Weekend Topic Suggestions
Please post topic ideas here!
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
April 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
How long from now will virtually all the serial bottom callers throw in the towel? Or will some of them keep it up for decades, if necessary, so they can claim their stopped-clock prediction called the bottom, once it finally happens?
Tuesday, February 28, 2012 - 11:47
S&P’s Blitzer: US Housing Prices May Not Have Reached Bottom
By Chris Cermak
–US’s Shiller: “Continued Great Uncertainty” In Home Prices
–US’s Shiller: Housing Indicators Better Than A Year Ago
–US’s Case: Rising Household Formation One Positive Sign
WASHINGTON (MNI) - U.S. housing prices may have yet to reach bottom, S&P’s David Blitzer said Tuesday as the S&P Case-Shiller Home Price Index fell in December to its lowest level since February 2003.
“Clearly we have not confirmed any bottom yet, and we may not be at the bottom,” Blitzer, managing director of S&P Indices, said during a conference call.
The S&P 20-city composite index fell 1.1% from November and 4% year-on-year to a level of 136.71, according to the December figures released earlier Tuesday. That puts the index below its last post-crisis low of 137.64 reached in March of last year.
While some housing indicators were beginning to turn positive, Yale University Economics Professor Robert Shiller said there was “continued great uncertainty in home prices” that was holding back some of the recent momentum.
“In the short run, it’s still a holding pattern,” Shiller said on the same conference call. “There are these real positive signs now, on the other hand they’re still very low,” compared to historical levels.
“We might be on the verge of a recovery, but maybe not,” Shiller said, noting that consumers remained cautious about buying in part because of still-high unemployment, unease over rising gas prices and the ongoing European debt crisis.
…
However, the housing bust is no longer hurting the economy.
http://www.bloomberg.com/news/2012-03-02/housing-in-u-s-lays-foundation-for-recovery-as-economy-coaxes-buyers-back.html
I believe it. While prices may be edging down, and may continue to do so in real dollars, you may get more construction, sales and associated activity. Not excess, speculative activity, but more than the absolute bottom we’ve hit.
You’ll get some building because people want different units in different places than those that are empty — multifamily in viable redeveloping cities rather than moving to the existing ghost towns on the exurban fringe.
‘In September, Jason and Rebecca Prone paid $383,000 for a new 3,100-square-foot home in Northville, a Detroit suburb, because they couldn’t find an existing house in the area chosen for its quality schools. ‘If we didn’t put in a bid by the time we were outside looking at it, we missed it,’ said Jason Prone, 34, a transplant from Washington, D.C., who works from home for the U.S. Patent Office.’
‘Demand also has grown for New York City-area condos and for homes in the Boston-to-Washington corridor, said Doug Yearley, chief executive officer of Toll Brothers Inc, which reported that orders for the quarter ended Jan. 31 rose 19 percent and average prices climbed 22 percent to $682,000.’
‘Dan Kowalyshyn figures he owes about $200,000 more than what his four-bedroom house is worth today. It faces a cul-de-sac where three of the six homes have been lost to foreclosure since his $570,000 purchase in 2006.’
‘The software developer has decided to keep up on his mortgage payments because he sees signs of improvement outside his window. Trucks drive by to deliver lumber for houses being constructed by PulteGroup Inc., KB Home and Meritage Homes Corp. ‘Either those builders are insane or they’re getting some traction selling new homes,’ Kowalyshyn said from his house in Eastvale, California.’
Right, so you’ll get an increase in housing-related activity from historically low levels, which will add to the economy.
But housing won’t drive the recovery, as it has after several other recessions. People, after all, are now just buying or renting housing as housing.
So something else will have to generate the growth. But at least the damage is pretty much done.
With the govt guaranteeing 90% plus of the loans? The Fed pressuring interest rates down? People are paying too much for houses as we speak. How will foreclosures from houses bought in 2011-12, etc, figure into this? I wonder how many times the ‘damage is done’ was said in Japan?
But, but, but …… Ben!
Prices always go up. The Fed will guarantee that.
** snicker **
“Signs of improvement”
I see new construction as a sign that current owners are totally screwed…….when the new construction comes onto the market priced $2-300K less than what they paid for a equivalent house in 2006.
A take on Stealth Stagflation:
Since 2006 (dates and figures for illustration only) we’ve doubled the money supply, and in essence doubled “productivity” (by offshoring, downsizing, reneging on pension and benefits, cheaper/better managed materials, technological improvements, etc.)
Although housing may have lost 50%+ of “value” since 2006, the prices remain proportionately higher–thus giving the illusion of stabilization.
In actuality, houses, cars, even packaged food stuffs have doubled in cost for what we’re offered over what they would have cost to produce in pre-2006.
Housing in my area is back to 1993 prices.
‘Housing in my area is back to 1993 prices’
Some would say this is recovery. Other would say recovery has arrived when house prices get back to bubble peaks. Just what is recovery, post housing and stock bubbles? What about employment and income levels?
IMO, the biggest downside to bubbles are the distortions to the economy. Unwinding these mal-investments and putting resources back in sustainable efforts would be a definition of recovery to me. During the go-go years, people borrowed against houses and spent on goodies. If consumers start doing that again, I don’t see the long term benefit. Part of the problem with this subject is the short term thinking.
What are we doing economically that is different and positive compared to what we were doing in 2005? It’s not enough that the bubble prices go away. What do we replace it with?
I guess my point is that bubble prices WON’T go away, they’re essentially here to stay and this is the new normal.
The problem (if that’s what you want to call it,) is that incomes won’t increase proportionately, and that spending spree you reference is a long-over anomaly. Unless another world economy emerges to offset the USD,(unlikely, though they’ll equalize,) debt levels will rebalance at this new higher level of expectation and life will go on.
Over the next fifty years, the Boomers will all die off, taxes and necessity will rebalance income inequality back into a new middle class, then someone will “deregulate” the banking system and the disparity will start all over again.
You may recall that I wrote to you in 2005(?) suggesting that this was the unstated policy of the Bush Administration–use housing to inflate the USD in order to address the trade imbalance with People’s Republic of China. I think that intended or not, that’s precisely what has happened.
“I guess my point is that bubble prices WON’T go away, they’re essentially here to stay and this is the new normal.”
How can this be?
Sales have cratered to 14 year lows, inventory is massive.
The only way to address that lopsided supply/demand scales is dramatically lower prices.
Just had dinner tonight with two realtors from coastal CA. HARP is now guaranteeing UNLIMITED loan-to-value mortgages for 40 years for “qualified” underwater borrowers. These two women are both 30% underwater on their personal homes, and own between them 100 diversified units. Oh, and they’re both in their early 60’s.
The government is doing precisely what I predicted it would do at the HBB meetup in LV– trying to keep the market “values” stable while inflating the money supply.
ahansen,
I take it you haven’t heard of the “budget constraint”.
Incidentally, who are they going to sell it to if wages don’t inflate?
There’s a demographic time bomb coming along. The more you “extend and pretend”, the less it works actually.
You rest my case, Puss.
Shouldn’t he check what the new houses are going to sell for before he decides that signs are looking up for him?
Polly, you’re a lawyer. You actually do due diligence.
Most people go by the “one potato, two potato” method of buying houses. It looks good, let’s sign the paper.
‘Either those builders are insane or they’re getting some traction selling new homes,’
I suspect the builders are perfectly rational; it’s the buyers or whoever loaned them over $500,000, which in many cases is unlikely to ever be repaid, whose sanity is questionable.
Interest rate: when and how high?
After the reelection and up to 14% in three years.
Yikes!!!
Will housing prices crash or inflate with everything else?
Unless teaser rates come back, 14% interest rates will have to crash prices. Interest rates tripling means that it isn’t just the downpayment that is a contraint on the price. “How much a month” would have real meaning again.
Why?
I note the last time in the cycle interest rates were at current levels was the early 1960s; it took until the early-1980s for interest rates to reach 14%.
Is it different this time?
Only 5% of underwater loans might get settlement’s principal reductions, report says
http://www.washingtonpost.com/blogs/ezra-klein/post/only-5percent-of-underwater-loans-might-get-settlements-principal-reductions-report-says/2012/03/02/gIQAbY6qmR_blog.html
How many homeowners will benefit from the $25 billion mortgage settlement that state attorneys general reached with the banks last month? The biggest portion of the deal — about $17 billion — is dedicated to reducing the mortgage principal for those who owe more than their homes are worth. Ted Gayer of the Brookings Institution runs the numbers and finds that 500,000 homeowners will get principal reductions — just 5 percent of underwater mortgages.
As it turns out, there are strict conditions on who can qualify for principal reductions: Homeowners have to be facing imminent default, they can’t be backed by Fannie or Freddie, they must occupy their home, and their mortgages have to be serviced by one of the five firms that were part of the agreement.
All told, Gayer estimates that just 5 percent of total underwater mortgages will qualify. Of these eligible borrowers, the average underwater homeowner would receive about $20,000 in principal reduction, although the agreement mandates bigger reductions for the most distressed borrowers that could raise the total amount of principal reduction to $34 billion.
By comparison, officials had originally estimated that up to a million homeowners could receive principal reductions under the deal — twice Gayer’s total. Gayer openly admits that his estimate is just a back-of-the-envelope calculation that relies on different data sources and “simplifying assumptions,” detailing his full methodology here.
Outside of the principal reduction, there are other ways that homeowners will benefit from the settlement as well, with $3 billion dedicated to refinancing for homeowners who are up-to-date on paying their mortgages, and payments of up to $2,000 to homeowners who were foreclosed upon. But Gayer’s calculations could spur on those who believe the settlement has fallen short of expectations.
So, click through to the blog post to get links to more of the background data. So, as I said before, looks like this is going to be a big nothing. The only actions that have had significant impact are the “first time” home buyers credit and low interest rates. Robo signing is a timing issue. Everything else is a rounding error.
Are we short of skilled labor ? Did the banking sector with its allure of the fast buck ruin a generation that could have been otherwise trained in somthing “useful” ?
Did the captains of industry outsource so many jobs that a skill gap in manufacturing has developed?
Are there any electronic assemblers who can convert nano to pico to micro ? Any skilled machinists who are not 70 years old ? Any new technicians who know OHM’s law ?
Of course there are. But in many cases that’s no longer good enough. They need to have experience in the exact job being offered or we’d rather move the job overseas.
Midwest living, anyone?
BTW, it’s not even the beginning of tornado season just yet in Tornado Alley. These early-season deadly twisters suggest a possible repeat of whatever unfavorable conditions were in place during the deadly 2011 tornado season.
Rescuers scour rubble for survivors after tornadoes kill dozens in Midwest, South
By the CNN Wire Staff
updated 4:52 AM EST, Sat March 3, 2012