Housing 2008/2009 Thread

[LegendKiller]

Originally posted by: Craig234

Originally posted by: LegendKiller
[It was silly to buy post-2002/3 if you were buy-and-hold unless you bought in 2007 when you could drive a hard bargain, even then, it was silly. It was painfully obvious that prices were ridiculously high and would come down. To buy into a peak is a bad move, especially considering negative carry.

That's an awfully cavalier attack with the benefit of 20/20 hindsight, however much many of us suspected it was the case.

Surely the stock market being 'at a peak' and 'foolish to buy' in 2007/first half 2008 was 'painfully obvious' too, and you can point us to you saying so before the crash?

Not to mention real estate is not entirely an investment-driven issue, people need to live places, and that carries some weight too. No point in trying to call them 'foolish'.

I can prove that I called a problem in 2003/04.

The rent/own disparity was huge in many locations.

 

[IronWing]

Originally posted by: LegendKiller

Originally posted by: Craig234

Originally posted by: LegendKiller
[It was silly to buy post-2002/3 if you were buy-and-hold unless you bought in 2007 when you could drive a hard bargain, even then, it was silly. It was painfully obvious that prices were ridiculously high and would come down. To buy into a peak is a bad move, especially considering negative carry.

That's an awfully cavalier attack with the benefit of 20/20 hindsight, however much many of us suspected it was the case.

Surely the stock market being 'at a peak' and 'foolish to buy' in 2007/first half 2008 was 'painfully obvious' too, and you can point us to you saying so before the crash?

Not to mention real estate is not entirely an investment-driven issue, people need to live places, and that carries some weight too. No point in trying to call them 'foolish'.

I can prove that I called a problem in 2003/04.

The rent/own disparity was huge in many locations.

I have to agree with this. The bubble was obvious by 2003 when looking at median home prices vs median household incomes across the board. The shenanigans the banks were willing to play were apparent in 2000 when we bought our (first) house. "Are you willing to document your income?" We thought it was a joke, who on earth would loan somebody that much money with no verification of ability to pay it back? By 2003 when we refi-ed the banks were appraising properties at whatever value was required to make the underwriting work.

 

[Jhhnn]

Slew Foot has it right, unfortunately for a lot of people. The listing he offers up, however, just shows that there are still a lot of dreamers out there.

Oh, yeh, somewhere between 1 in 5 or 1 in 7 american "homeloaners" are currently underwater, depending on who you want to believe...

De-regulate! Free Market! Ownership society! Buy now! It'll never be cheaper! Get in now, before you're locked out forever! Refinance to get the cash you need, now! Get your nothing down low rate option ARM right here! Rah! Rah! Rah!

 

[Trianon]

more sad news, like a vicious cycle... too bad they didn't mention median price, I wonder if it broke thru 2002 levels yet...
Text

Home sales tumble to 7-yr low
By Lucia Mutikani Lucia Mutikani 1 hr 22 mins ago

WASHINGTON (Reuters) ? Pending sales of existing U.S. homes dropped to a seven-year low in November, data showed on Tuesday, as rising job losses and a deepening economic recession kept potential house buyers on the sidelines.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in November, dropped 4.0 percent to 82.3, the lowest level since the series started in 2001. That was worse than economists' expectations for a 0.1 percent drop.

November's reading was 5.3 percent lower than a year-ago and October's pending home sales index was revised down to 85.7.

"Mounting job losses and very weak consumer confidence deterred home buyers from signing contracts in November," said Lawrence Yun, NAR chief economist. "December's housing market activity could be comparably lower due to ongoing problems in the economy."

U.S. stock indexes trimmed gains on the data, which provided more evidence that the year-long recession was on track to be the deepest since the 1981 economic contraction which lasted about 16 months.

The economic downturn, triggered by the collapse of the U.S. housing market, has been marked by massive job losses and a record decline in consumer confidence.

However, economists are cautiously hopeful that president-elect Barack Obama's proposed massive spending plan, together with steps by the Treasury and Federal Reserve to lower mortgage rates will support the housing sector later this year.

"The housing market is always quiet at the turn of the year so what matters now is the performance through the spring, when activity usually rises," said Ian Shepherdson, chief U.S. economist at HFE in New York.

"With mortgage rates dropping sharply we are cautiously optimistic that sales will not fall much further and should even rebound a bit by mid-year. But the immediate outlook is bleak."

The NAR said November's pending home sales data did not capture the impact of mortgage interest rates declining to near 50-year lows in December. It expects the 30-year fixed-rate mortgage to hold steady through the first half of 2009 year and rise slightly in the second half.

NAR said its housing affordability index, which looks at the relationship between home prices, mortgage interest rates and family income, was on track to match a record high set in 1972.

November's pending home sales index was dragged down by worsening market conditions in key regions. In the Northeast, the pending home sales index dropped 7.2 percent to 63.2 in November, while the index fell 6.7 percent to 74.2 in the Midwest.

In the South the index declined 2.2 percent to 85.3 and in the West it was down 2.4 percent to 101.2.

(Editing by Theodore d'Afflisio)

 

[dullard]

Originally posted by: Trianon
more sad news, like a vicious cycle... too bad they didn't mention median price, I wonder if it broke thru 2002 levels yet...
Text

Last I saw, median prices were at 2004 levels. But that'll change soon enough.

 

[Trianon]

Originally posted by: dullard

Originally posted by: Trianon
more sad news, like a vicious cycle... too bad they didn't mention median price, I wonder if it broke thru 2002 levels yet...
Text

Last I saw, median prices were at 2004 levels. But that'll change soon enough.

Still downward, I presume

 

[Slew Foot]

Originally posted by: Trianon

Originally posted by: dullard

Originally posted by: Trianon
more sad news, like a vicious cycle... too bad they didn't mention median price, I wonder if it broke thru 2002 levels yet...
Text

Last I saw, median prices were at 2004 levels. But that'll change soon enough.

Still downward, I presume

Fixed

 

[BoberFett]

Originally posted by: Jhhnn
Slew Foot has it right, unfortunately for a lot of people. The listing he offers up, however, just shows that there are still a lot of dreamers out there.

Oh, yeh, somewhere between 1 in 5 or 1 in 7 american "homeloaners" are currently underwater, depending on who you want to believe...

De-regulate! Free Market! Ownership society! Buy now! It'll never be cheaper! Get in now, before you're locked out forever! Refinance to get the cash you need, now! Get your nothing down low rate option ARM right here! Rah! Rah! Rah!

You're confused. The push for everyone to own a home was not a product of a free market. That was government tinkering.

 

[Trianon]

Originally posted by: Slew Foot

Originally posted by: Trianon

Originally posted by: dullard

Originally posted by: Trianon
more sad news, like a vicious cycle... too bad they didn't mention median price, I wonder if it broke thru 2002 levels yet...
Text

Last I saw, median prices were at 2004 levels. But that'll change soon enough.

Still downward, I presume

Fixed

I would be if I didn't by my townhome in Oct 2002.... Although I guess I could sell at loss and getter bigger place for the same money I paid for this one back then, right?

 

[Craig234]

For what it's worth, I just bought a modest house in Phoenix to rent to a friend there. We'll see if it turns out to be the investment I hope it is. I may get another, they seem cheap.

 

[dullard]

Originally posted by: Trianon
I would be if I didn't by my townhome in Oct 2002.... Although I guess I could sell at loss and getter bigger place for the same money I paid for this one back then, right?

Exactly. If you are planning to sell your house and move into a more expensive house or equivalent house, then this downturn in prices actually helps.

Suppose your current home cost $200k and the home you really want is $400k. Suppose prices fall 20% for both. Yes, you lost a horrible 20% * $200k = $40k on your home. Since realtor prices are proportional to the price of the home, you have to pay the realtor $2.5k less. Your net loss on your home is $37.5k. However, your dream home went down 20% * $400k = $80k. So, yes you lost $37.5k but you get your next home $80k cheaper.

Suppose you just want to move to an equivalently priced home. Same math. You lost $37.5k if your $200k home goes down 20%. But your new $200k home is $40k cheaper. Thus, you STILL gain $2.5k due to falling prices even if your new home is valued the same as your own home.

Conclusion: falling home prices are good for most people. Also, consider that property tax valuations fall too.

However, there are people who move out of a home to an apartment or a nursing home and they just plain lose out when prices fall. Or, there are people like me. I have a home and my fiance has a home. When we marry this fall, we will sell one of them and we won't buy a new one. The more prices fall, the worse off my pocketbook will be. Luckilly, in my home town, prices are still marginally up for homes like mine (I had two neighbors recently sell for $6k more than what was expected).

 

[bobsmith1492]

Originally posted by: dullard

Originally posted by: Trianon
I would be if I didn't by my townhome in Oct 2002.... Although I guess I could sell at loss and getter bigger place for the same money I paid for this one back then, right?

Exactly. If you are planning to sell your house and move into a more expensive house or equivalent house, then this downturn in prices actually helps.

Suppose your current home cost $200k and the home you really want is $400k. Suppose prices fall 20% for both. Yes, you lost a horrible 20% * $200k = $40k on your home. Since realtor prices are proportional to the price of the home, you have to pay the realtor $2.5k less. Your net loss on your home is $37.5k. However, your dream home went down 20% * $400k = $80k. So, yes you lost $37.5k but you get your next home $80k cheaper.

Suppose you just want to move to an equivalently priced home. Same math. You lost $37.5k if your $200k home goes down 20%. But your new $200k home is $40k cheaper. Thus, you STILL gain $2.5k due to falling prices even if your new home is valued the same as your own home.

Conclusion: falling home prices are good for most people. Also, consider that property tax valuations fall too.

However, there are people who move out of a home to an apartment or a nursing home and they just plain lose out when prices fall. Or, there are people like me. I have a home and my fiance has a home. When we marry this fall, we will sell one of them and we won't buy a new one. The more prices fall, the worse off my pocketbook will be. Luckilly, in my home town, prices are still marginally up for homes like mine (I had two neighbors recently sell for $6k more than what was expected).

Sell both and buy a new one? Pool your resources!

 

[Jhhnn]

You're not paying attention, dullard. At least 1 in 7 "homeowners" are upside down, under water, buried, screwed- and that number is still growing. They're chained to the oars, and if their boat sinks, they're going down with it. They can't give it away without destroying their credit, and they sure as hell can't come up with the cash difference to get out from under... It'll take many years of paying too much for them to ever see daylight.

Part of the reason that number is so large is the refi boom- remember that? People who had equity traded in tomorrow for today, took the money and spent it on old bills, new trucks, pleasure cruises, and used it to speculate in real estate, too...

Even for people who have large equity, trading up isn't necessarily very smart. In a descending market, leverage can be lethal. Let's say you had $40K equity in a $200K house, and you use it to trade up to a $400K house... then the market drops another 10%... at which point your equity in the new house just evaporated, whereas you'd still have $20K equity if you'd stayed in the old house... If it drops further than that, you're underwater in the new place.

Yeh, I realize real estate is largely a local or regional commodity, and that some markets will be more stable than others. As this continues to unfold in all it's awful glory, it seems unlikely that any more than a very few markets will remain untouched... it's a good time to exercise some caution...

 

[dullard]

Sorry that I'm 2 weeks late with my monthly update. I was gone in South Africa and in Puerto Rico. When I got back, I just had no time to update my graphs.

The Jan 2009 numbers are in. Existing home sales are up, but are still at the 2nd lowest in the 2005-2009 period. New home sales fell further and faster than normal. Prices fell again, but Jan or Feb is usually the bottom, they'll likely come back up by spring. The S&P 500 is falling off a cliff like the NAHB index did. I don't think it'll far as far as the NAHB, but the trend is still ominous. My buy-in point for the S&P is 750, I missed the last 750 because it was only there for a couple hours when I was busy at work.

 

[dullard]

All data is in for the month.

[*]Existing home sales wiped away last month's gain, reaching new multi-year lows. Also, they have reached 3 months significantly below the threshold that sales were at for a whole year.

[*]Existing home prices kept their free fall. However, Jan or Feb is usually the lowest price of the year, so I don't expect them to stay this low. They are 15% lower than this time last year and 26% lower than their all time high.

[*]New home starts have made a new move - for the worse. They were almost a perfectly linear drop for 3 years. But now, for the last few months, it has been an even sharper drop. If that rate continued (unlikely), new home construction will end completely by this summer.

[*]New home sales are now down 78% from their peak and have a massive 13.3 month supply of unsold new homes.

Note: the stimulus package may start having an effect in a couple of months. It'll be interesting to see what happens then.

 

[StageLeft]

I still think that most of this is psychological. If you believe your house is worth 50% less, it is. Just don't believe the hype. That 3 bedroom bungalow is still worth every penny of the $680k you paid for it and don't you let nobody tell you different.

 

[Genx87]

I am surprised there are any new home starts considering the inventory excess out there.
Two of the auctions I went to last Winter\Spring had home builders there buying homes because it was cheaper to buy them than build them.

 

[BoberFett]

Originally posted by: Jhhnn
Part of the reason that number is so large is the refi boom- remember that? People who had equity traded in tomorrow for today, took the money and spent it on old bills, new trucks, pleasure cruises, and used it to speculate in real estate, too...

Since you are one who blames everything on Republicans, how do you explain this?

 

[dullard]

Originally posted by: Genx87
I am surprised there are any new home starts considering the inventory excess out there.
Two of the auctions I went to last Winter\Spring had home builders there buying homes because it was cheaper to buy them than build them.

There will always be some location with strong need for new housing, or even just a person who wants a new house. So, I doubt that construction will end entirely. But, the best solution to the housing problem is to end the excess inventory. The best way to end the excess inventory is to stop building them. But, ending home building is having a devistating effect on our economy. I don't think I want to go to that extreme with no new houses built. I'd rather have a prolonged housing problem that is slowly working its way through than a total collapse that lasts a bit less time.

 

[LegendKiller]

Originally posted by: Skoorb
I still think that most of this is psychological. If you believe your house is worth 50% less, it is. Just don't believe the hype. That 3 bedroom bungalow is still worth every penny of the $680k you paid for it and don't you let nobody tell you different.

Something is only worth as much as the next person is willing to pay for it. Just because you were a greater fool in buying it doesn't mean somebody else needs to be the greater fool in buying it from you.

 

[PingSpike]

Originally posted by: dullard

Originally posted by: Genx87
I am surprised there are any new home starts considering the inventory excess out there.
Two of the auctions I went to last Winter\Spring had home builders there buying homes because it was cheaper to buy them than build them.

There will always be some location with strong need for new housing, or even just a person who wants a new house. So, I doubt that construction will end entirely. But, the best solution to the housing problem is to end the excess inventory. The best way to end the excess inventory is to stop building them. But, ending home building is having a devistating effect on our economy. I don't think I want to go to that extreme with no new houses built. I'd rather have a prolonged housing problem that is slowly working its way through than a total collapse that lasts a bit less time.

Just insure all the houses and then pay some bums to burn them down. But pay them in wine because it can't be traced.

 

[dullard]

I just wanted to update this thread with more good news. Every statistic related to housing that I follow has stopped falling, flattened, and then improved. Graph.

Existing home sales are up over 7% from their lows (with pricing up over 10%). The number of existing homes sold are now at Dec 2007 levels.

New home sales are up 16.7% from their recent lows; new home starts are up 21.5%.

Builder confidence is double what it was a few months ago. The stock market is up over 30%. Inflation over the last two years is 1.75% (very reasonable). Real GDP to be released on Friday is expected to be negative, but far less negative than it was.

Yes, it is the peak summer buying season, but none of the previous few summers were as uniformly positive as this summer seems to be.

My own house is on the market (about 1.5 months now). Yesterday people said that they will make an offer on Wednesday. Crossing my fingers that they follow through. It looks like I'll get about a 4% price hike over what I bought it for 5 years ago (of course, they may try to lowball).

 

[dullard]

Existing home sales reached their highest level since August 2007. Although to do so, prices took a small dip from their recent highs.

New home sales are at their highest level since Sept 2008. New home starts are near their highest mark since Nov 2008.

Basically everything has been positive since the beginning of the year. We have had many months straight of positive signs. Hopefully that trend continues.


Personally, I closed on the house I was selling on Friday. It is quite nice to get that headache over. Trust me, having a house offer come in when you are in South Africa (with limited to no phone or email capabilities), having only 3 weeks from the offer date to do a massive list of repairs in the United States, and a closing date when you are in Canada is a lot of stress. I had to pay thousands of dollars more to have professionals do the work that I could have done easilly if I were home. When it is all said and done, I broke even within $20 or so (not counting realtor fees). I had that house for 5.5 years.

 

[dullard]

Dec 2009 Graph

It has been a few months since I've bothered to update this thread. Existing housing sales are roaring back. They are at levels not seen in 3 years. Heck, they are now only 10% below the all time high. Prices are stagnantly low though.

 

[Slew Foot]

People rushing in before the old expiration of free government cheese. Not unexpected.