Real Estate Has Bottomed? NOT!
Bloomberg's Caroline Baum examines a Nattering near our heart: Why Real Estate Market is Nowhere Near A Bottom.
Every time a housing statistic emits a faint heartbeat,
there's a flurry of pronouncements that the residential real estate market has bottomed.
New and existing home sales peaked in July and September of 2005, respectively.
Single-family starts, which are the most sensitive to changes in interest rates, are down 63% from the January 2006 peak,
easily topping the 38% peak-to-trough decline in 1973-1975 and 57% 1984-1991 dive, and vying for first place with the 65% plunge in 1977-1981.
There are 1.34 million one-to-four family first-lien mortgages in the foreclosure process, which amounts to 27% of the inventory of existing unsold homes.
A year ago, foreclosures represented about 18% of the unsold inventory.
The Nattering One muses... it takes about a year to go from delinquency to foreclosure to sold REO...
and this year foreclosures will represent 30% of existing sales. Next year that number will increase substantially which means...
that new sales will continue to decline. Permits, the harbinger of future GDP growth are 42% off from last year.
Until builders work off their backlog, permits and starts will continue to decline.
Existing home inventories in total and in relation to sales pace; are at all time high's.
With an avalanche wave of REO's from Q2, Q3 & Q4 headed downhill, inventories could continue to supress existing home pricing for years to come.
To clear the new homes backlog, builders will have to cut their prices to match the plunge in existing distressed home prices.
While homebuilders are pressuring Congress to enact a tax credit for first-time buyers,
and lenders & borrrowers are begging for bailouts on multiple levels, they are all resisting the one thing that would end the madness,
solve the problems and requires no legislative action to spark buyer demand,
cutting prices to economically supportable pre bubble insanity levels.
Every time a housing statistic emits a faint heartbeat,
there's a flurry of pronouncements that the residential real estate market has bottomed.
New and existing home sales peaked in July and September of 2005, respectively.
Single-family starts, which are the most sensitive to changes in interest rates, are down 63% from the January 2006 peak,
easily topping the 38% peak-to-trough decline in 1973-1975 and 57% 1984-1991 dive, and vying for first place with the 65% plunge in 1977-1981.
There are 1.34 million one-to-four family first-lien mortgages in the foreclosure process, which amounts to 27% of the inventory of existing unsold homes.
A year ago, foreclosures represented about 18% of the unsold inventory.
The Nattering One muses... it takes about a year to go from delinquency to foreclosure to sold REO...
and this year foreclosures will represent 30% of existing sales. Next year that number will increase substantially which means...
that new sales will continue to decline. Permits, the harbinger of future GDP growth are 42% off from last year.
Until builders work off their backlog, permits and starts will continue to decline.
Existing home inventories in total and in relation to sales pace; are at all time high's.
With an avalanche wave of REO's from Q2, Q3 & Q4 headed downhill, inventories could continue to supress existing home pricing for years to come.
To clear the new homes backlog, builders will have to cut their prices to match the plunge in existing distressed home prices.
While homebuilders are pressuring Congress to enact a tax credit for first-time buyers,
and lenders & borrrowers are begging for bailouts on multiple levels, they are all resisting the one thing that would end the madness,
solve the problems and requires no legislative action to spark buyer demand,
cutting prices to economically supportable pre bubble insanity levels.
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