Home Sales Accelerate as Prices Decline on Sustainable Rebound

[Godhumor]

Source: Bloomberg

The third decline in U.S. home prices in three years is driving a pickup in sales as bargain hunters rush to buy before mortgage rates rise, even as values may slump further.

Mounting foreclosures pushed the median price for a U.S. existing home to $158,800 in January, the lowest level since 2002, according to the National Association of Realtors. At the same time, sales climbed 22 percent from October, the biggest three-month gain since the end of a homebuyer tax credit. The rally began as mortgage rates started to rise from record lows in November and the economic expansion picked up speed.

...

Prices are falling again after seesawing in 2009 and 2010 because of the federal tax incentives for homebuyers. The credits cost $16.2 billion in tax revenue, according to the Government Accountability Office in Washington. There is no plan to renew the benefits as Congress wrangles over budget cuts.

“The tax incentives are why we are seeing this triple dip in prices,” said Nariman Behravesh, chief economist of IHS Inc., a research firm based in Englewood, Colorado. “Without the credits, we wouldn’t have seen such volatility because prices would have declined right to a bottom and we would be into a sustained recovery by now.”



Read more: http://noir.bloomberg.com/apps/news?pid=20601068&sid=abJ9cUD.17zQ

---

I have to keep the title the same as the article, but it is the last 2 paragraphs in the excerpt I really wanted to highlight. The theory is we didn't bottom out due to tax incentives (Artfully called artificial gains in the article) so we're seeing a tremendous amount of wobbling in the real estate sector.

[MineralMan]

1. Home prices aren't going to start rising until the current

surplus of homes has been sold. Supply and demand at work. The house next door to mine was foreclosed on two years ago. Finally a guy bought it for $70,000 from the bank. He put about $30,000 into a total rehab on the house that included finishing the basement, adding a bedroom and bath down there, and a legal egress window. It's on the market now for $159,000 and has a steady stream of lookers stopping by. I expect it to sell for $130-140,000 very soon. The rehabber will pickup a decent profit and it'll be one more house fewer in our large surplus of homes in the Twin Cities.

[PSPS]

7. No. Prices won't rise until wages go up.

Housing prices in some markets were over ten times the median income of the area during the bubble's peak. In a healthy economy & housing market, the figure should be between two and three. The only reason it got so high was because there was no legitimate loan qualification process during the bubble.

While we still have dangerous loan products that require almost nothing down, at least you have to prove your income now. That means that houses will have to return to two to three times the median income for the area there are in.

With the all-out assault on the middle class under way, and the dearth of manufacturing in the country, I see nothing in the foreseeable future that will justify a rise in housing prices. If anything, prices will continue to go down as wages continue to erode.

[bemildred]

2. Is that "acceleration" like the final circling before the plunge? nt

[Godhumor]

4. Sustainable interest with low prices/interest means

That we've bottomed out, for the most part. The article is predicting that prices will continue to dip a bit but we've hit a point where the industry signs point to a sustainable, non-government based recovery.

[bemildred]

5. Maybe.

I expect a bottom in the next year or two. I expect that every effort will be made to re-inflate the real-estate market. I have serious reservations about whether the market can actually be stimulated into another erection though. We have grave and pervasive economic problems while our governments seems mostly interested in keeping the old game alive, rather than making the essential reforms.

[Godhumor]

6. The government has actually introduced a lot of mortgage-based reforms to limit issues

The three most notable are modifications to Regulation Z that completely change how originators can be paid, the SAFE Act requiring federal registration for all originators and the realigning of GSEs to prevent the carte blanche ability to guarantee bad loans.

It might take time to move through the leftovers from the current mess, but the government has not been quiet on the issue.

[bemildred]

9. Thank you for clearing that up. nt

[Thav]

3. I talked with my realtor yesterday

and she said they've been busy, but properties are selling quite low. So this isn't surprising.

I hope that extends to commercial property as well, since I'm hoping to beat out two other parties on this property I want.

[sumus]

8. Home prices

CoreLogic said Tuesday 3/8/11 that about 11.1 million households, or 23.1 percent of all mortgaged homes, were underwater in the October-December quarter. That's up from 22.5 percent, or 10.8 million households, in the July-September quarter. That means that all those folks are just renting without the ability to move if they need to.

In the Northeast, the median home price is $236,500 in the Midwest it's $126,300 In the South, the price is $136,600,and in the West it's $193,200. The rule I learned is that you can afford to buy a house that's 3X your gross salary, so you do the math but I don't see wages that can support even these prices (and that's median price not the average) I do see pressure to push wages down.

So in short, home prices are just going to lay there flat or go down in 2111.

The real issue is that were all still being victimized by a slow motion bank robbery that allowed wall street and the banks to sell mis-marked securities, junk ranked as AAA good to investors and pension funds. A crime for which no one has been punished. The banks are being bailed out by being lent our tax money at 0 interest to lend back to us at 5%. But there is no bailout for the 401ks or Retirement funds of America that bought those supposedly guaranteed securities. On the other hand it did work out well for some, today just 400 Americans have the same wealth as half of all Americans combined. 400 = 157,000,000 million and the Tea Party Republicans will die to keep them from paying 3% more in their taxes.