Hang On ... We Haven't Hit Bottom in the Housing Market

[marmar]

via AlterNet's PEEK:



Hang On ... We Haven't Hit Bottom in the Housing Market

Posted by Jill Hussein C., Brilliant at Breakfast at 8:04 AM on July 27, 2008.

Another $250 billion in adjustable-rate mortgages are expected to reset this year and next, and over $700 billion by 2010.




Remember the housing market disaster? How home prices are plummeting? You don't hear much about that these days, do you. This morning, Joe Scarborough's obsession is "Obama's saccharine speech" in Germany. You know, the one I posted yesterday that was greeted by a huge crowd numbering in the hundreds of thousands.

In normal times, one would expect the value of one's home to appreciate by around 4-5% per year. Our house appreciated by around eight percent between the time we bought it and our first refinance two years later. Today, houses similar to mine are just now falling in price -- and are sitting on the market dangerously close to the number at which my own house should fall.

Unlike many people, we haven't used our house as a piggybank to buy vacations and SUVs -- or even put in gourmet kitchens with granite countertops and stainless steel appliances and Aga cookers on which no one actually cooks. But as prices continue to fall, here in New Jersey, the state I call "The Next Flint, Michigan", I wonder how long it's going to take for the price to get down to what we paid for it.

Because the bottom still hasn't fallen out of the housing market:

In the latest evidence that prices are still sliding, the National Association of Realtors reported Thursday that the median price of existing homes sold in June fell to $215,000, down 6.1 percent from a year ago. Sales fell 2.6 percent from the month before -- far more than analysts had expected.

(snip)

Richard Gaylord, president of the Realtors, said a recent survey found that nearly one-quarter of potential home buyers are "waiting on the sidelines." A major housing package passed by the House Wednesday after months of debate could help boost the market by offering a credit to first-time home buyers, the group said.

The problem is that this "credit" is actually just an interest-free loan of a few thousand dollars. Would that spur YOU to buy a house in a market that is still trending down?

Another $250 billion in adjustable-rate mortgages are expected to reset this year and next, and over $700 billion by 2010. That's a huge number of people who are going to be trying to refinance -- into rates they can't afford. Even the new housing package requires that lower-cost government-backed loans be limited to 90% of the value of the house -- far less than what many homeowners would require to bail them out of their creatively-financed McMansions.

The three pillars of the American Dream are education, employment opportunity, and homeownership. In the past eight years and beyond, higher education has become unaffordable for many families and attempts are being made daily to dismantle the public school system in this country. Employment opportunity is diminished by outsourcing and recession. And homeownership is about to drop dramatically, leaving many homeowners with little but what they're wearing on their backs.

If those who created the Republican economic policies that gave rise to what we see around us today had set out deliberately to eliminate the middle class and push its denizens downward, they couldn't have done a better job.

Unless they actually DID have that in mind....


http://www.alternet.org/blogs/peek/92883/hang_on_..._we_haven%27t_hit_bottom_in_the_housing_market/

[Eurobabe]

1. How fast can one type noshitsherlock?

[Tandalayo_Scheisskopf]

2. Housing prices are falling anyway.

The simple answer would be for the federal government to step in and freeze all these soon to be reset arms and turn them into classic adjustable rate and fixed rate mortgages. No reset. Only one home allowed under the plan per applicant, to shake out the flippers who got caught with their pants down. No transfer of homes to family members or business associates as a dodge.

And public execution of anyone who made and sold 12-tape or CD audio books on how to get really rich flipping homes.

[BlooInBloo]

3. Housing prices are projected to drop another 25%...

http://calculatedrisk.blogspot.com/2008/07/fitch-projects-additional-25-percent.html

[Warpy]

4. Prices are down more than 6% in a lot of markets

I know in parts of Florida, the drop has been closer to 33%. I sold a house there and have been watching that market for the last two years since I sold since people told me I was an idiot for listing and selling for 10% under the comps.

Ha ha ha.

My own feeling is that the precipitous drop is over in a lot of areas and that what we'll see from now on is a slow slide for the next 10 years or so until either wages rise to reflect inflation or the price becomes affordable again.

The problem is with the type of loan that is due to reset over the next year and a half. These are the jumbo loans extended in the hottest markets, loans over $450,000 for bungalows worth a quarter of that amount. Even converting to a 30 year fixed won't work as people won't be able to afford anything but that initial teaser rate. They'd bought at the peak of the market and didn't realize the paper profit they were counting on to help them get a down payment on another barn for an affordable fixed mortgage just didn't materialize. Now they're stuck.

So are we, because they'll take a lot of stuff with them when they default.

[Liberal_in_LA]

5. bump

[Ichingcarpenter]

6. I heard an interview on the radio that the falling oil prices is gonna hurt

the financial markets because they had bet with their hedge funds that
the price would go up and have lost considerable money since they went down.

The analyst said to watch for an unexpected hit on financials soon.

[marmar]

7. The Ponzi scheme is nearing its end.

n/t