4 Reasons Why the Housing Market Still Hasn't Recovered

[Conservative]

4 Reasons Why the Housing Market Still Hasn't Recovered - Reason.com

It is somewhat naïve to conclude from this that housing is back. (Unless you live in the greater Washington D.C. area where construction is booming like its 2005.) Just this week the Federal Housing Finance Agency reported to congress that Fannie Mae and Freddie Mac are still in “critical condition” because of poor performance and the legacy of their bad loans in the last decade.

Part of the challenge in this debate is how a recovery is defined. I argue that it will be when foreclosures have been worked out of the system, negative equity is cleared away, and prices have stabilized. By that standard, we still do not have a housing recovery.

Argument #1: With record low interest rates everyone will be looking to get back into homeownership.
There have actually been “record” low rates for several years now, but the cheapness of a mortgage is only one factor in the home-buying process. Consider while mortgage applications are up with super low rates, nearly four out of five of those have been for refinancing, not home purchases. That is because household debt is still a massive deadweight on the capacity of families to buy a new home. At the same time, household wealth has been crushed over the past few years. Refinancing is not recovery, and low rates are not a sign of a positive future.

Argument #2: Housing starts and sales of new and existing homes all went up in April and May.
The shadow inventory still has millions of homes to clear away, and this means that prices will likely continue falling for the next several years, even if at a slow rate. Falling prices and continued foreclosure rates don’t qualify as a recovery, no matter how many homes people are buying relative to previous months.

Argument #3: The historically positive correlation between the Wells Fargo Housing Market Index (HMI) and Case-Shiller Housing Price Index suggests we are heading into recovery.
Demand for new homes is not the benchmark for recovery, so reaching a bottom on the HMI is also not the bottom of the housing market.

Argument #4: Homebuilder profits are up, leading to improved builder sentiment
Construction companies have been voicing their negative sentiment with their wallets and shedding jobs— about 50,000 since January. You would think will all that positive sentiment that builders would be gearing up for their great summer. But in fact, according to the Bureau of Labor Statistics, nearly 30,000 of those construction jobs dropped this year were lost in May, right when the housing market was supposedly taking off again.

And the part that really agrees with what I am saying...

Even if you put the good news into this calculation, the result is still nothing close to a recovery. At best there is light at the end of the tunnel. That light is several years away, though. It is absurd to think that housing prices have reached their bottom. It is equally absurd to think that foreclosures and underwater debt will not create massive headaches for the years to come. Don’t be deluded by a few positive stories. Stay buckled in, because destination recovery is still a ways down the road.

 

[Avorysuds]

Pretty much.

You can't have people buying homes when the job you have might not be around in 5 years or you already lost your job. Just reality.

 

[freedombecki]

4 Reasons Why the Housing Market Still Hasn't Recovered - Reason.com
...
And the part that really agrees with what I am saying...

Even if you put the good news into this calculation, the result is still nothing close to a recovery. At best there is light at the end of the tunnel. That light is several years away, though. It is absurd to think that housing prices have reached their bottom. It is equally absurd to think that foreclosures and underwater debt will not create massive headaches for the years to come. Don’t be deluded by a few positive stories. Stay buckled in, because destination recovery is still a ways down the road.

Well, I hope things work out ok, Conservative. Thanks for a thought-provoking thread.

Something that would help the housing market tremendously would be for people who are marginal borrowers would be well served to slow down their personal spending, and be sure the mortgage is paid up. That's when the housing market will recover.

 

[Douger]

Reason #1. Because murkins used their homes as an ATM machine only to find out that the house is worth about 1/2 of what they owe on it. This means they'll die there and never be able to sell or move elsewhere.
Your masters really, really love this scenario.
Zillow - Real Estate, Homes for Sale, Recent Sales, Apartment Rentals
Go check on family and friends addresses and you might understand. If not ? Get a 17 year old Meskin (preferably"undocumented") to explain it to you.

 

[Jackson]

People have to have jobs or not in fear of losing the one they have to be active in the home market. That leaves a great portion of the population out of the game.

 

[Toro]

The article is somewhat flawed.

First, it appears prices have stabilized. Second, if you do the math, we will clear away the excess inventory away within the next 18-24 months. There is only a minor correlation between negative equity and defaults. There is a strong correlation between 90-day delinquency and foreclosure. 90% of mortgages that are 90-days delinquent will be foreclosed. There are roughly 4.5 million mortgages that meet this criteria, implying 4 million shadow inventory. But there is always a shadow inventory of some kind. Explicit inventory is in balance at 6 months supply, the long-term average. However, that supply will shrink when sales normalize. We are building about a million homes less to meet household formation and depletion, and household formation has been stunted because of the recession. When you run the numbers, it comes out that we will be in real equilibrium some time in 2014, give or take a few months.

 

[francoHFW]

..because Pub disfunction, austerity, fear mongering, and refusal to do anything to help the economy since 2/2010 have ruined the recovery from THEIR DEPRESSION?

"No compromise, un-American tea party GOP" (TIME)...

 

[Mad Scientist]

..because Pub disfunction, austerity, fear mongering, and refusal to do anything to help the economy since 2/2010 have ruined the recovery from THEIR DEPRESSION?

"No compromise, un-American tea party GOP" (TIME)...

Four more reasons just for Franco:

1. Barack
2. Hussein
3. O
4. Bama

 

[Ernie S.]

People have to have jobs or not in fear of losing the one they have to be active in the home market. That leaves a great portion of the population out of the game.

Hey I quit my job and bought a house on the same day, 15 months ago.

 

[Texanmike]

The housing market hasn't recovered because the money is fake.

Mike

 

[uscitizen]

If we start doing the correct stuff we could be back on track in another decade, but not before then.
And I do not see anyone with the guts to do what is needed either.

 

[uscitizen]

The housing market hasn't recovered because the money is fake.

Mike

So was the price of houses.
The housing market has recovered as far as price corrections.

 

[Texanmike]

The housing market hasn't recovered because the money is fake.

Mike

So was the price of houses.
The housing market has recovered as far as price corrections.

The price of houses was fake because the money is fake. I've been saying it for four years now. When you go to a bank and get a loan to buy a house the money is "created" by you signing the debt note. You can only create so much fake money before the balloon busts. It busted and we are trying to patch it up. The corrections are not done.

Mike

 

[uscitizen]

Actually the price of houses needs to drop some more to be competitive.

 

[Texanmike]

Actually the price of houses needs to drop some more to be competitive.

We are in complete agreement.

Mike

 

[francoHFW]

..because Pub disfunction, austerity, fear mongering, and refusal to do anything to help the economy since 2/2010 have ruined the recovery from THEIR DEPRESSION?

"No compromise, un-American tea party GOP" (TIME)...

Four more reasons just for Franco:

1. Barack
2. Hussein
3. O
4. Bama

Sure. Cause the GOP hates him, and he's black....

 

[Neotrotsky]

With a tool like Papa Obama in office
is the main reason

 

[waltky]

Housing market creating a 'new normal'?...

Depressed Housing Market Leads Recovery
7/03/12 --- Based upon the performance of the homebuilder stocks since the Oct. 4, 2011 lows and year to date, you would think that the market for new homes was booming. There are subtle signs of stability in data from the National Association of Home Builders, rising new home sales, and stability and a possible bottom for home prices, but the housing market is far from normal.

Back on June 21, I wrote Homebuilders Vulnerable in Current Market and focused on the PHLX Housing Sector Index (HGX), discussing the downtrend that went all the way back to the July 2005 highs for the homebuilder stocks.

The weekly chart for PHLX Housing Sector Index shows rising momentum (12x3x3 weekly slow stochastic). HGX is above its five-week modified moving average at 128.49. The weekly chart profile is thus positive particularly with the breakout above the downtrend that goes back to July 2005. This downtrend connects the highs of July 2005, January and April 2006, and February 2007.

I did not expected this trend to be broken to the upside at this time, but that does not mean that you avoid "buy and trade" strategies for the homebuilders rated Buy or better by Stock valuation and analysis, newsletter, analysis report, institutional software. My annual value level for HGX is 122.53 with my quarterly pivot at 135.17 and monthly risky level at 148.28. HGX is up a staggering 33.8% year to date and up 87.1% since its October 4, 2011 low. The September 2008 high is 146.34 with the 120-month simple moving average at 155.73.

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See also:

US economic recovery is tepid, says IMF
3 July 2012 - The IMF said US house prices had stabilised but were still depressed

The US recovery "remains tepid", according to the annual report from the International Monetary Fund (IMF). It has cut its growth forecast for the US economy to 2% this year from an earlier estimate of 2.1%. The IMF warned of risks from the eurozone debt crisis and uncertainties surrounding domestic policies, with an election in November and the debt ceiling needing to be raised in 2013. But it said there was also a chance that the economy could recover faster.

The IMF said non-financial firms could invest more than expected and the housing market recovery may accelerate. Its report said that "house prices have stabilised recently, but remain at depressed levels". The most recent official figures have shown that the US economy grew at an annualised pace of 1.9% in the first three months of 2012. Last month, the US Federal Reserve cut its forecast for economic growth in 2012 to 2.4% from 2.9%.

Boosting growth

As well as cutting its growth estimate for this year, the IMF also cut its forecast for 2013 to 2.25% from 2.4%. It suggested that the federal budget could be cut by less than planned by President Obama in February. The IMF also said that spending should be made as "growth-friendly" as possible, with investment in infrastructure, training, housing initiatives and an extension of emergency unemployment benefits.

It warned of the dangers of the so-called fiscal cliff, which is the $4tn of tax increases and government spending cuts that are due to automatically happen at the end of the year. The IMF added that the federal government needed to act quickly to deal with the debt ceiling, which will be hit when it reaches its debt limit of $16.4tn. The ceiling is expected to be reached some time between the presidential election and the end of the year. It said that the ceiling should be raised quickly to avoid uncertainty and a loss of confidence.

BBC News - US economic recovery is tepid, says IMF

 

[signelect]

There is a huge disparity between need and want. People were buying what they wanted but couldn't afford because congress passed laws to allow it. If people bought on what they needed and could afford we wouldn't be having this conversation. I was listening to RED on the view the other day and all she could take about was her home in the Hamptons. 99.9% of American don't live in the Hamptons. Get real, houses are just too expensive because people want more.

 

[waltky]

Foreign millionaires snatchin' up American homes...

Real Estate Tourism: Who's Really Buying America's Homes?
8/10/2012 - Russian billionaires have been making headlines for snapping up some of the most opulent homes in the United States. Yuri Milner ‘overpaid’ by 100% on a $100 million Silicon Valley mansion in 2011. Dmitry Rybolovlev’s daughter bought an $88 million penthouse in New York City (after spending $100 million on Donald Trump’s Palm Beach palace in 2008). This week, an anonymous Russian buyer plunked down $47 million in Miami’s most expensive sale ever.

But Russians certainly aren’t the only foreigners plowing money into American real estate. “The reason the Russians get so much attention is that they buy the highest ticket trophy properties,” says Jacky Teplitzky, a managing director at Prudential Douglas Elliman Real Estate, who peddles property in New York City and South Florida. “But if you go by number of buyers, you have much more activity coming from places like Argentina, Brazil, Colombia and Venezuela.”

To name a few. Since the housing bust, foreign buyers have flooded the U.S. housing market, taking advantage of favorable exchange rates, weaker prices and, in some cases, record-low mortgage rates. Foreign nationals accounted for $82.5 billion, or 8.9%, of the $928 billion spent on U.S. residential real estate from April 2011 through March 2012, according a June survey from the National Association of Realtors. That was up 24% from $66.4 billion the previous year. More than 50% of sales over the past year occurred in just five states: Florida, California, Texas, Arizona and New York.

Chinese are also shopping in the U.S. in growing numbers. Buyers from mainland China and Hong Kong account for over $7 billion in sales annually, or 11% of international sales activity in the year to March, according to NAR, making them the second-largest foreign buyers of U.S. homes. The influx of newly minted millionaires has inspired developers to reserve units on floors with the number ‘eight’ in new condo projects — like Manhattan’s One57 — for Chinese buyers (Chinese consider eight to be a lucky number), and real estate brokers are embarking on overseas marketing trips that have resulted in big-ticket purchases like Beverly Hills’ $34.5 million Wehba Mansion.

If the Chinese are the second-largest foreign buyers of U.S. homes, who’s No. 1? Our neighbors to the north in Canada. Canadians accounted for 24% of sales to foreigners in the year to March, according to NAR. And it’s not likely to let up: Realtor.com says Canadians account for the most international search activity on the listing site every month in nearly all of major U.S. metro areas. Canadians have been a dominant purchasing force in hard-hit Sunbelt states like Arizona and Florida. A relatively weak greenback coupled with low home prices represents an opportunity to scoop up a home that could be used for vacations now and retirement later.

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