nojoker

Is Case-Shiller Right That Housing Hasn't Hit Bottom?

Yes, Case-Schiller is correct - more price declines ahead. Even with positive demographics, the weakness in the overall economy could be paralyzing potential buyers. We have yet to see the real fallout from the rise in unemployment.

If the low hanging fruit is gone, sub-prime and some Alt-A, what happens to the prime borrowers who lost a job and have no income? How can you sell? Even if you bought 10 years ago, you may not have equity.

If sales rise for the next several months, then a bottom in prices is possible.

Have We Gained Anything from the Housing Bubble?

Good news ... and bad news. The bad news someone overpaid for a house. For whatever reason, they are unable to pay and the house becomes a statistic. The good news ... someone will eventually buy the house in the video, most likely an investor. It will get fixed and sold. The severe price correction in housing may, emphasis on may, create a very stable housing market once it does bottom. Current and future buyers will live in their homes and not view them as an investment.

No, home prices will not appreciate significantly, if and when prices finally bottom out. Why? The money train is gone! Some research shows the easy money environment added 20% to 25% to the price. Buying and paying for house is not an easy thing.

So, what's the best thing that could happen? Well, it's possible that people will learn that debt is not always a good thing. Banks will be more prudent in their lending. And, in about 25 years we will repeat this cycle.

About the video, I've observed houses that were much, much worse. Here's an example - no appliances, no cabinets, no sinks, no toilets, no furnace, no A/C, no carpet, fireplace completely removed, light fixtures gone, baseboards removed, ceramic tile removed, holes in the exterior walls, lot's of broken windows, graffiti on walls, boarded up garages, empty swimming pools, killer bees nesting in the home, deliberately flooded homes, severe black mold, pets left behind, termites ... you get the idea it's a long list. By the way, many new home builders did not use copper, too expensive. Water lines are aquapex ... plastic tubing.

Can you imagine buying a foreclosure with concrete dumped into the drains? Yes, it's happened!

I think the best news ... real estate investing in the future will be approached with extreme caution.

Here's a link for the curious.

www.fultonhomes.com/pa...

This is a local Phoenix builder in bankruptcy. Click on the image "Before you buy a foreclosures". Keep in mind, this is a builder that wants to sell you a new home. The builder will emerge from bankruptcy with little or no debt, and the cycle will start anew.

Phoenix Housing Inventory Down

The decline in listings could be a phantom decline. Yes, the actual number of listings have declined, but it's not primarily due to sales of existing homes. The reason could be foreclosures. The owner kept the house listed until the bank took it. The bank may, or may not, list the property in a timely manner. I've found properties that have taken more than a year to hit the MLS - bank owned for that entire time.

Two More Reasons I Think Housing Has Hit Bottom

Not likely ... builder's prices are still too high. Alt-A resets are just starting. The Federal Housing Plans have only delayed foreclosures. Yes, it will halt a few, but not enough to matter to the market.

There's still too much inventory to sell - Orlando and Phoenix are two examples. Affordability is through the roof, probably record highs in some areas. But, if you are concerned about losing a job or finding one, you are not looking for a house to buy. Affordability doesn't mean much given current economic conditions.

If it is a bottom, then it's going to be a long, long, long, flat bottom.

The Fed Wasn't to Blame for the Housing Bubble?

You need to read this paper.

Are Home Prices the Next "Bubble"?

by Jonathan mcCarthy and Richard W. Peach

It's from the FRB-NY. It was published in December 2004.