It's Still About Affordability, Stupid [Housing Tracker]
Quotes Of The Day
"There's no way in hell the house you buy now will be more expensive next year.” - LA economist Christopher Thornberg. (LA Times, Aug. 3rd)
"At the moment, a bottom for the housing market is not visible." – International Monetary Fund report. (Chicago Tribune, Aug. 3rd)
House Sales/Price Data
A Glut of One-Bedroom Apartments. NYC: “Price appreciation for one-bedrooms… is sluggish compared with other types of apartments. Buyers, many of whom are having difficulties getting mortgages, are unwilling or unable to pay the prices sellers still expect. And by one estimate one-bedrooms have been taking… longer to sell than bigger, or smaller, apartments. Halstead Property: Although the average sale price for a one-bedroom apartment grew by 7% in the last year, overall apartment prices in Manhattan jumped by 21%. From Q2’06 to Q2’07, prices for one-bedrooms rose by 10%, while overall apartment prices rose by only 7%… StreetEasy.com:There are more one-bedrooms available than apartments of other sizes.” (NY Times, Aug. 3rd)
Should You Buy A Home Now? California: “More than half of the adults in the Los Angeles metropolitan area own their homes. But because of the price run-up… fewer than 11% of adults in the L.A. area earn enough to buy a median-priced home of $412,000 [NAHB)]. [In] 2001, when the median was lower, that figure was about 38%. LA economist Christopher Thornberg: Home prices will stabilize when homes are affordable to about 25% of the adult population… In Southern California, home prices would have to come down 20%-35% from their current levels… Moody's Economy.com: The median home sale price was 20 times a year's rent for a comparable property. The 15-year average ratio in Los Angeles is 16.4.” (LA Times, Aug. 3rd)
CNBC And The Tempo Of Doom. “National Association of Realtors: The national median price for a home sold in June dropped 6.1% from June 2007. The Illinois median was $200,000, also off 6.1% from a year earlier. Chicago, Illinois region prices were down 3.3%... Florida’s median sales price in June was down 16%, y/o/y. Californians have seen a 37.7% median price decline in the last 12 months. S&P/Case-Shiller’s narrower 10-city index has fallen 16.9%, its biggest decline in its 21-year history. Of comparative comfort, I suppose: Chicago-area prices were down 9.4%.” (Chicago Tribune, Aug. 3rd)
In Mortgage Crisis, Look For The Signs Of Recovery. “Home prices still remain too high for most households to afford. Michael Pento, senior market strategist at Delta Global Advisors: By historical norms, the nationwide median price of a home is usually three times the median household income. Today, home prices are more than four times the median income… In the city of San Diego, California, the median home price of $355,000 is about 5.5 times the median household income of $65,238, as estimated by the San Diego Association of Governments. The home price is close to eight times income in Del Mar, six times in Imperial Beach and five times in Chula Vista and Poway.” (Sign on San Diego, Aug. 3rd)
Signs Are Dim, But Is Vegas’ Future? Nevada: “New-home construction remains stalled, and the median price of a home is about $270,000, down from $329,000 two years ago. Nevada leads the country in the rate of home foreclosures. We’re no longer holding the pace of 5,000 new residents a month. The school district is reexamining how many schools to build.” (Las Vegas Sun, Aug. 3rd)
After the Bubble, Ghost Towns Across America. “Many new planned communities across the country are half-empty, with for-sale signs outnumbering residents by a large margin. Some of the projects abandoned by bankrupt developers are in places that were hotbeds of new housing construction: Southern California, Atlanta, Las Vegas, Phoenix. Zelman & Associates real estate research: As of July, the percentage of vacant housing stock available for sale or rent stood at 4.8% nationally, the highest figure in at least 33 years… National Association of Home Builders: In the past year, roughly 15%-20% of residential developers have gone out of business, suspended operations or changed their line of work.” (Wall St. Journal, Aug. 2nd)
Home Prices Fell in 23 of 25 U.S. Metro Areas in May. “Radar Logic: Home prices fell in 23 of 25 U.S. metropolitan areas in May from a year earlier as foreclosure sales pushed down values... Sacramento had the biggest price drop, falling 31% from May 2007. Prices declined 29.5% in Las Vegas, 27.2% in San Diego, 26.9% in St. Louis and 25.8% in Phoenix. Sales rose in 22 areas in May from April, driven by “motivated” sellers including banks that foreclosed on or took possession of homes whose owners defaulted, the company said. Susan Wachter, real estate finance professor at the UofP Wharton School: “A large percentage of sales are foreclosure sales.” (Bloomberg, Aug. 1st)
Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.
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This article has 8 comments:
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hernje
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20 Comments
Aug 04 06:18 AM-
CLH
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717 Comments
Aug 04 08:20 AM-
JasonC
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367 Comments
Aug 04 09:02 AMTake the headline claim, that there is no way a house bought today will have a higher price a year from now. Um, what if I bought the house for $2, and it is 5000 square feet, recent construction, in a nice zip code?
Everything depends on the price paid. If a market is already down by half, and many are, and you bid 20% (or 30%, or 50%, pick your figure) more below the market, why does anyone think a price agreed today on one house, with an already distressed buyer, might not be exceeded next year?
You can speak of national trends in such terms, but not individual transactions, because you don't know what the bidding dynamics were, how much the price already fell, whether the area got crazy before in the bubble, etc, etc. Everything depends on the actual price.
Right now, banks try to protect themselves in "declining markets" by asking for a 5% larger downpayment. This is silly. One, it is too small to matter much, and two, it ignores the real question - how much has the agreed price already dropped?
If you put a 5% extra downpayment on a house you buy for 3% below an insane peak price, the bank is still going to take a bath in the end. If you don't, on a house bought for a third of the peak price, the bank will be fine.
What is happening is everyone is attempting to avoid the direct question of what the house is actually worth, in favor of directions or divisions of risks. They do this because the insane past trajectory has made past "comps" useless. But implicitly they are still "believing" any price a transaction can happen at, is a long run clearing price.
In fact, the clearing price is, what a surprise, a price at which the number of buyers equals the number of sellers, and a huge backlog of sellers does mean the averages still have further to go. But you can get that whole "further" in one big step, by just offering (or as a seller, accepting) a significantly lower price, tomorrow. There is nothing about any of it that has any *time scale* built into it.
Just get the right price. Accept no substitutes. None of the substitutes work.
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adan
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304 Comments
My Website
Aug 04 09:23 AM-
LiquidSoapDispenser
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54 Comments
My Website
Aug 04 10:10 AM-
Basic Finance
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14 Comments
My Website
Aug 04 01:39 PMIf what you mean are people who are buying foreclosed properties with the intention of flipping them in a year....OK...but I'm not sure I would call those people "SMART greedy".
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all freakin doomed
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2 Comments
Aug 13 08:04 AMI wonder if they"ll be so happy when they haven't turned a profit by the time they retire and have no incomes to deduct against.
Ha ha ha ha ha ha ha ha
My only gripe is with our stupid government for allowing these deductions for so called investing!
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all freakin doomed
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2 Comments
Aug 13 08:18 AM