After steadying, home prices begin falling again

[steve2470]

http://bottomline.msnbc.msn.com/_news/2011/11/07/8684796-after-steadying-home-prices-begin-falling-again

After holding up relatively well this summer, it looks like home prices have begun falling again.

For a second month in a row, home prices fell 1.1 percent from the month before as fresh foreclosures continued to add inventory to the glut of unsold homes, according to data from CoreLogic, a real estate research firm. Home prices fell 1.1 percent in both September and August.

Record low mortgage interest rates appeared to have put a floor under home values this summer. After falling steadily last winter, the CoreLogic index flattened out this summer. But the latest drop leaves home prices 4.1 percent lower than they were in September 2010.


The outlook for home prices remains clouded by the continuing wave of foreclosures that has left the market with many more sellers than buyers. Some banks have slowed the pace of foreclosures to avoid adding more unsold inventory to their books. As lenders slash prices of foreclosed properties, those “distressed” sales force prices of all homes lower.

[dkf]

1. No bottom til the foreclosures are cleared out

[customerserviceguy]

3. That's what I've been saying all along

A lot of lenders have not even begun to try to process the bad loans and REO properties they have. I see it nearly everyday, a borrower moves out, sends the bank the keys, and the bank doesn't make any steps to get the property ready for sale, like turn the utilities over into their name.

[dkf]

4. We are just dragging this out and making it impossible for things to recover.

Is there any good accomplished by the government prolonging this? Or is this just for show to appeal to populism?

[customerserviceguy]

5. Absolutely

When the dot-com boom became the dot-bomb bust, did we try to drag out the pain? No, we figured that if you invested in something that was already too sky-high, you were bound to get burned. The housing bubble is no different.

[sendero]

2. Exact...

....imundo. And there is still boatloads of inventory to clear.

[econoclast]

6. I think more is at work here than the overhang of foreclosures

Consider the following ... In 1970 there were about 25 million two parent & children households in the US.

Families with children are the fulcrum of the housing market. Because single-parent families, on average, tend to be relatively poor, the buying power is concentrated in two-parent families with children.  Two parent & children are the kind of household that requires and can afford a large home.

To meet this demand for housing there were in 1973, 36 million housing units with three or more bedrooms. Supply and demand were roughly in balance.

Jump forward to today. There are still about 25 million two parent & children households in the US. But the number of housing units with three or more bedrooms has doubled to 72 million.

We have, over the past 40 years MASSIVELY overinvested in singly family housing. Using the mortgage interest deduction, low interest rates, subsidized mortgages thru FNMA and other GSEs etc, we have goosed the housing market at every opportunity. And housing is not a productive asset. Until we have reached this point. And now we have to face the fact that many existing homes are owned by the soon to retire who will be looking to cash out. I think we still have a way to go before we see stabilization foreclosures or not.