Housing Market Shows No Signs of Life

Inventory levels of existing homes had been steady for several months but preliminary April figures show another spike to more than 11 months of supply.

The housing market cannot improve until the supply and demand picture does and these numbers are pretty ugly. When supply is growing faster than demand, prices will continue to fall, so investors should keep this in mind when allocating investment dollars to anything that is dependent on home prices.

 

Comments

[Pauly B:]

Exactly, In my neighborhood I have 5 homes vacant within a block of me and they have been vacant since last fall. My home value has tanked. In other neighborhoods near me homes on entire cul-de- sacs are vacant. I live in the Midwest and it will take some time to correct this.

2008 May 29 09:17 AM

[specks:]

You know... I'm trying to figure out where all this inventory came from.
Is it simply the result of pure speculation by the nation in general? And if so, what was it that caused so many to think there was a shortage of housing? Afterall, why would I speculate on a house without thinking I could make a killing by selling it to someone else?
Any experts out there with appropriate market intelligence?

2008 May 29 10:57 AM

[Malkiel:]

The current inventory is piling up because foreclosed homes are being thrown into the mix, a combination of homes people couldn't make payments on and homes they no longer wanted to make payments on because they were too far "upside down" in relation to market value.

At its heart, "speculation" is a guess that a trend will continue rather than a studied calculation that it could. Home builders who continued to build when the prices got way beyond the median income of the local market were making a guess that whatever factors beyond their area of expertise that drove the mortgage market would continue. They might be wishing now that they had done more research and less guessing...

2008 May 29 11:46 AM

[mitchfromvi...:]

10 years doing feasibilies for a National Builder. They have sunk cost in land, infrastructure, proffers (schools, firestations, etc). Profit margin is out the window and all Big Boys are operating on CASH FLOW. They have to build and sell 'em no matter the losses. I imagine around the "kool-aid" fountain there is hope that they can survive the "pain" and the guy down the road will fold his tent first.

So inventories continue to pile up, price continue to fall. Inside scoop people in NoVa / DC metro market are writing up a lease agreements with "cousin Billy Bob", getting a loan for their 2nd home showing that cash flow and their current 800 credit score, buying a home across the street (same schools, etc) for $200K less. After closing, "Billy Bob" can make his mortgage payment and buyer defaults on his original home and has a never, probably bigger home for a mortgage WAY LESS than he was paying.

Will a red letter "DEFAULT" get lost in the coming shuffle (here and coming in the future)? Will the banks quit lending money for mortgages? Will Congress legislate a "grace period" for any defaults that occured during this mess?

Trust me, there are thousands in NoVA banking on it BEFORE this loophole is closed!

2008 May 29 12:42 PM

[Yokohama Kid:]

I once lived in a midst of housing and land buble in Japan. People in those buble years considered 10000 Yen bill nothing but worth 1000 Yen bill. They gave away 10000 Yen as a tip to taxi drivers and anybody who served them. It was just a game who finally gets stuck with overvalued houses and lands.

2008 May 29 02:05 PM

[mlambert890:]

Real estate will always come back. Its prepostrous to think otherwise. Do you think populations are declining? Do you expect mass suicides? Do you think people somehow no longer want homes?

Expect the prices to continue to contract until US home median settles down to 1999 levels plus some realistic growth adjustment 99-2008. Then expect, most likely, a return to realistic growth moving forward.

"Housing is dead" in the short term certainly (3-5 years), but clearly "housing" is never "dead" unless civilization is over. Despite the hype of those with an agenda, there will always be people who dont want to be piled like rats into a megalopolis. Once prices return to rationality, you will start seeing the inventories return to healthy levels.

2008 May 29 02:57 PM

[LiveOakVA:]

Reviewing the sales histories of some inside-the-beltway properties, of course one finds the spectacular price inflation during the bubble. From 2000 until 2006, total increases of 150% - 200% were common.

For homes currently listed we're now seeing price reductions up to 30% off the peak. 40% off the peak for the growing number of foreclosures is common.

But looking further into the sales history, one often finds another hint as to what we might expect for the near future. During the late 80's until the 90's prices were quite flat in many neighborhoods.

Are you ready to "shelter in place" for the next 10 years...?

2008 May 29 03:57 PM

[sickofthehype:]

Wakeup obviously named himself that for a reason. Time to live up to your name. Oh, and good luck waiting for 1969 pricing. Maybe you've got a Delorean to drive around looking for those deals..

2008 May 29 11:57 PM

[Diegojames:]

DOES ANY KNOW THAT OVER A MILLION CHINESE ARE GOING TO LIVE IN TENTS. WHY NOT SELL THEM THESE HOMES? THEY HAVE THE MONEY AND WE ....HAVE THE HOMES....

SEE THE DEAL?????

2008 Jun 03 12:06 PM