A decade of declining home prices ahead

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investorzzo's picture
investorzzo
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A decade of declining home prices ahead

This is from the Wall Street Journal:

"How much should we worry about a new leg down in the housing market? If the number of foreclosed homes piling up at banks is any indication, there’s ample reason for concern.

As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That "shadow inventory" was up 30% from a year earlier.

Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. That’s nearly nine years. Of course, banks could pick up the pace of sales, but the added supply of distressed homes would weigh heavily on prices — and thus boost their losses." ("Number of the Week: 103 Months to Clear Housing Inventory", Mark Whitehouse Wall Street Journal)

A 9-year backlog of homes. No wonder the yield on the 10-year Treasury is under 3%. The country is in a Depression.

http://www.globalresearch.ca/index.php?context=va&aid=20316

bcc87's picture
bcc87
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Re: A decade of declining home prices ahead

I work in real estate; the banks have been holding bank owned properties to not contribute to a complete collapse in the housing market. I've noticed this month an increase of bank owned properties in my area. Short sales are a killer since so many people are upside down and will be stuck for years and years. The artificial stimulus with first time homebuyer credits, etc. is over and high inventory and fewer buyers is a reality.

investorzzo's picture
investorzzo
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Re: A decade of declining home prices ahead

Renter nation

http://finance.yahoo.com/real-estate/article/110173/renter-nation?mod=re...

The first link posted in the first window isn't working. I got it from another site.

http://palestinefreevoice.blogspot.com/2010/07/decade-of-declining-home-...

investorzzo's picture
investorzzo
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Re: A decade of declining home prices ahead

Foreclose This House

Believers in the fledgling recovery are ignoring some key facts. There are already 11 million homeowners underwater on their mortgages. As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process. This “shadow inventory” was up 30% from a year earlier.

At the current rate of sales, it would take banks nine years to clear this inventory. They are likely to increase the rate of sales as inventory continues to pile up. This will compel prices to go lower. Prices would fall even if a tsunami of Option ARM and Alt-A resets weren’t hurtling down the track – but they are. Beginning in June, a surge in resets will begin and not subside until late 2012. These liar loans were riddled with fraud, and the vast majority of these mortgagees will default after the reset. A surge in foreclosures is just over the horizon.

http://theburningplatform.com/blog/2010/08/01/john-paulson-will-be-wrong...

dshields's picture
dshields
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Re: A decade of declining home prices ahead

the decline in home prices seems like it is going to continue.  the so called "jobless recovery" is crap.  how do you have a recovery without jobs ?  companies do not want to hire as it costs too much and it is easier to squeeze more work out of the existing work force.  the company i work for (a wall street/fleet street company) has hired a few temp workers but no real increase in employees in quite some time - a few years.  we are making money but we are not getting rich these days.  we used to make a lot of money - it was pretty exciting for a while.  now it is all very difficult and we are constantly working to try to find new markets to enter or new ways to increase share in existing markets.

the housing situation is really pretty bad.  the media for some reason just does not really report it much.  we have cnbc on the tv 24x7 at work and they tend to talk everything up and up.  green shoots, its the next bull market, the buying opportunity of a lifetime, etc..  i used to try to believe it but my faith is deteriorating day by day.  i am not big on the conspiracy thing.  it implies that thousands of people with evil intent can keep a big secret for years - not likely.

but the numbers that can be believed do not tell a very good story.  the real estate and jobs markets are in bad shape and i do not see what is going to make them better.  when we exported our manufacturing to third world countries we hollowed out the middle class.  then we had a big debt spree and the bubble burst and here we are.  20 years of stupid stuff along with a series of large government mistakes and america is in a bad way for sure.  what made the democrats think everyone could afford a house ?  what made the democrats and republicans think it was a good idea to export our manufacturing base ?  was it even avoidable ?  does globalization mean the destruction of the america i grew up in ?  people can not afford houses who do not have decent paying jobs.  that is the bottom line.  the housing market will continue to drop until static equilibrium is reached - houses cost an amount that people can actually pay.  they way things look, that is going to be a pretty big drop from where we are now.  people who used to make 40 bucks an hour plus benefits making things people wanted to buy could work hard and afford a house.  people working at walmart/home depot/costco can not afford a house.  that nasty old supply and demand thing is at work in the housing market.  our expectations exceeded our ability to pay again.  it is a sad story for sure.  i do not know where it leads.  this much i do know.  nobody ever experienced the "american dream" on government handouts so building a class of dependency is not the answer and probably leads to tyranny.  inflation will not fix the housing market.  higher interest rates will not fix the housing market.  i have never heard of anybody getting out of debt by spending more so that doesn't work (the government).  none of that works.  add in increased costs for energy over the next decade, higher taxes (fed, state, and local) and continuing high or higher unemployment and it does not look good at all for the housing market.  i think we are looking at a very serious housing situation for sure.

for the last few months every weekend the wife and i go grocery shopping (at a walmart super center) and in addition to what we normally buy we pick up between 10 and 20 dollars worth of canned and/or freeze dried foods.  we cleared off a shelf in the basement and we have been storing it there.  it builds up pretty fast.  the bigger the pile the better i feel.  that is my current answer to the housing market.

Johnny Oxygen's picture
Johnny Oxygen
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Re: A decade of declining home prices ahead

i am not big on the conspiracy thing.  it implies that thousands of people with evil intent can keep a big secret for years - not likely.

This is a common misunderstanding that 'evil' people all get together and make a collective decision to do some nefarious act. Think of it more like this. If someone who is physically frail gets picked on in the first grade then again in the third and sixth grade is it a conspiracy? No. its a tendency. There is a tendency for the strong to take advantage of the weak and the wealthy the poor. Why? Because they can.

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taxed2death
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Re: A decade of declining home prices ahead

I counted 45(Fourty Five!) realty signs in a 5-6 mile stretch the other day,some land,some new const,some old and it occured to me to look at the mls.No deals at all.The places are still selling for more than they were just bought for a few years ago.In my opinion 45 places for sale is a clear statement of things to come.Where I live,a middle class family can just barely get into a modest house with a roof that doesnt leak.Prices must and will come down for a long time.Although I am a bit more fortunate,many of my friends live in houses in which they owe more than it's worth,they're staying simply because they need a place to live.I am altering my lifestyle to those who grew up during the depression.Pay off your debt.Have a deep pantry.Talk to your friends about money.Help your neighbor stack some wood or work on his car.These are things to do in the best of times,let alone the edge of some possibly turbulent ones.

Rob111's picture
Rob111
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Re: A decade of declining home prices ahead

So with the predictions of a further drop in home values what is a person to do.  Nicole Foss(The Automatic Earth) is predicting up to a 90% drop, Karl Denninger is predicting from what I can tell another 50%  I'm about six years(theroetically I still have quite a bit of equity) from paying off my house in which I only plan on being in for another two to four years, should I sell?   Talk about a quandary!

Johnny Oxygen's picture
Johnny Oxygen
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Re: A decade of declining home prices ahead

Unfortunately I think its really going to be a matter of how much do you want to lose. The sooner you sell the less you lose.

earthwise's picture
earthwise
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Re: A decade of declining home prices ahead
Awareness wrote:

So with the predictions of a further drop in home values what is a person to do.  Nicole Foss(The Automatic Earth) is predicting up to a 90% drop, Karl Denninger is predicting from what I can tell another 50%  I'm about six years(theroetically I still have quite a bit of equity) from paying off my house in which I only plan on being in for another two to four years, should I sell?   Talk about a quandary!

 It would seem that if you're ever gonna sell, now would be the time to do it before prices drop off a cliff with the rest of the economy. I'm in a similar situation, on paper at least, except that I planned on never selling-ever-.   We, my wife and I, built this house as our last, we both operate our businesses from here, and we've prepped to make a stand here. If not for these things, I'da bugged out a year ago; in fact we almost did. Equity position doesn't mean much if your commited to staying. If not, then git while the gittin's good.

Just my perspective FWIW.

bcc87's picture
bcc87
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Re: A decade of declining home prices ahead

While I agree that paying of debt is a wise and guarantees you to have a home to live in; I've done a 180 when it comes to my house. Rather than pay down, Im savign the $$ to invest in PMS, etc, and paying the minimum payment as I feel over the next 10 to 20 years, there will be such sweeping changes to our system that it will benefit those who are upside down in their homes.

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