Quick housing recovery seems unlikely

From Kiplinger:

More Woes For Housing

Forget about a housing recovery later this year. In fact, odds are that the residential property slump will extend into 2008, as beleaguered homebuilders slowly unload a mountain of unsold houses and prospective buyers continue to face affordability challenges.

Those dismal home sales figures for May weren’t an aberration — the housing market’s fundamentals clearly stink. On the supply side, the amount of unsold residences in May was equal to a hefty nine months’ worth of sales at the current pace, and seven months for new homes, forcing builders to slash prices or offer lucrative freebies if they want to move any property.

Surveys of homebuilders show them as pessimistic as they were in 1991, during the last big housing slump. They will break ground on approximately 1.35 million new homes this year, 100,000 fewer than what was previously expected before the mortgage rates jumped. The pullback is bad news for a variety of housing-dependent industries, such as plumbers, drywall hangers, landscapers and insulators. Next year, housing starts should creep up to 1.5 million or so. Nicholas Retsinas, the director of the Joint Center for Housing Studies at Harvard University, says, “It’s going to take into 2008 to work out the oversupply. It will be a while before there’s a rebound.”

Average home prices are likely to fall about 4% to 5% this year, and will probably give up another 1% next year before they stabilize. In principle, this should spur demand. But the recent spike in mortgage interest rates has instead pushed many potential customers to the sidelines. The average rate on the popular 30-year fixed mortgage will probably stay close to its current 6.7% for the remainder of the year, which is up about a half percentage point from May.

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7 Responses to Quick housing recovery seems unlikely

  1. Bloodbath in Winter 2007 says:

    Quick is so general. This winter? 2008? 2009?
    If nothing, it’ll be fun.

  2. john says:

    All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
    – Arthur Schopenhauer, (1788 – 1860)

  3. Rob says:

    People in the housing industry must feel like travelers stranded at the airport. With each new announcement the flight home is postponed a little longer.

  4. HOUSE OF CARDS says:

    Playing: A Look Back: “Lets Make a Boom!”


    A comical, sad, and amazing look back at the boom. This segment originally aired in May 2005 and it’s simply stunning to compare the sentiment expressed in this clip and compare it to what we’re experiencing today… only 24 months later! The collapse is clearly fully engaged and well underway. Includes a revealing interview with Nicholas Retsinas, director of Harvard’s Joint Center for Housing Studies in which he strongly suggests that housing, particularly home building, disproportionately contributed to buoying the national economy during the 2001 recession.

    Originally aired on: 5/17/2005 on News Hour

    Running Time: 16 minutes 19 seconds



  5. john says:

    NEW YORK, June 27 (Reuters) – The full effect of the subprime lending crisis has not yet been seen, the chief executive of stock exchange group NYSE Euronext said on Wednesday.

    “We haven’t yet seen the full extent of the subprime lending crisis problems,” said chief executive of NYSE Euronext John Thain on the sidelines of a Wall Street Journal conference at the New York Stock Exchange building.

    Thain was speaking ahead of a lunch at which U.S. Treasury Secretary Henry Paulson said the subprime mortgage mess that has hurt investor sentiment for risky assets in recent weeks was a symptom of the excess liquidity that was sloshing around financial markets in recent years.

  6. john says:

    Everyone in the life boats this ship is sinking!!

  7. Lindsey says:

    At the beginning of this year I predicted (OK, I took a wild-ass guess) that median home prices would drop 10%.

    Having never happened before, it really was a crazy thing to say, but I also figured that since the run-up was so high and so fast, we really could have a plunge like that.

    Six months in, it’s looking like it’s possible I missed on the high side.

    That is reallly scary.

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