Housing Bubble Predictions For 2nd Half Of 2010
What are your housing bubble predictions for the second half of 2010? Some from the first of the year. “I don’t think that the RE recovery will begin any time soon in FL. There is still an incredible number of foreclosures and abandoned houses that aren’t on the market. With interest rates so low it doesn’t appear that the banks have much incentive to move these houses.”
A response, “I think the bottom end of the market has stabilized in Ca and Az.The higher end is going to take a major hit this year.Dont get greedy and buy what you can afford.Buy when everyone else is sh@tting in their pants and sell when it seems times are too good to be true.”
One said, “Not sure about CA, but in AZ if you are referring to areas like Maricopa, Suprise, Buckeye, SanTan and such as the low end, then you are probably correct. The low end of areas closer in still have not come down to where they would be in line with median incomes.”
A broad prediction, “I don’t think the real estate market will stabilize yet, though some places will have bigger price drops than others. There may even be a stupid and brief resurgent mania or two in some big cities. Unfortunately, what will continue is ineffectual attempts by the government to “rescue” the housing market. Things like tax credits, homebuilder bailouts (direct and/or indirect), continuing low interest rates and funky FHA-like subsidies will be invented by politicians. Shadow inventory will continue to grow.”
“One good thing that may happen is that sellers will become more restless and rebel against the REIC, and the MLS will not have a monopoly on information like in years past. Realtors will continue to dwindle in numbers, and commisions will decrease in size. Sellers advertising their home on Craigslist may become the norm, even for banks.”
One said, “I predict Q1 of 2010 will see a continuation of the mania in the housing and stock markets, with housing **inventories touching lows** only seen near the peak of the bubble. Housing prices will rise in many areas due to the lack of inventory, low interest rates, the tax credit, and relatively low prices (as perceived by buyers who think 2005 prices were “normal”). The power of low interest rates cannot be overstated.”
“The GSEs will become the ultra-super-SIV, and principal reductions will become the norm on GSE loans. IMHO, one of the reasons inventory has been kept off the market is because the PTB wanted housing prices high enough that borrowers can refi into GSE loans. I believe a good portion of the toxic loans now belongs to the GSEs, and they can now do what they’ve wanted to do, without the complications of multiple layers of investors in the private, securitized market.”
“Conspiracy time: It’s possible we’ll discover that a lot of the “shadow inventory” was sold off in bulk, possibly to creditor nations (like China) in exchange for our Treasury debt — another possible reason for them wanting to keep prices high for the time being.”
“Rates will be kept low, and housing prices will be kept high until late spring/early summer, when some of the housing investors, bulk purchasers, and regular sellers (who’ve held off in anticipation of a better market) see strength in the market and inventory begins to build again around June-September.”
“The DOW hits ~11,500, and the S&P hits ~1,400 by September. Gold goes to 985 in January, then goes back up to the 1,200-1,400. The dollar rallies to 78.21 in the first few months of the year, then declines as more govt programs are announced at the end of April and the Fed continues to force rates down. No change in interest rate policy until Q3, when they raise rates 1/4 pt. with a disclaimer that they will drop them if need be. Unemployment drops for the first three quarters, then rises again next winter.”
“Overall, 2010 is relatively flat, with bullish tendencies for the first 2-3 quarters. IMHO, 2011 will see another “official” recession with multiple state/municipal bankruptcies and bailouts, and housing prices begin to take another leg down.”
A reply, “What were Japanese interest rates like over the period (roughly 1990-2009) when their housing prices crashed spectacularly, never to return?…What happens from here is a gamble on whether interest rates can remain low, and even given low rates, whether home prices can stay permanently high relative to incomes. I still see more downside risk, in the forms of the risk of higher rates or the risk that “higher than expected” foreclosures at the high end will sink everything of lesser value, than I see the risk of getting “priced out forever” again. Further, I am willing to live with the latter risk; I would rather get priced out of San Diego and live out my days in a part of the world with saner home prices, then to get stucco and kick myself forever for failing to follow the sane advice I have freely dispensed here over the past several years.”
Here’s another, “I’ll make a prediction, but it’s more of a pipe dream. If the original premise is wrong, then the whole thing goes to pot. Prediction: Obama and Congress are going to shut off the financial spigot. <— all of 2010-2012 will hinge on this. Extend and pretend may work, but only for a while. There is huge bipartisan agreement in Congress that those billions could be easily put to better use than sneaking it over to AIG or Fraddie.* So at some point, Congress is going to say: ‘Enough. You want liquidity? Sell your shadow inventory for pennies on the dollar and pay your bills with it. If it’s not enough, you can declare BK and wipe out some debt, just like Kmart did. Live by the sword, die by the sword.’ If nothing else, Congress can gum up the works long enough to effect the same effect.”
“Commercial RE will take out a lot of small banks, and all that will remains is the original FDIC deposits. I also think that a couple of big-banks will go into simultaneous bankrupt and break-up. The billions will be put to use creating jobs — even if it’s make-work. If housing prices fall and credit is cut off, you can still live as long as you have a job. Lots of FB’s will go BK as they should, and many will have to squeeze into an apartment or fly without health insurance,** but it will be a life based on fundamentals, more like it was in the 50’s and 60’s, when people lived with layaway and putting a little in the bank.”
“The political disagreement is where to put the billions: jobs, education, health care, war, or paying down debt. But it’s pretty established that the money shouldn’t go to the damn banks.”
A reply, “I’ve been thinking the same thing. Obama says that he doesn’t care about being re-elected, but I don’t believe him. Everything he does this year will be aimed at increasing his popularity. I think he’ll screw the banks and come up with a bunch of “jobs” programs. FDR mode. We’ll see if it works (politically and/or economically, but it won’t work politically unless it works economically.)”
From Brazil, “2010 Predictions: Housing will continue to rise with the rate of inflation. Only a few areas will experience undue speculation. Being under-built, housing construction will increase and home builder equities will rise faster than market indexes. Mortgage debt increases bringing the countries total mortgage debt as a percentage of GDP to 4% up from 3.5% in 2009. Mortgages will be involved in 65% of total house sales with an average down payment of 15%. The average term of the mortgages will be 17 years fixed at 8.5%.”
“Government programs will continue to benefit the poor and middle-class. Because of strict import controls, the industrial and manufacturing sectors will continue to expand adding purchasing power and enabling the middle-class to grow for the 12th straight year. Consumer goods will remain expensive. Exports will rise slightly and therefore increase the trade surplus. Poverty and hunger will be reduced further. The rich will tolerate such things because “inexplicably” (for supply-siders), their wealth will continue to increase as well. These are my 2010 predictions for BRAZIL.”
“2010 predictions for the United States of America: Housing: The hard hit, low-end areas will rise 8% and the thus far “immune” fortress areas will fall 12%. Economy: Interest rates will rise 1.25%. The Dow will end at 9000-10000, Gold at $900-1000 and oil at $70. The fudged unemployment numbers will end about unchanged. Politics: Republicans will experience moderate gains in Congress. The country will become even more politically polarized at the extremes however…”
“Political/Social: 2010 will see an emerging movement from the rational center. Leaders will rise with a message that damns both parties for the sake of America’s survival. Bailouts, lost jobs, lost hope and hijacked government will be the Rubicon crossed. Real, grass-roots movements will involve both the Right AND the Left. The clear and present danger of our corrupt 2 parties will be recognized as the greater danger allowing many to put aside differences for the greater good.”
One notes, “I think we have hit bottom and will stay there for a very long time. People have too much debt to start buying and housing is not going to rebound giving us a feeling of wealth. The feeling of wealth will have to come from someplace else. Our economy needs to change by creating something we can sell to the world and create new jobs. Maybe our educational system can provide the knowledge to create new ideas for a different economy, but people are going to have to give up on the idea of entitlement and put in some honest work.”
A reply, “How can we possibly speak of “bottoms” in the light of trillions of dollars of bailouts and stimulus that have held us up so far? If the government, and The Fed (where does one end and the other begin) can keep pumping money into the system then we may be able to talk of a bottom. Anybody that doesn’t believe The Fed and the federal government can keep pumping in Viagra to the out of work porn star, known as the U.S. economy, cannot yet speak of bottoms.”
“If you believe we are at bottom then you believe the actions of Bernanke and Geithner can continue indefinitely with no external force calling their bluff.”
One from Illinois, “I don’t disagree that prices will continue to correct toward equilibrium, but it seems to me that the litany of interventions has kept (most) housing markets from going completely FUBAR. The Powers That Be have succeeded in slowing the inevitable in a somewhat controlled fashion — I was expecting considerably more chaos, despair, weeping, and gnashing of teeth.”
One from California, “My predictions are reruns from previous years: Cash will remain king as banks and other financial entities continue to relentlessly absorb money from the economy rather than recycle money they receive back into circulation. This subtraction of circulating money will force consumers to cut back on non-essential consumption - not a good thing in an economy where 70% of economic activity depends on this consumption.”
“Because money will be tight people with money will tend to save rather than spend, which will act to restrict money velocity and will make money all the more scarce. The war on savers will end; The war on spenders will begin. Those who need money the most won’t be able to get it, at least not on terms favorable to them as they were in the past. This means those with money will get to call the shots, will get to set the terms.”
One said briefly, “Let’s just hope that the housing market continues to improve defying dark predictions for 2010.”
And finally, “A sure lesson of 2009 is that crazy hangs on longer than anyone expects. I see an increasing number of people thinking that the worst is probably well behind us and we should start getting back up to normal just any time now. Most of my friends are much worse prepared for another shock than they were in the fall of ‘08, many of them say they could not survive another round of trouble. More than a few of these poster children have loaded up on debt in ‘09 to “maintain”, wasting a valuable stretch of time to better prepare.”
“My take is that Normal, in the sense of something sustainable, is still a long way down there. We are headed there in fits and spurts, dragging and clawing all the way. Likely we will get in a wave at Normal without the train stopping at the station. The lesson for me is not to take the day as an end game, but to live, work, play and love hard all along the way. In the last year of this decade I see good things.”
