Wednesday, December 20, 2006

Markets Heading for a Fall - Part Deux

From Yahoo! Finance, more dire predictions for homesellers in 2007.

'Although few experts predict that home values will fall dramatically in 2007, many economists say that prices won't improve for 12 to 18 months. And without the cushion of rising home equity -- which softened the blow of high oil prices last year and kept consumers buying big-ticket items at a rapid clip -- Americans may lose confidence in their finances, and the broader economy is likely to suffer.

Ambitious building booms in many markets in the past half-decade, combined with mortgage interest rates that have increased about 1 percent in the past year, have resulted in residential real estate stagnation. The gridlock defies conventional wisdom, stubbornly remaining neither a buyer's nor a seller's market.

"We are currently experiencing the worst of the market freeze, which is being exacerbated by the gap between the buyer's desire for bargains and the seller's fantasy of what they once thought their homes would be worth," said Diane Swonk, chief economist for Chicago-based Mesirow Financial, who forecasts a rebound in early 2008. "The good news is that there are some signs of stabilization. The bad news is that a substantial backlog of unsold homes still exists."'

Moody's Economy.com makes an important observation - is this a portentous statistic?

'Global forces and U.S. monetary policies play important roles in the housing slowdown, which already appears to be depressing the national economy.

The newest forecast by Moody's Economy.com, a private research firm, projected that the median sales price for an existing home will decline in 2007 by 3.6 percent -- the first decline for an entire year in U.S. home prices since the Great Depression of the 1930s.'

Again, how did we end up in this mess? Quick answer: It's the interest rates, stupid!

'Peter Morici, business professor at the University of Maryland, said artificially low interest rates over the past half-decade encouraged China and other exporting nations to purchase 10-year bonds, which kept U.S. mortgage rates low and fueled the housing bubble -- despite a gaping trade deficit that should have sapped investor confidence years ago.

"In order to play this ponzi scheme, the value of the homes had to go up faster than the economy grew and faster than people could service their debt. We've reached that limit," Morci said. "The housing market sustained the economy at a time of very large trade deficits. It's been a false prosperity."'

And what do the forecasters say about our fine state?

'Florida will likely remain the toughest market for buyers and sellers.

Building frenzies in Miami, Orlando and the Caribbean coast resulted in a plethora of for-sale signs. Developers desperate to unload inventory offer free granite countertops, appliances and furniture -- even cars, vacations and mortgage payments for up to six months.

Meanwhile, insurance companies dramatically raised premiums after Hurricane Katrina. Depending on where they live and their policies, Florida home owners may pay as much as 10 times more for flood and wind insurance than last year; premiums can exceed $30,000 per year on mansions. That's caused monthly costs to skyrocket, pinching current owners and making it all but impossible for renters to buy.

Throughout Florida, 12,773 existing single-family homes were sold in October, down 22 percent from a year ago, according to the Florida Association of Realtors. Florida's median price was unchanged at $242,500, but more than half of the urban areas posted declines. Around Fort Myers, the median price plunged 44 percent to $249,200 from October 2005.'

And let us end with some serious b.s. from a man who obviously owns real estate that he can't unload. His data that he quotes is from pre-2005, and his statements are nothing but air-filled cheerleading. We will keep his statements here for posterity.

'Not everyone is pessimistic -- even in beleaguered Florida.

Long-term demographic shifts from the Midwest and New England bode well for the notoriously boom-and-bust state, said Dave Denslow, professor of economics at the University of Florida. Florida, which gained 430,000 new residents in the past year, is a popular destination for Latin American immigrants and retirees from northern states, Canada and western Europe.

"People start thinking about buying a retirement home in their late 50s, and baby boomers are approaching that age," Denslow said. "The demand for residential housing here is only going to get stronger through 2020."'

What a load of crap.

40 comments:

Anonymous said...

"If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years," said David Lereah, chief economist of the National Association of Realtors and author of "Are You Missing the Real Estate Boom?" "It's as if you had 500,000 dollar bills stuffed in your mattress.

"He called it "very unsophisticated." (Los Angeles Times Aug 28th, 2005)

Anonymous said...

NAR President Pat Vredevoogd Combs urged consumers to make sure they understand the risks and rewards ofall types of mortgages before they make a decision on a loan. She also advised consumers to consult with a Realtor and to participate in mortgage education programs sponsored by Realtors before they buy ahome

We are committed to helping people buy -- and keep -- the home of their dreams, and an educated consumer really can make the best decision,"said Combs, of Grand Rapids, Mich., and vice president of ColdwellBanker-AJS- Schmidt. "Realtors(R) help Americans achieve the dream of homeownership. We work to ensure that homebuyers have access to the proper information so they can fulfill their homeownership goals.

Now they are concerned?

lizziebeth said...

I just love the fact that so many of these folks are banking on the retirees! They seem to forget the history of retirees and Florida! Most either rent or buy an inexpensive second home to visit during the cold winter months. I grew up in Illinois. The snowbird retirees usually went down after Christmas and came back in April. They lived in Mobil homes or condominium communities. The cost was economical and many were able to enjoy the Florida winters.

The theory of the rich baby boomers is hog wash! Most Americans don't save. People have been having children later, thus having college expenses later in life and we are a nation of debtors. Pensions are being thrown out the window.... We won't be retiring like the previous generation with a fat check from our pension, social security, great benefits... I know that many that retired in the 80's and 90's found they made more money when they retired than when they worked thanks to pensions, low taxes........

Yeah! Keep building them homes for all those rich boomers!

lizziebeth said...

Once again, I forgot how to post links! So here's the website for a great story on foreclosures!

www.responsiblelending.org

Losing Ground: foreclosures in the subprime market and their cost to homeowners.

Great read!

Anonymous said...

HSBC Sours on American Loans

HSBC Holdings PLC is learning that the U.S. lending business may not be so easy.

The London bank is facing rising problems with its U.S. consumer-loans portfolio nearly four years after its acquisition of Household International Inc., a U.S. lender that specialized in subprime loans, or loans to people with spotty credit records. The acquisition has been well-received because it raised HSBC’s U.S. profit, complementing its huge Europe and Asia businesses.

Last month, the U.S. unit said a portfolio of consumer loans it acquired recently had quickly soured. This month, HSBC underscored the loan situation was worsening. That has led to an unexpected rise in delinquency rates in mortgage-related debt. These loans are secured with collateral, so the bank’s ultimate losses may be pared. Still, it could portend further losses in unsecured credit-card loans. The problems have arisen despite HSBC’s having one of banking’s best computerized systems for analyzing consumer risk.

“Our concern is that next year, the worsening is going to spread beyond the secured-loan book and actually going to start impacting the unsecured book,” said Antony Broadbent, a bank analyst at Sanford C. Bernstein in London. “And economically, that is a far bigger deal because of the amount of unsecured lending that HSBC has and, frankly, because the loss rates on that business are much higher.”

sandi said...

Lizziebeth,
I couldn't agree more. I have numerous aunts, uncles, and in-laws who have been coming down to Florida since the 60s. In every case, they are/were middle-class folks with just enough money for an inexpensive mobile home in a nice retirement community to spend the winters. NONE fit the description of what Dr. Evil ooops! I mean Dr. Denslow, describes.

Anonymous said...

Nice story about HSBC - but what about the new bankruptcy laws that came into effect? Won't those protect the lenders of unsecured credit?

Not that receiving a bunch of overpriced POS houses would be any better on the books.... :(

Anonymous said...

In recent years, high appreciation in many areas has masked problems in the subprime market. CRL projects that the cooling housing market, will cause failure rates to rise sharply in many major markets. California, Arizona, Nevada,Florida and greater Washington, D.C. will be especially hard hit.

jayz said...

So what happens to all the forthcoming foreclosure properties? Auction? REO? It's gonna take years to untaggle this morass.

Anonymous said...

Can anyone recommend a few good town(s) in Florida for further research that has good schools and good for families?
Maybe in a few years it may be worth a look after the crash ends.

Anonymous said...

Good schools do not exist in Florida.

jayz said...

There are pockets throughout the state where there are good areas for families with good schools. However, it has been my personal experience that these also tend to be the most expensive areas, housing-wise. Also, in many of the newest areas, the new schools tend to be A-rated. Just don't expect them to stay that way in 10 years.

Good link:

Florida FCAT Scores

Crazy g said...

One of Crazy's crazy predictions:

>>"""THE HOUSING INDUSTRY IS ALL DONE..PERIOD""<<<<

The day of reckoning is soon upon us.....I've been telling my wife this day would come, for nerly 10 years NOW.....SHE'S SICK OF HEARING ABOUT IT!!!!

WELL!!! Didn't Ben Bernanke & Hank Paulson , just return from China, trying to make the dollar go down in value.....

WHEN THE DOLLAR GOES DOWN.....
[trust me... the tide will go out]

When the dollar goes down, the STOCK MARKET, BOND MARKET, AND REAL ESTATE....are all going DOWN!!!!

>>>>"""IT WILL BE UGLY...THERE WILL BE TEARS""<<<<

Your retirement home, will probably be a BUNKER in your back yard...which eventually will turn into your grave...

How & when this transition is to take place is unkown, simply because it's out of our hands......
Foreigners holding our financial assets are in control of our financial destiny....

When they can NO LONGER accept the lose of currency value, the game is over for ""YOU""

lizziebeth said...

Anonymous is wrong about Florida not having good schools. There are some excellent A rated schools all across the state. My friends daughter went through public schools in Tampa, got a great education and is now pre med at Duke on partial scholarship. Do you know how hard it is to get into Duke???? Many kids from some of the best public schools as well as private would kill to get into Duke!!! Another neighbors son is at SMU in Texas, another difficult school to get into! I can go on and on where children I know go to college! The schools must be doing something right for these children to get into these top notch schools.

My kids are getting an excellent education. I have either taught or have had my children in public schools throughout the country. I really don't see much difference between the school my children are at here in Florida and the A rated Plano schools my kids went to in Texas, North carolina, GA, MO, IL, MI and PA.....

Schools here get a bad rap because school systems are so large they encompass the whole county. Thus having the inner city schools, migrant schools, lumped together with neighborhood schools...... I know many a dedicated teacher throughout the country and to say good schools do not exist in Florida is an insult to the profession. I know more teachers here with Masters and National Teachers Certification. Based on what teachers are paid here, that says a lot about their dedication to the children of Florida.

To the person looking for good schools and good family areas in Florida, there are too many to list. What you must do is choose which part of the state you'd like to live in and then narrow in on great communities for families. Since you are waiting for the bottom, it may be a couple more years giving you time to look.

On a side note, if you are from New York, don't come to the West coast. May I suggest West Palm, Bocha....... we have enough whiney New Yorkers that don't like the bagels, sandwiches, pizza....... schools, shopping......... If you are from New York, stay where you are. My experience has been that most hate everything that isn't New York, Florida isn't New York!!!

lizziebeth said...

Hey here's a new one! One realtor in Bradenton now has a Rent vs Buy calculator on his website! If that isn't a sign of things changing, I don't know what is. Of course this realtor has most of his properties dually listed for sale and rent.

jayz said...

That's awesome, Lizziebeth. In my neighborhood, there are 4 homes for sale, 2 of which are also for rent. They've been sitting there for months. All listed for over double the median neighborhood price from 5 years ago.

Crazy G said...

Crazy's thoughts on one of them thar fancy educations....

Crazy went to one of them expensive schools....just checked the other day....$25,000/yr + room & board of $8000..... WHEEUUWWW!!!!

Somebody has to earn a lot of money to pay that back...for sure!!!!

My dad told me 50+ yrs ago!!!!

>>>>"""IF EVERYBODY GOES TO COLLEGE, YOU'LL HAVE COLLEGE EDUCATED SWEEPERS"""<<<<

Industry keeps on raising the bar...without an MBA, you ain't squat!!!!

EVERYBODY CAN'T, AND EVERYBODY SHOULDN'T GO TO COLLEGE/UNIVERSITY


It destroys Ricado's division of labor scienario....
Everbody, can't be like Crazy....we'd all go crazy then....

THERE ARE NOT GOING TO BE ANY JOBS FOR THE MULTITUDES....IT'S ALREADY WRITTEN IN STONE....

The 11 th commandment says....
''THOU SHALT NOT WORK FOR A LIVING''

Live off thy bretheren...alms for the rich & poor alike....

Crazy's advice is to learn to speak Chinese....then you'll be able to communicate with your BOSS AND SLAVE MASTER....

Cuz he'll own you, your house, your company store, and your wife & children!!!!

CRAZY G said...

Wanna buy a house....
Getta guud eduukaion, den a guud gaob......
==============================
Since 2001, private sector non-defense jobs are down 1.2 million....

Government, and defense sector jobs are UP 2+ MILLION.....

CRAZY'S advice is; learn how to work for the government, or a government contractor...

BE A LEACH!!!!

Everybody loves a leach, cuz there always there, just for you...

SKB said...

"CRAZY'S advice is; learn how to work for the government, or a government contractor...

BE A LEACH!!!!
Everybody loves a leach, cuz there always there, just for you..."

What exactly are you trying to say with that statement?

SKB

CRAZY G said...

SKB reply:
What's a LEACH!!!!

Somebody who demands money from you, that you otherwise wouldn't pay them, "IF" it were NOT the law!!!!

The tax assesor demands money from you....cuz that's the law....

School board demands money from you ....cuz that's the law.....

JUST BECAUSE IT'S THE LAW...DOESN'T MEAN IT'S RIGHT TO ACQUIRE YOUR ASSETS, CUZ THE MAJORITY VOTED IT IN!!!!

IS IT ""RIGHT"" TO ASSESS YOU HOME 2.5% TAX, cuz a couple of politicians vote for it!!!!

You don't like it SELL!!!!

I guess you could say, the people a voting with realtors in the listings numbers....

Come to think of it...the Realtors give you the same B.S. as politicians,,,,,

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Any names to those good towns?
Thanks in advance.

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