Posted on 05/10/2010 3:58:51 PM PDT by grand wazoo
A Graphical Illustration Why the Downturn Will Persist Through 2013
What We Know Will Happen
Adjustable-Rate Mortgages Will Reset
Adjustable Interest Rate Mortgages will continue to reset through 2012. These resets will trigger a steady flow of foreclosures. While there exists a material supply of foreclosures, house prices can not maintain inflation-adjusted value and the Housing Market will not recover.
The worst offending Affordable Mortgages, the Option-ARMs, are only now beginning to reset. These mortgages will result in massive foreclosures within the markets they were utilized.
While the bulk of ARM resets will end in 2012, it will take up to a year to process and dispose of the foreclosures which result. The disrupting influence of these defaults will not be resolved until well into 2013.
What Needs To Happen for the Housing Downturn to End
Unemployment Rates
Stimulus Spending will obviously distort the unemployment rate, but such spending is neither efficacious nor persistent. Given the rapid rise in unemployment, and the economic fundamentals which point towards further job losses, the Stimulus is unlikely to overtly reduce the unemployment rate.
Vacant Houses
The number of vacant houses in the U.S. is at a record high and rising. House prices will not stabilize or recover while there is so much excess inventory available.
The percentage of all houses vacant further illustrates the excess inventory problem. This percentage is at a record high and is rising.
A dramatic and sustained reversal of the vacant housing trend is required to end the Housing Depression. Given the requirements for stabilization, it is unlikely that vacant housing inventory will have returned to sustainable levels by 2014.
For Sale Houses
The number of houses for sale is approximately double the level consistent with stable prices.
While a reduction in supply to sustainable levels by 2014 is possible, rising unemployment, tight credit conditions and falling demand make it unlikely. If prices fall far enough the supply of houses for sale will decline steadily, but such valuation levels do not yet exist and the excess supply will take considerable time to work off.
Percent of Occupied Housing Units Owned
The distortion to homeownership which occurred during the Housing Bubble will inevitably reverse itself. While the reversion is occurring, there will be considerable pressure on house prices and the broader market is unlikely to stabilize.
The current slope of the homeownership rate trend is consistent with a return to sustainable levels by 2014. While it may take longer than four and a half years from today for the distortion to fully reverse itself, the correction is unlikely to occur in less time.
Conclusion
Analyzing existing economic conditions produces interesting conclusions for the expected duration of the housing downturn. The Housing Market can not fully stabilize or recover until the fundamentals which influence prices, purchasing activity and homeownership return to sustainable levels. Given our present economic reality, prevalent housing-related trends and what needs to happen to end the malaise, it is unlikely that the Housing Market will recover before 2013 - 2014.
It will end when the flaming socialists no longer control the executive and legislative branches.
I don’t see how the supply of homes will ever meet any kind of demand. Not to mention the bubble was created with false purchasing power.
I don’t see an end to any of this.
What gets me is the final chart, % owner occupied.
The purpose of the bubble was to get % owner occupied to a much higher level. This is the Bush-Frank-Kennedy bi-partisanship in action.
All they got was a 4% bump, and we are left picking up the pieces.
It will only end when the Grand Government Ponzi scheme is busted once and for all.
After anylyizing the charts i figure that Obama will probably Mandate that all people who do not own a home have to take a negative intrest loan for twice the value of the mortgage. The Liberal mind can get out of anything.
Look back at television shows during 2003-2008. Home improvement shows, house flipping, and house hunter shows were all over the tv. Most are gone now.
Those darn lazy homeowners! They bit off more than they can chew. The heck with them....
http://www.foreclosurehamlet.org
http://www.livinglies.wordpress.com
“which were able to keep feeding the housing bubble “
...through the Federal Reserve making “money” out of thin air to loan to banks for those mortgages. The Federal Reserve is the center of evil.
Agreed.
Why won't resets at these low rates reduce mortgage payments and reduce the rate of foreclosures?
Are all of these ARM payments being reduced because of the lower mortgage rates?
I don't know, but all these fear peddlers have been claiming for 3 or 4 years that all the ARMs will adjust up. I suspect they're wrong.
We’ve built our economy by regulating labor supply. Government has mandated high unemployment through policies that make labor expensive.
It will take an awful lot of smart legislation to move our country as far right as it needs to go to reorient our nation toward job creation.
As things stands we will continue equalizing our living standard across the rest of the world. Better for them, but worse for us.
Regulation has to go.
I say it will take at least 10 more years.
It will end when the government gets out of the business.
What’s that? Besides a bad link I mean.
“The other problems were the banks, which were able to keep feeding the housing bubble and a certain mania that developed which convinced many people to think of their homes as an investment.”
Those programs etc. were forced on the banks by Congress, they had no choice!
If it had been left to the banks no one would have been able to buy a home for less than 20% down and have an income where no more than 30% of their net income had to be spent to cover the mortgage plus taxes and insurance.
“Are all of these ARM payments being reduced because of the lower mortgage rates?”
They are moving upward and the mortgage payments are increasing greatly.
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