starts
…The National Association of Home Builders is scheduled to release its monthly confidence survey Monday afternoon. Most recently, the industry group said the index rose for the second straight month in November.
…Also on deck, the Commerce Department is scheduled to report November housing starts and permits Tuesday morning. In October, starts of new homes plunged 14.6% to a six-year low, while building permits dropped 6.3% to the lowest rate in nine years.
More at the link above, Rich
I posted this on the weekend discussion last night, but didn’t get many responses – I’ll try again!
Saw a house (MLS 2351629) – OLP $325, now is up to $335 (WHY do people do that?? INCREASE the price??).
Sold in Zillow in 99 for $165 – not sure if anything happened since then (can one of the realtors on this site see if there is any other sales history on this?)
Selling agent is asking for final and best offers by 5pm Wed (Dec 20). Why would they do that??
It’s a fixer upper. Worth $325 based on what I’ve seen, but it KILLS me that these people, who bought it in 1999 for $165 is now going to make ALL THIS PROFIT!!
thoughts?
lina – People increase the price usually when the house has been on the market for so long, they dont want to lower the price anymore, so by increasing it, accomplishes 2 things
1. creates a sense of urgency to buy now or it will continue to go up[ in value
2. be found when searching for higher priced homes
Lina,
I dont know that anybody can say why they (the sellers) did it without guessing. My guess is that
1 – their neighbor just sold for $330 so they want to do it too.
2 – They need to net an extra 10k from the sale to get to where they are going next.
http://www.youtube.com/watch?v=lPnA1cnewLA
I get the sense that it’s something around creating a sense of urgency – increasing the price and putting a deadline on it – it just reeks with a slimy sales tactic, doesn’t it?
“Selling agent is asking for final and best offers by 5pm Wed (Dec 20). Why would they do that??”
I missed this part. With that i would say you, Lina and BigWindow may be on the right path as to why the increase.
I noticed a house that went on auction a few weeks ago. Nobody showed up to the auction!
I don’t see anything wrong with it. Greedy grubbing sellers have a right to ask any grubbing bloated price they want, but buyers have a right NOT to buy their bloated overpriced shack.
Just walk away and laugh. Next.
On the other hand DOM’s is questionable activity.
Lina
Just say no…………
KL
I guess my next question would be: what is this house worth?? I feel like it will sell at current price, but can’t seem to get myself to a place where I’m settled with what homes are really worth right now.
Again, as I mentioned in the past, the bubble will not burst as long as there are buyers willing to spend asking price for homes, and there clearly are – even the week before xmas!
Ok, I just had to know, so I called the selling agent.
He said that basically:
– they are pricing the house to sell,
– that the $325 to $335 was nothing more than a typo (the price was supposed to be $335 from the get-go),
– that they have several offers (he said he doesn’t have them, but that other agents do),and
– he hopes/expects it will sell above list, and to make it fair for anyone interested, he is giving a Wed deadline.
Sounds like buyers see this as a deal, I guess. Which is probably is at $325K based on TODAY’S reality – not sure about 2007 and 2008 reality though.
Can anyone let me know how long the house lina is referring to is on the market for?
MLS # 2351629
Just to share a thought here.
“that they have several offers (he said he doesn’t have them, but that other agents do),”
Every house i have inquired about in the past year has had the same story. Every house has had a “bid” on it and yet they are all still sitting there. I am getting the feeling that they always say that to incite a sense of urgency.
Just because they put a deadline of Wednesday on it doesnt mean they will sell it wednesday. There is a distinct possiblity that none of the offers will be accepted because they were too low. Or :::gasp::: someone along the line lied and there are no offers on the table.
“Again, as I mentioned in the past, the bubble will not burst as long as there are buyers willing to spend asking price for homes, and there clearly are – even the week before xmas!”
I think it’s because they are believing that they’re in a buyers market – not everyone is all that educated. They see a few prices drop and it looks good to them, AND this is traditionally a good time to buy because only true sellers hold on during the holidays.
“Again, as I mentioned in the past, the bubble will not burst as long as there are buyers willing to spend asking price for homes, and there clearly are – even the week before xmas”
You need a babysitter. if you want it so bad then buy it, but you will be overpaying.
Back in 1992-1994 the last bubble burst houses sold and some greedy grubbers refused to budge, but their house just sat and sat and sat. Buyers need to walk away if the seller is a greedy green eyed grubber. let’em rot.
I suggest do not even look at the house if it is priced near 2004-2005 prices. You can’t have everything you want at any moment in time. sometimes you have to wait for the ideal situation.
Listed on 12/8
12/8 of 2006? just over a week ago.
And they are already going the auction route?
Maybe they really gotta get out and fast.
We lost out on one house we low balled on this past summer. We happened to see the buyers moving in a few weeks ago. They bought the house close to asking with an ARM. That house should be back on the market shortly…hopefully the new “owners” don’t ruin the house while they are renting it.
What do you mean by “auction route”? They are trying to start a bidding war, is what it sounds like.
lina Says:
December 18th, 2006 at 11:23 am
I get the sense that it’s something around creating a sense of urgency – increasing the price and putting a deadline on it – it just reeks with a slimy sales tactic, doesn’t it?
http://www.hudsonteatenants.org/tearoom/viewtopic.php?t=542&start=125
I think your giving up to quickly. The decline has just started. It took five years to get here. Expect some time for it to fall. It’s like a roll coaster. When it starts to go back down, it starts of slow. This decline will take about 5 to 10 years before we hit the bottom. Nov. NJ home prices are down about 5% YOY.
“Again, as I mentioned in the past, the bubble will not burst as long as there are buyers willing to spend asking price for homes, and there clearly are – even the week before xmas”
From a personal experience….sad to say that I bought Enron stock when it was going down thinking that at this price its a bargain (purely emotional) and it continued going down and I lost a decent amount of money. You know what’s happening in the market…walk away. Contracts on a house doesn’t mean it will close.
Lina,
in re: to your “all this profit” objection in #13.
$165 cost basis in 1999 to $335 asking in 2007.
subtract inflation over that period. today’s $335K sure buys less now than it did in ’99.
2) don’t forget to subtract interest paid (you’ll have to guess), property taxes, regular maintenance, upgrades/improvements, if any.
Still a profit, for sure, but not stratospheric. My own rule of thumb is never bid on a new listing in this market, especially near the holidays.
Home prices still have room to decline, and it may take 15 years or more to reach new inflation-adjusted highs
DECEMBER 25, 2006
COVER STORY
Housing: Curb Your Enthusiasm About A Recovery
Home prices still have room to decline, and it may take 15 years or more to reach new inflation-adjusted highs
Housing booms are short and exciting. Housing busts, on the other hand, are long and painful. So don’t put much faith in those oft-heard assertions that the worst is already over. Prices are likely to fall further in many markets in 2007. In some others, prices may rise, but at less than the rate of inflation. A BusinessWeek analysis of the past three decades shows that if history repeats itself, it’s likely to take 15 years or more for many parts of the country to get back to their inflation-adjusted peaks.
For residential real estate, the outlook for 2007 ranges from mildly positive to awful. The major markets that do least badly will be “revenge of the nerds” cities like Dallas and Houston that the boom bypassed. Even if all they generate is low-single-digit price gains, they will look good by comparison. Seattle and Raleigh, N.C., with healthy job growth, should also do O.K. The biggest losers will fall into one of these groups: cities like Detroit that are suffering economic contractions; cities like Los Angeles, San Diego, and others in California where prices are extraordinarily high and have barely begun to adjust; and cities like Miami, Las Vegas, and Phoenix that have a huge overhang of unsold houses or condos.
Advice to homeowners: If you need to sell and you’re not getting much interest, cut the price by an extreme amount. If you make halfhearted cuts, you’ll remain overpriced and you’ll follow the market all the way to the bottom. Advice to buyers: Bargain hard. Many sellers are still asking for too much. “As tough as our market’s been, the toughest thing is to get sellers to understand that prices aren’t going up 18% to 20% a year anymore,” says Ned Redpath, head of Coldwell Banker Redpath & Co. Realtors in Hanover, N.H.
In some ways, a story on housing doesn’t even belong in the Investment Outlook issue, because regular folks shouldn’t be taking a one-year perspective on the places they live. If you really need to know what prices are going to be doing, say, six months from now, it probably means you’ve worked yourself into some kind of corner. For the long term, housing is still a good bet for most homeowners because in addition to any capital gain, it provides a unique annual dividend: a roof over your head.
THAT SAID, RIGHT NOW is not the ideal time to buy or move up, even with the recent price declines. The inventory of existing homes shot up 34% from October, 2005, to October, 2006, and now stands at nine months’ worth of condos and seven months’ worth of single-family houses at the current rate of sales. That backlog will take a long time, and a lot of price-cutting, to clear out. One housing bear, Ian Shepherdson, chief U.S. economist of High Frequency Economics in Valhalla, N.Y., guesses that prices nationally could fall 5% to 10% from the end of 2006 to the end of 2007, going by the Office of Federal Housing Enterprise Oversight housing price index. Using that same measure, Goldman, Sachs & Co. (GS ) predicts a 3% decline from 2006 to 2007. Before 2006, the index’ worst performance since its origin in 1975 was a 0.3% increase in 1990. The OFHEO numbers don’t cover the highest- and lowest-priced homes, which will probably do even worse, says Economy.com Chief Economist Mark Zandi.
The Federal Reserve is likely to help the market in 2007 by cutting short-term interest rates, which will make adjustable-rate mortgages cheaper. Offsetting that, Zandi notes, is the fact that banks are being required to toughen their standards for exotic loans such as interest-only and option-payment mortgages. That will make it hard for people with marginal incomes to buy or refinance.
Housing prices were pushed up in part by get-rich-quick speculation. Now real estate has lost its grip on the public’s imagination. Says Richard J. DeKaser, chief economist of National City Corp. (NCC ) in Cleveland: “We’re looking at several years of weak home prices. It’ll return to the time when no one is talking about real estate.” Oh, well. You can still take a flier on Google Inc. (GOOG ).
By Peter Coy
I’m going to put that Coy/BW piece up on the front page. Thanks.
jb
“What do you mean by “auction route”? They are trying to start a bidding war, is what it sounds like. ”
right but they are taking a auction style approach in that they are waiting for the highest bidder by EOD wednesday. Yes indeed they are hoping for bidding war.
Well, here’s my gut feeling: it’s a buyers market, yet they are setting up a situation to benefit the seller.
My gut is telling me to not get involved – why should we/would we want to get involved in a bidding war in a buyer’s market the week before xmas, right?
unless you HAVE to have THIS house, have some holiday fun rather than second guessing your gut. Instead fill it with holiday goods and revisit 07.
lina, agree with Spelunker. Why all the debate over a house that isn’t even all that great? Let it go. Inventories are huge, you’ll find something better.
Happy Holidays!
Or, just go in with a low offer, and if someone bids higher, then they win.
Here is my LAST post on this subject, until I find out what happens on Wed!
We went in at $315K, with a flexible closing of January. Take it or leave it. They’ll probably leave it! That’s fine – I feel better offering $315 and using that extra $20K on renovations, instead of it sitting in the sellers pocket!
Why cant we Have bidding wars? But as opposed to bidding up we bid down. Lets take a 500k house first bidder, bid 275, next bidder 250 thab 3rd bidder 225 lol now that would be fun
Don’t we wish! I would just take a market that allows average middle class people to be able to comfortable afford a house, AS WELL AS other necessities, such as food…..
Buying a house as a way of saving the planet!!!
SO you want to have A HOUSE AND FOOD??? May be you also want to be able to pay for car insurance and have some money saved for retirement as well???
Well, if you want a house you have to sacrifice!!! But look at the brigh side of things: Living on Raman noodles will make you slim and running to the train station everyday will make you fit. By not being able to afford utilities (such as heat and electricity) and cars you will fight the negative effects of Global Warming!!! Andsicne you will not have electricity you do not need oll of thouse fancy appliances, computers, vaccuum cleaners, etc…
Your only one concern will be – can you afford ever increasing property taxes in NJ down the road.
Also, since you will not be able to retire, you will help save failing Social Sequirity System – help thouse not so fortunate, who do not own a wonderfull 1920 colonial house.
SO buy a house now and help us SAVE the Planet!!!
Greenspan
One more post about this! So we emailed our realtor and told her to put in $315K, etc. and she called back wanting to talk about this.
I know she is not going to be willing to put in this offer, saying we won’t get the house (which we likely won’t), but I don’t get why she can’t play on our side a bit more, and go to the listing agent and tell him that she has a good buyer who may be willing to negotiate, but doesn’t want to “play” this highest bid game?
Wouldn’t a realtor who was looking out for our best interests do something like this? That’s what I would do if I were trying to make a sale – talk up the “product”, more than just relying on “price”.
Hey Lina,
Geez, stop whining and wake up! The sellers have every right to offer the home in an auction format, and they do not care one iota about your desire to “negotiate” or to avoid playing their game. There’s plenty of downside risk to them, because if they’re either lying about multiple offers or do not receive a suitable offer, they will be standing there Thursday AM…egg on their face…and still for sale. Then it will be open season on that listing.
If there are truly multiple offers on the table, it’s more likely that this home has been deliberately underpriced to get things cooking and competitive among buying prospects. In that case, it’s your agent’s job to try and suss out the true value of the home, present those ideas to you and help you come up with a winning game plan. Submitting a wussy offer with some lame “we don’t want to play your game” message is NOT a winning strategy. Your agent is reluctant, because no agent likes spending time and effort on a 100% guaranteed losing proposition.
If you think the seller’s bluffing, stand pat, don’t offer, shut up and take your chances. If not- and you want to own this home- figure out what it takes to prevail.
Hey Homey-
There actually IS such a thing as a “descending” auction in RE! That’s how tax certificates are auctioned…you might enjoy playing around with these. In fact, every once in a while, the lienholder ends up with the ability to foreclose and gets the property for virtualy nothing! Same goes for sewer and water certs.
Google “tax liens” or “tax certificates” and see what pops up.
HI Lina, Why are you so focused on this home?? Just say: “315K and I do not want to talk about it again. meanwhile, lets go look at more homes”
lina
PLEASE BUY THIS HOUSE at $335K It’s only 20K more than your offer.
PLEASE !! PLEASE !!
335K is a small price to pay for happines. You can stop agonizing and enjoy the house.
I thought this was a place to get information, not name calling (aimed at clotpoll!!).
Anyway, my realtor is so frustrated with our lowballs, she suggested we might want to work with another agent that can get the point across to us that lowball offers will not get us a house in Maplewood.
I never loved Jersey to begin with (moving there because of price/commute to NYC), and this housing process has not moved the needle towards the favorable side at all!
Lina.
Why maplewood? Why not some other surrounding suburbs?
Also what’s the rush to buy? Why cant you rent a similar place?
The house that you mentioned for 335K looks like POS, I would not put ANY offer on that house, let alone lowball or worse bidding up. Remember once you get into a house, moving to another one is damn expensive because of all the costs involved in buying one up.
If you believe in bubble, you need to have the patience to wait until it unfolds itself completely. The process has just begun in 2006.
Finally (I think) for any home that anyone of us buys, you need to answer this question. What if this house loses 10% of it’s value in next 2 years. So for a 500K house, what if comps sell for 450K in year 2008. Would I be at peace (also knowing that you would have ponied up 85K in those 2 years just for interest, property taxes and other non-recoverable expense) or would you curse yourself for being impatient. Answer to this question will help you in making a decision whether you can afford to rush now into buying a house.
Good luck with your decision.
lina: Trust me you do not want a hosue in Maplewood, grossly over priced, taxes are insane, loust grammar schools, scary high school, surrounded by deteriotating towns. Please do your self and family a favor skip Maplewood, only cluless NY’ers buy there.
Hey Lina…
Going back thru my last post to see what name I called you. Haven’t found it. Just in case I didn’t call you a name, I’ll do it now:
Wuss.