Housing: A Train Wreck in Slow Motion

[marmar]

from Yahoo! Finance:



Housing: A Train Wreck in Slow Motion
by Mick Weinstein
Posted on Friday, May 30, 2008, 12:00AM


There are three big pressures on this market: rising commodity prices (tied to dollar weakness/inflation), an ongoing credit crunch weighing on financials, and the sharp housing market downturn.

Last week we addressed the first with a roundup of opinion on the oil price spike. This week we turn to housing, as the latest S&P/Case-Shiller Home Price Index indicator released Tuesday poured a bucket of cold water on those hoping the U.S. residential real estate had bottomed.

Bloggers once again cut through the official-speak and presented some straightforward conclusions that investors and homeowners will appreciate knowing. Click through links for the full articles:

• Calculated Risk presents three key graphs to explain where we're heading in U.S. residential real estate, concluding, "With existing home inventory at record levels, prices will probably continue to decline over the next few years - perhaps another 20% in real terms on a national basis."

• Macroeconomist James Hamilton uses Calculated Risk's analysis to explain the broader implications: "The reason for the gradual and predictable changes we see in house prices is that if a homeowner is mistakenly too hopeful about what his or her house can sell for... the home just sits on the market unsold until reality finally sinks in... the magnitude of subsequent declines in house prices is probably the single most important determinant of how many more homes end up in foreclosure. That in turn will determine how widespread the failures of major financial institutions become. This has been like watching a train wreck in slow motion."

• Tim Iacono, author of 'The Mess that Greenspan Made' blog, notes the 14.4% year-over-year decline for the 20-City Composite Index is the steepest decline on record, and provides a helpful city-by-city chart of the decline. How's your area doing?

• Heather Bell at Index Universe finds two "faint glimmerings" of hope in the Case-Shiller report: slightly positive returns for Charlotte, North Carolina and Dallas, Texas. Yet with this week's publication of the Conference Board's Consumer Confidence Index, which hit a 16-year low, "it seems doubtful that consumers will be looking to buy much of anything, let alone a house. A real turnaround in housing does not appear to be in the cards anytime soon."

...(snip)...

Realtors, Kiss Your 6% Goodbye!

This week, the Justice Department and the National Association of Realtors reached a settlement in the antitrust case against the NAR's monopolistic hold on home listing information. It's a victory for Internet-based and discount listing services and another stake in the back of traditional brokers attempting to recover from this downturn.

• Media expert Jeff Jarvis says this means good riddance to real estate agents' familiar 6% commissions: "The only reason... that Realtors could hold onto their high commission for such little value and work is that they kept information away from the marketplace, making it inefficient. This new economy can now come to real estate sales as information become freer. Oh, it's not fully freed yet. But I do believe that the combination of this settlement and what it does to empower discount players and the depressed real estate market will combine to finally shove dynamite up Realtors' rears."

• Calculated Risk looks at brokers' commissions as a percentage of GDP, showing that commissions "soared" in recent years as a function of the housing bubble. But as of the first quarter of 2008, commissions declined. "Now, with prices falling, transactions falling, and more competition, it is likely that total commissions will fall further over the next few years. Tough times for many real estate agents." .....(more)

The complete piece is at: http://finance.yahoo.com/expert/article/stockblogs/85273

[arendt]

1. Great links, useful info. K&R n/t