“Everything I see points to lower prices, much lower prices.”

From Bloomberg:

Realtors Cut Forecast, Say Slump Will Extend to 2008

The National Association of Realtors reduced its home sales forecast for the ninth time this year and said the housing slump will extend into 2008.

Existing home sales will fall 8.6 percent in 2007, exceeding the 6.8 percent drop estimated a month ago. New-home sales probably will decline 24 percent on top of an 18 percent fall in 2006, the Chicago-based trade group for 1.3 million real estate brokers said today in a statement.

The two-year housing decline is worsening amid a surge in credit costs and the collapse of more than 100 mortgage companies after defaults by homeowners. Federal Reserve policy makers, who meet next week, said at their last session “tighter” credit is putting the U.S. economy at risk.

“There’s been an unusual hit to home sales, starting in March when subprime problems emerged and more recently when problems spread to jumbo loans,” Lawrence Yun, an economist for the group, said in the forecast. Jumbo loans are those over the $417,000 limit guaranteed by Fannie Mae and Freddie Mac and are typically given to borrowers with good credit.

New home sales won’t reach a bottom until the first quarter of 2008, the organization said. A month ago, the Realtors said the low point would be at the end of this year.

“To say home prices are going to go up next year, you have to wonder what the NAR is thinking,” said Alex Barron, an analyst who follows homebuilders for Wayzata, Minnesota-based Agency Trading Group Inc. “We’re going to see a drop in volume and prices.”

The U.S. housing decline may last as long as four years until 2009, Moody’s Investors Service said in a report yesterday. That would match the length of the downturn that ended in 1991. Home sales will take a “substantial hit” in the next several months, Moody’s said.

“The Realtors keep splicing a little more off their outlook to make it more gloomy, but they are still more optimistic than we are,” Meyer of Lehman said today in an interview. “The data from the mortgage and credit markets is all pretty dismal.”

Sales of existing homes will continue to fall through the middle of next year and then level off before gaining in 2009, the Lehman report said.

“Home prices need to come back down to more affordable levels so that people can take that inventory off the market,” Barron said in an interview. “Everything I see points to lower prices, much lower prices.”

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29 Responses to “Everything I see points to lower prices, much lower prices.”

  1. BklynHawk says:

    Note to Sellers, please read…JM

  2. skep-tic says:

    I love how the media is finally starting to call BS on NAR. Changing forecast 9 times in one year = ouch

  3. skep-tic says:

    CNN disses NAR too:

    CNN Money, “Home values and housing sales will take an even bigger hit than previously forecast and will not recover to their earlier levels throughout all of 2008, at least, according to the latest economic outlook from the National Association of Realtors released Tuesday. The group has continually been revising price estimates lower…As recently as the March economic forecast, it had still been looking for an annual gain of 1.2 percent in existing home prices.”

  4. Essex says:

    Man….I am so glad NOT to be a seller this year. *whew*

  5. dreamtheaterr says:

    Headline by Chameleon Yun: House prices to increase 25% next year. Buy, buy, buy.

    Fine print: They will decline 25% in the interim.

    Bottomline: You’re a phucked phool.

  6. sas says:

    I think the gold prices are trying to tell us something…

    Anyone else hear them?


  7. John B says:

    I went long OPPENH Funds GOLD/SPEC METALS ! Bought 250k worth in IRA about 25% less that were we closed tonight !

    Also very long SRS / SKF Ultra Shorts ( Thanks James ) LOL

    Fantastic returns since the bubble popped!

    Johnny B

  8. 1987 Condo Buyer says:

    That’s that well diversified portfolio they are always talking about!!

  9. profuscious says:

    sas #6:

    my wife….

  10. Everything's 'boken says:

    We’re better off; JB perhaps not.

  11. Clotpoll says:

    Sloop John B (7)-

    Imagine how well you’d do if you actually knew what you were doing.

  12. honest-realtor says:

    Price will never go down in the long term! It is the perfect time to buy with so many houses for sale. Don’t miss it!

  13. Everything's 'boken says:

    You will never make a sensible post in the long term! It is a perfect time to skip your posts wholesale. I won’t miss anything!

  14. WickedOrange says:

    “Investors expect the central bank to lower its federal funds rate target to 4.75 percent from 5.25 percent, based on the price of rate futures on the Chicago Board of Trade.”

    Things that make you go hmmmm…

  15. dreamtheaterr says:

    From the previous thread:

    pretorius Says:
    September 11th, 2007 at 5:57 pm

    The capital invested in each previous year is also earning returns in the current year and should be added to savings in the current year.

    My 401(k) has $100,000 in it on 12/31/07 and that balance appreciates 5% in 2008 – $5,000 in savings

    I earn $100,000 in 2008 and put 15% of it into my 401(k) – $15,000 savings

    I own a home that I bought for $100,000 which appreciates 5% in 2008 – $5,000 savings

    Economic savings rate = [ $5,000 + $15,000 + $5,000 ] / $100,000 = 25%

    Personal savings rate using conventional metric = 0%

    #246, Pretorius

    I hope you didn’t calculate your IRR on the flipped properties like you did on the 25% return in your post above.

    I was a CEO of Ford last year and my salary was 1 cent for the entire year since I did such a kick-a$s job. I so happened to earn 1 cent in interest from my checkings account for whole year. So is my economic savings rate 100%?

  16. RayC says:

    Here’s one for the old “Price Reduced” file.

    GSMLS #2434729

    In Westfield, 4 Bed, 3.5 bath, all newly renovated, on a very nice block on the “sought after” north side-Wilson school area, currently listed at 799K.

    Last week there was an open house at 899K.

  17. Bloodbath in Winter 2007 says:

    To the housing bears:

    when the value of homes was soaring by 10k a month in 2003/2004/2005, what was happening to salaries?

    They were not going up at that rapid of a speed.

    When these things have such a disconnect, there’s a massive problem afoot. Until the housing values come down significantly, there will be problems in the industry.

  18. njpatient says:

    “Sloop John B (7)-
    Imagine how well you’d do if you actually knew what you were doing.”

    He feels so broke up
    He wants to go home.

  19. njpatient says:

    “The U.S. housing decline may last as long as four years until 2009, Moody’s Investors Service said in a report yesterday. That would match the length of the downturn that ended in 1991. ”
    But I thought bi said the bottom was in’99?!?

  20. Jay says:

    From the Bloomberg article above:

    “The U.S. housing decline may last as long as four years until 2009, Moody’s Investors Service said in a report yesterday. That would match the length of the downturn that ended in 1991.”

    The decline did not end in 1991.

    “1991 – A False Glimmer Of Hope”

  21. Jay says:

    1988 – The Crash Begins
    1989 – The Market Turns
    1990 – Bank Failures And Foreclosure
    1991 – A False Glimmer Of Hope
    1992 – Reality Sets Back In
    1993 – Hope For A Bottom
    1994 – Disappointing Bounce
    1995 – Uncertainty As The Bottom Is Hit


  22. ithink_ithink says:

    see the article, my question is right after…

    Citigroup Grants $21 Billion in Funding to GMAC

    Sept. 11 (Bloomberg) — GMAC LLC, the lender partly owned by General Motors Corp. that lost more than $1 billion on mortgages, will receive as much as $21.4 billion from Citigroup Inc. to fund auto and home loans.

    The financing replaces a $10 billion arrangement dating from August 2006 with New York-based Citigroup, the biggest U.S. bank, according to a federal filing today. GMAC will get access to $14.4 billion and may be granted $7 billion more if certain conditions are met, according to the filing. The funds are for assets tied to U.S. automobiles, mortgages and other items. … more….

    All of you! listen you me. This is going to take a really long time.

    As of today OPEC just opened its liquid over night lending rate because supply is tight (note: priced in USD), but varying central banks globally have done similar with their currencys. As the above article states, it seem other ‘states’ & ‘entities’ are doing likewise. i.e countrywide/BOA yada, yada, yada. (don’t bother with the gov’t # b.s. if you’re in it for the long term, like, wow, isn’t it ironic that so many 1930’s something’s are on this blog and yet they don’t need to worry about investing in their ‘retirement’ property for another, at most, 10 years?)

    The point being, it’s def. musical chairs…. now for those older than 30, do you remember the old VD song? Exxxactly! China’s got inflation bad (US does too… but it’s healthcare not food yet & we got plenty of bad teefs that ain’t needin fixin’ quick wif all da’ richy rich autism ADDHD & other yadda, yada, yada) so while the China trade gap is bigger with the US does old school Europe got us beat as they’re doing more actual trading with China. Hmm…

    So, let’s forget about all things local Tip & think global. How does this play out? Is it really 1:33am & am I really out of my ’04 Pinot?

    I’m sorry to everyone. I shouldn’t have had coffee at 3:30pm while playing musical chairs because when my wife mentioned that she’s noticed all the quality finds from good yard/garage sales will be gone with the depression/WWII-era folks dying (“i see hunter-green plastic honey, keep driving!”) then my mind just got going & I started extrapolating previous time periods to now & if previous folks were collecting sheet music & I’m purchasing vinyl for a quarter, what’s my 401k granite counter top grave really going to be worth? Oh why I didn’t I buy in earlier!!!!!

    btw: if you do have vinyl & want it mp3, ask JB for the email & maybe I can help you out, otherwise I highly recommend you get one of these:


  23. chicagofinance says:

    HELP! I’m on west coast time and I have to go to work tomorrow :( :( :(

  24. cynicalgirl says:

    #13-What do you mean by “long term”? 10 years? 20 years?

    If prices drop 50% in the next 2 years, do you think they will recover (double) and then make additional gains in the next 8? It’s doubtful.

  25. Mike says:

    Number 23, you’re a sick pup.

    Take a look at a chart of any homebuilder for the last six months! Just read a AP article on a fund manager, Miller from Legg Mason who had invested in such stalwart companies like CTX, PHM….back just a few months ago Miller was bragging about needing to take a chance and sticking with the HB’s. LOL

  26. Bubbling says:

    Can someone explain to me why FED would even consider lowering rates when Dollar is so low on global markets??

  27. Jamey says:

    I sold my mother’s condo this year (she moved into assisted living). She lives in NE Pa, a RE market that was not part of the bubble, yet still affected somewhat by the downturn.

    My secret? Listing at a reasonable price. The last comp from Winter ’06 went for $210k. I listed at that price and settled for $199k. (I had set $194k as my absolute floor; Ma paid $145k in 2003.) Was able to avoid using a realtor, due to the condo assoc’s rule that the assoc had 30-day right-of-refusal, after which the unit was offered to the other condo owners. One of the owners referred a friend to me. An offer was tendered after I had a friend show them the place. I accepted. The 4% I would have agreed to pay a realtor came close to covering the difference between the asking and selling prices.

    Did I get lucky? I hardly think so. There’s no secret to selling in a down market: Price it so someone will buy it. Sure, I could have held out for the extra $10k, but carrying costs and taxes would have more than zeroed out that “gain.” No windfall realized; ma put a fair amount into improving the place, the previous owners of which had occupied since the early ’70s. (Think: Federal Pacific circuit panels.) Ma got a small-ish annualized return, but considering what a hassle it was for me to maintain the place–worrying everytime it snowed, etc–I would have let her eat a small loss, too.

    Life in post-bubble America in microcosm? Even those who “don’t have to sell” will be forced to adjust to the reality of RE cycles.

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