From Marketwatch:
The U.S. housing market has not reached bottom and will likely not begin to recover until the middle of this year, three housing economists said Wednesday.
The weakness will extend to existing-home and new-home sales and housing starts as well as to home prices, which are likely to show their first full-year decline nationally since records have been kept, the economists told home builders at their annual convention here.
I don’t think we’ve seen the bottom,” said David Berson, chief economist for Fannie Mae. “We’re going to see a much bigger drop in investor demand this year. But by the second half of the year the market will stabilize, if investors pull out quickly.”
Berson said he expects the home-price index calculated by the Office of Federal Housing Enterprise Oversight will show a nationwide decline in values for 2007, the first time that will have happened since the data began being collected in 1975. Unlike other measures, the OFHEO data measure the price changes on the same homes over time, meaning the index is less likely to be skewed by the types and locations of sales.
“It won’t be a big decline, maybe 1%. And the declines will be far more centered in areas that have had the most investor activity,” he said. “Real home-price gains, adjusted for inflation, will be negative this year, next year and possibly the year after that.”
The biggest problem the housing market faces is “a seriously large inventory situation,” said David Seiders, chief economist for the National Association of Home Builders, which is hosting the International Builders Show here this week. Seiders said the housing boom in 2004 and 2005 produced at least 400,000 more housing units than demand could support, and builders are having to push hard to move those homes off the market.
Seiders said, though, that he believes home sales did hit bottom in the fourth quarter and that housing will make a “gradual recovery” over the next two years. He said housing could actually begin to make a positive contribution to economic growth again starting in the second half of this year.
“One of the good things is that the U.S. economy has been able to handle the dramatic correction in housing,” he said. “GDP growth, unemployment, the overall inflation situation and interest rates” have all been positive despite housing’s woes, he said.
…
“There is still a little room for sales and starts to weaken,” said Frank Nothaft, chief economist for Freddie Mac. “We should hit the trough in the first half of the year. But we’re a few years away from the robust levels of activity we saw in 2005.”
According to CNN 2.1 million homes are vacant.
http://www.cnn.com/video/player/player.html?url=/video/business/2007/02/06/aw.housing.market.cnn&source=money
Don’t worry, they’ll find a way to twist that. After all, baby boomers need third homes nowadays.
-Richie
The market will hit “bottom” in 4 months? Keep dreaming “economists,” realtors, and Greedy sellers.
Long way down, Grubbers:
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
Reality will sink in sooner or later, in the meantime, a big thanks goes out to HSBC for paying my rent again last month, and also to the Bagholder who out-bid me on a property last year and is now $75,000 underwater. Thank you, thank you, couldn’t have done it alone.
I have come to lose all respect to these so called economists. How can a bottom be reached in 4 months?? How will a house become more affordable in 4 months? Is God coming down from heavens with loads of money for people to buy houses OR is it that in 4 months Pres. Bush will decide that all houses in the U.S will have a market value of 50% off current prices.
On a different note, I smell mortgage fraud when i read posts about buyers paying more than LP.
According to CNN 2.1 million homes are vacant
I posted this the other day, but I downloaded the Census database of vacancies for the Northeast. Since the 1950’s the northeast has averaged 1.1% vacancy. In 2006, we hit an all time record of 2%. It has never been this high since the Census Bureau started tracking it.
My guess is after a successful “spring come back”, economists are now targeting beginning of school year bonanza.
RentingInNJ,
Interesting. Last weekend, I looked at least three vacant rental properties within the same development.
Finally…the words I’ve waited years to hear!
From Dick Vitale:
“This is not a vintage Dook team.”
Music to my ears!
Go to hell Dook.
SEC investigating Country Wide
http://www.nysun.com/article/48159?page_no=1
Apparently, the Securities and Exchange Commission is thinking along the same lines, having just kicked off an investigation, I’ve learned, into trading in the shares of Countrywide Financial, one of the nation’s largest independent mortgage lending firms.
The period in question centers on late 2006 trading, prior to a disclosure last month in the Financial Times that Countrywide and Bank of America have held discussions about a possible alliance.
Interestingly, though such speculation was quashed last week by Bank of America CE0 Ken Lewis at a financial services conference, the stock continues to trade around its peak, currently selling at $44.74, sharply above its 52-week low of $32.10.
So this weekend I saw a great big brown cedar shingled house in Glen Rock going for $575 down from $675, and on the market since 2/06. The realtor pretty much begged us to make an offer, he said none had come in since it went on hte market. Well my wife andI went home and thought it over. This house had 9K taxes, a bit on the affordable side when talking about Glen Rock. So we called our broker and offered $475. I guess the agent showing the house that weekend said the same to everyone that weekend. Apparently they received 2 offers in the low 5’s. I was thinking Who would come in so high. HAve some fun with the guy. Supposedly the owner moved out and was carrying another mortgage, but had lived at this house for over 20 years. He had equity built in prob bought it for $100K or less. Whats the fun in bidding in the 5’s. Its not like it was a gem or something. It looked like a ski lodge from the outside, but had potential.
I have a few more low balls up my sleeve. Im hoping one will pan out. My wife is getting tired of the low offers since none have bitten yet. I see it like a sport, and know one of these fish will bite sooner or later.
Is Feddie using a different technique to measure delinquency rates?
http://globaleconomicanalysis.blogspot.com/2007/02/delinquency-footnote-12.html
“…if Freddie Mac renegotiates the terms of the loan with someone who is delinquent then “voilla” that person is no longer delinquent. It seems to me that since about June of 2006 Freddie Mac is struggling to keep this ponzi scheme afloat.”
“Fannie Mae has instructed its lenders and servicers to avoid foreclosure whenever possible by offering borrowers who get behind in their mortgage payments various alternatives, including temporary forbearance, loan modification and preforeclosure sales.”
>>
Please read disclaimer at the bottom of referenced page.
Fannie Mae has instructed its lenders and servicers to avoid foreclosure whenever possible by offering borrowers who get behind in their mortgage payments various alternatives, including temporary forbearance, loan modification and preforeclosure sales.
This is the kind of thing Japanese lenders did during Japan’s 15-year real estate bust (during which prices fell 90%). The difference between Japanese and US real estate is that holding costs in Japan are low – property taxes are nugatory. Mortgage payments in Japan had to way outstrip rents before the collapse really got going. Property taxes stateside are anything but negligible. With rents roughly half of mortgage payments on an equivalent property in many places, and property taxes a significant portion of a homeowner’s budget, I expect price declines to get going much sooner.
ck986 (10)-
986, perhaps your wife is reacting to the amount of time you’re wasting in the pursuit of failure.
You mention that there were two other offers in the low 500’s. Instead of disparaging them, you might consider that two offers in the same range indicate current market value.
The other idiotic part of the extreme “lowball” game:
1. The seller accepts your insanely-low offer.
2. The seller then directs his agent to lower the asking price to the price he just accepted from you and continues to market the property during attorney review.
3. Within days, other interested parties “magically” appear, and bid up the home.
Think this doesn’t happen? It does (the scenario above is a gambit played out a zillion times during the last RE decline…I was taught it during my 1st year in the biz), and it’s going to start happening more as NJ agents figure out how to play the declining market game.
Can’t get tomorrow’s price today.
Clot – great advice. So if you want to play lowball on the way down, you still have to be willing to up the ante a bit or risk getting outbid by others drafting on your efforts. I could see buyers having mental breakdowns after this happens once or twice. Its a good thing to keep in mind.
ck986,
Funny, I saw that house too but didn’t bother going in.
Just missed out on a house in Hillsdale b/c the other offer, $5K less than ours, wasn’t contingent on selling a home. :(
““We should hit the trough in the first half of the year. But we’re a few years away from the robust levels of activity we saw in 2005.””
This “economist” actually thinks we will see another speculative boom in a “few years”. He’s totally out of touch with reality, or a complete idiot.
“Can’t get tomorrow’s price today.”
That’s exactly what sellers have been getting the last few years, tomorrow’s price today (future appreciation today). Now it’s time to give it back.
I don’t think we’ve seen the bottom,” said David Berson, chief economist for Fannie Mae. “We’re going to see a much bigger drop in investor demand this year. But by the second half of the year the market will stabilize, if investors pull out quickly.”
By “pulling out quickly”, does he mean sell their properties? To do that quickly, it seems they would have to drastically lower their prices. Will that stabilize the market – at ’03 prices?
About the time they expect it to recover interest rates will increase sending the guesstimate of recovery down further.
Now I know where all the Psychic Friends network employees went. Remeber they didnt see Psychic friend going chapter 11 either.
Clot,
No my wife just wants to buy a house and move near her family. I dont really mind waiting though and I know she can bear it out a little while longer. We just werent really into this house, but at $475 we sure would be. You could probably get me to like almost any house in the towns I am looking at it all depends on the price of the home. Or you can wait for someone who loves that home and pay the full LP. He/She hasnt come by in a year, so I wouldnt hold my breath. The house has not changed status to ARR so the offers may have fallen through or not been accepted. In any case they will be holding an open house again this weekend.
The beautiful Tudor accross the street had been originally priced at 699 and was last at 525 but has been withdrawn, I guess the bag holder would rather pay the 11.5K taxes a year rather than let the house go at market value. I would have bought that Tudor at 500, if the taxes were 7-8K. I think the taxes in that town probably hurt home values.