Posted on 09/14/2006 1:29:48 PM PDT by SirLinksalot
Housing not facing bust, Just normalcy : experts
By Patrick Rucker
WASHINGTON (Reuters) - While the U.S. housing market is drifting down from stratospheric levels, the sector is just returning to normal and is not poised to crash, several economists and industry leaders told lawmakers on Wednesday.
"True housing busts are a relatively rare event," Federal Deposit Insurance Corp chief economist Richard Brown said at a congressional hearing on the housing market.
In a recent study of past housing trends, the bank regulator concluded sharp drops in housing markets are most often linked to "episodes of severe local economic distress."
With wages and employment still strong, Brown said, a real nationwide housing market crisis was not likely.
Mounting evidence of sharp slowdown in the long-hot U.S. housing market prompted the Senate Banking Committee to call in experts to talk about the implications of a potential "bubble" bursting.
Sales of new homes in July were down 22 percent from a year earlier, while existing home sales were off 11 percent.
The slowdown has put a damper on home price gains, which have flattened out considerably after several years of double-digit growth in many parts of the country.
Noting the dramatic change, Democratic Senator Charles Schumer of New York mused: "To paraphrase Shakespeare: Is there a bubble or isn't there a bubble? That is the question."
National Association of Realtors President Tom Stevens had an emphatic answer.
"Contrary to many reports, there is not a 'national housing bubble'," he said. Instead, Stevens said the slowdown reflected cooling in some overheated markets, while other regions had never even known a real warm spell.
Earlier this month, the National Association of Realtors predicted the nation's median existing home price would be up 2.8 percent in 2006 - compared to 12.4 percent last year.
"Markets in Florida, California, Arizona, Nevada, Virginia and Maryland have exhibited trends far above the local historical norm," he said, referring to areas that have seen some of strongest sales and biggest price increases during the recent boom.
"Because of these exceptional trends, it would not be surprising for these markets to experience a price adjustment," Stevens added.
David Seiders, chief economist for the National Association of Homebuilders, predicted the housing market would bottom out "around the middle of next year."
The housing sector burned especially bright during a two-plus year period leading up to its peak in mid-2005. Seiders said the cool-down should last just as long.
Still, he said the slowdown should not impact the nation's economic expansion, unless there was a further spike in energy prices or interest rates.
The FDIC's Brown said that, after a boom, housing prices are more likely to stagnate rather than drop sharply.
Prior to 2000, the FDIC observed 54 housing booms and only 21 housing busts. Of the busts, only nine followed a boom in the preceding five years.
Those housing doldrums can be "fairly painful" for homeowners, builders and real estate brokers, Brown said, but they fall short of causing distress for the overall economy.
That was not his/her last post. He/she was posting today
The thread could've been pulled. I recall two accounts being temporarily suspended, and one being banned, all at the same time, on a bubble thread that was pulled. Somebody outed somebody else; the outer got zotted and the outee got a timeout.
Is it safe for me to come out from under the bed?
Doom and Gloom WIllie Green apostles are deeply saddened.
Sorry but its too hard to keep up with all the bannings nowadays
Out here in Oregon, mortgage companies recently increased their television advertising blitz. A commercial just aired urging people to take out a loan on their home equity. The ad actually said, "More money to spend, and with today's low loan rates, you will be ahead every month." That ad was run on a local news report about realtors and the local housing slump. They interviewed some people who were upset because they cannot sell their homes. Then featured a veteran house flipper who moved upwards into a pricey downtown loft. Of course, he made his money two years ago. The news ended on an up beat note: "Home prices are expected to rise again by the end of the year."
Meaning, the reporter expects home prices to continue downward. Until the end of the year. The report left out the cautionary "Maybe . . ."
A lot late to the "party", but thanks for the ping. :-)
I talked to several realtors in the last week or two. Some on the phone, and I visited several offices. The offices are empty, except for a few realtors at desks. Several of them admitted that there is *nothing* *happening* *at* *all*. Dead. D.E.A.D. Dead, as in "not breathing". One laughed in a rather brittle way about having to find a job soon if it doesn't improve. They told me about many price reductions, and nothing moving.
I also noticed in our weekly paper (it's a small area, but the RE market is the same in two counties, lots of Californians move up here) that a lot of the new construction houses are now renting! Odd, ain't it?
(No more Olmert! No more Kadima! No more Oslo! )
Thanks - I enjoy learning about both sides of the housing/RE debate.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.