Housing Woes Are Far from Over 17 comments
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Residential real estate site Zillow.com released a discouraging report on the future of the housing market in the United States. The web site compiles information regarding home prices, mortgage values, tax rates, and other important information and has become a leading authority on residential real estate. Among the findings of Zillow’s analysis is that nearly one-quarter of all U.S. mortgage holders are now underwater on their mortgage loans. Declining home values are of course the culprit and could continue to fall through at least the next year. They estimate that by mid-2010 that number could continue to rise and reach about 30%. This prediction is actually a great deal better than the opinion expressed just last week by analysts at Deutsche Bank (DB) , which claimed that as many as 48% of mortgage holders could be underwater as prices continue to fall through early 2011.
Homeowners are being hurt by price declines. The estimated median value for single-family houses slid to $186,500 in the period, a 12 percent drop from a year earlier and the 10th consecutive quarterly decrease, the Seattle-based real estate data service said in a report today.
“The negative-equity rate will rise and spin off more foreclosures,” Stan Humphries, Zillow’s chief economist, said in an interview. “I see a substantial downside risk to prices and don’t think we’ll see a bottom until the middle of next year.” — From an article by Dan Levy, Bloomberg.com
This analysis certainly puts a damper on many of the housing green shoots that have partially fueled the recent rally in equities. The rate of declines in home prices does seem to be stabilizing, and that is not to be dismissed. However, this report is further confirmation of our bearish stance on the residential construction industry. The twenty stocks that we cover in this group have appreciated an average of 73% over the last six months. However, the significant supply glut of unsold homes will continue to put pressure on these homebuilders. At current sales rates, the supply of homes on the market right now would last about 9.4 months, which is more than twice the average supply level from 2000-2005.
Luxury homebuilder Toll Brothers (TOL) will report earnings Wednesday, and analysts are expecting to see a loss of $.32 per share ex-items. We see no catalysts for a turnaround in TOL or its competitors, and we continue to rate most in the sector as Overvalued.
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The Zillow data is always taken from the most real estate agent-friendly sources.
This information is amazing for its candor, if for nothing else. It's certainly no surprise.
I COULD NOT DISAGREE MORE WITH THIS STATEMENT!!!!!
UNLESS
you count continued wealth destruction, increased forclosure rates, plummeting property values, unending price declines, monstrous supply and upcoming supply, proble higher mortage rates and both emotional and financial distress from the persistent collapse of the of the American dream as "woes."
In that case, I concede the title COULD have some merit.
Of course, that is the national trend so we must be very careful to understand that real estate is very regional in nature. Some areas went almost untouched by the upside of the bubble and may feel very little impact on the downside. However, even in those areas price appreciation will likely lag below trend until employment in their area creates enough demand. So, I expect that the best areas that will begin to rise earliest may stay flat for a few years as a result of lingering unemployment and fear.
Hmm, in my area Zillow has consistently been on the low side.
Since they must have some kind of automated system to come up with their estimates, it can't be expected to be really accurate, everywhere, all the time.
On Aug 11 09:23 PM Cold Reality wrote:
> When Zillow is downbeat, that's something, because they are another
> shill for real estate agents, and for the most part, their "Zestimates"
> are off by a huge amount--always high.
Case in point: So far in August (7 recording days) 88 trust deeds have been recorded, along with more than 100 Notices of Default. In NV, a trustees deed shows a property has been repossessed by the lender. More than 90% are homes.
Last month more than 400 Trustees' Deeds were filed.
This is in one county in northern NV that hasn't received the press coverage the Las Vegas area gets.
The worst part is that fewer homes are closing from the distressed inventory than are entering the pipeline.
Local analysts say that 40% of existing homeowners are already underwater, and the ratio may rise to higher than 60% before prices stabilize.
The real estate market in Northern NV is in for a long slow slog before it becomes viable again.
A little anecdotal evidence. I inquired about a foreclosed on 4plex next to a few that we own. The mortgage servicer who foreclosed is on the other side of the country. The rep I got told me their process is to have a local RE agent list it. And that should happen in 4 to 6 MONTHS! I pointed out that given the neighborhood it would be a burnt out junkie den by then. He said he knows that, but that's their process.
I just took a short trip to Manhattan. I was quite impressed by the number of empty/for rent storefronts that I saw. The friend I was staying with (a native Manhattanite) said he's never seen anything like it.
The key to long-term house prices was and will remain incomes. Long-term, buyers can afford about three times income, assuming they don't have too much other debt. Discussions on how much prices have dropped (Gee, it's down 50% so that MUST mean it won't fall any more!) are not of great interest if that's all there is to the discussion.
Unemployment continues to collapse (-250k jobs is horrid, though merely less horrid than -600k jobs). Lending is tight. Consumers are still heavily in debt.
Let's assume we get growth in 2012. Will the Fed start raising interest rates by then? Probably. If the deflationary forces of contracting credit abate and the inflationary forces of printing start to take hold, we could see rates rise sharply from 2012 to 2020. What will happen to house prices with mortgage rates at ten to twelve percent?
In any case, homeowners may be 30% or 50% underwater; if so, good for them because America as a whole is 100% underwater and sinking fast.
That means that it is not an awful lot of use for trading purposes.
On Aug 12 02:54 AM billddrummer wrote:
> In my area Zillow is usually high, because so many homes are entering
> the foreclosure process so quickly that Zillow can't keep up with
> the new information.
>
> Case in point: So far in August (7 recording days) 88 trust deeds
> have been recorded, along with more than 100 Notices of Default.
> In NV, a trustees deed shows a property has been repossessed by the
> lender. More than 90% are homes.
>
> Last month more than 400 Trustees' Deeds were filed.
>
> This is in one county in northern NV that hasn't received the press
> coverage the Las Vegas area gets.
>
> The worst part is that fewer homes are closing from the distressed
> inventory than are entering the pipeline.
>
> Local analysts say that 40% of existing homeowners are already underwater,
> and the ratio may rise to higher than 60% before prices stabilize.
>
>
> The real estate market in Northern NV is in for a long slow slog
> before it becomes viable again.
Way of the new world, we don't have jobs, homes or credit and Asia is booming.
When a politician says "spread the wealth" he is talking about taking away from the middle to feed the ends. Rich get richer, poor get more perks and middle pays for it all. Both here and abroad.
We have lost a hell of a lot more than 6.5 million jobs this century. If you are counting family supporting (and business supporting) jobs. Between manufacturing, high-tech (dotcom/Y2K), foreign competion and importation of labor the true loss is many millions more than 6.5
Sure housing is at the bottom and a "jobless" recovery is possible. Sure it is.
On Aug 11 11:03 PM BullBull wrote:
> Unemployment will decide everything else, as the unemployed get jobs—the
> consumer demand will rise -- the recession will be over -- more people
> will buy good houses. With about 6.5 million jobs lost, it is the
> worst economic contraction since the Great Depression. Who will hire
> more people? Who will be next Stars like Google, MSFT? New energy?
> New Car industry? Obama’s plan? … Good time buy value stocks (
> Trade4Rich.com ) .
While all the short-term focus is one jobs, "underwater" mortgages and "toxic" debt, people should contemplate a couple other factors that will have their way with prices in the end: 1) there are more people requiring housing, each and every minute that goes by, and 2) houses, like numerous other commodities, are "hard assets," and when governments print trillions of dollars of currency, eventually, all hard assets get repriced upwards.
Yes with 5% more price declines 50% of mortages will be under water and average home equity (under mortgage) would be down below 20% - all time historic low. Lot more foreclosures and foreclosures being actually put on the market (there is a shadow inventory now) - home prices will come under even more pressure.
smartstops.blogspot.co...
Did anyone ever stop to think of the taxes paid, repairs done, interest paid, cost to sell, cost to buy and on and on and on. Lets add insurance to boot on the thing over the life of the loan. Something breaks around here on a monthly basis.