Posted on 11/09/2006 5:17:47 PM PST by MeneMeneTekelUpharsin
The recent rise in new-home sales doesn't herald a housing turnaround. Rather, desperate home builders are simply resorting to extreme measures to keep inventories of unsold homes from mounting sky-high and prices from going into a free fall. Builders are willing to take huge hits to their profits just to unload empty properties, which bring in no income and incur financing costs. In addition, the 5.3% rise in new-home sales in September and the 3.8% advance in August should be viewed with a healthy dose of skepticism because many of those sales are likely to be canceled in subsequent months. Statistically, once a contract on a house is signed, it vanishes from the official numbers—the new-homes data compiled by the Commerce Department aren't adjusted for cancellations. This also suggests that sales declines in previous months were probably worse than they appear on paper, given that cancellation rates are hovering around 30%-40% of sales this year.
The average value of upgrades and other sweeteners offered by home builders is now equivalent to about 5% of the purchase price, similar to what builders offered during the steep downturn of the early 1990s. The implication here is that the median price decline of 9% for new-home sales in the past 12 months actually works out to about 14% on builders' books. Sellers are offering all sorts of enticements for buyers, including customized bathrooms, delayed mortgage payments and flat-screen TVs. One builder, knowing that a prospective buyer would soon return from vacation and take another look at a house, left a new car in the garage as an inducement to sign on the dotted line. We see several more months of pain ahead for the housing market, until enough excess inventory is mopped up to balance supply and demand. Total sales of new and currently owned homes will drop 7% next year after a 9% swoon this year. We see the median sales price declining about 3% in 2007.
Apartment rent hikes will peak during the first half of 2007 at about 4.7%. That'll be the national average for renewing rental deals or signing new ones. In the second half, expect a 4% average rise, still not at all shabby in historical terms. The steep drop in condo conversions will increase the supply of rental properties. Sales of condominiums are falling even faster than sales of houses, taking the luster off conversions. But the condo market isn't collapsing. At 7%, the national average condo vacancy rate is at a 13-year high. To cause serious damage, the vacancy rate would have to exceed 10%.
For your information.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
Wake up and do what?
Sell my house and move into an apartment? A motorhome?
Why should I wake up?
It's a real WTF moment when I see articles like this wondering if housing has bottomed. It's so obvious that it's nowhere near bottoming from every single statistic and CEO quote that I use it as a litmus test for Bushbots here on FR.
In your case, keep on going like you are. Don't listen to me nor respond. No need.
I'm in real estate, although anectdotal, prices are going down in a lot of areas and houses are not selling at all, a lot of houses aren't even getting any showings, these same houses would have sold in a weekend.
It will eventually turn around, it always does, unless President Hillary declares eminent domain nationwide.
That's what I did. In June I bought 35 acres of land in another state with some of the capital gains I'd earned on my house proceeds up to that point.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
Sell my house and move into an apartment? A motorhome?
You're supposed to cash everything out and BUY GOLD!
You don't have to write anything to me about the market. I research it EVERY day and am quite familiar with what is going on. Those who have been on here lying about the housing market and have set up people for a financial fall are to be held responsible. Dishonesty is exactly that -- dishonest.
A lot of existing homes aren't selling simply because they're priced too high. Much of the existing home inventory on the market is people fishing for high prices and they will only sell and move if the get those prices. We saw this in California in 2001 when we sold my parents' home. New home inventories are a much more meaningful number.
Key thing to keep in mind is that if housing gets very weak then the entire economy will weaken significantly and the Fed will cut interest rates. Then mortgage rates will fall another 0.75% or so and housing demand will increase in response. So there are self-correcting mechanisms in our economy. It's a constant rebalancing of markets into an equillibrium.
Ok.
The market here in St. Petersburg is like Antartica. Between the naturally cooling market, property taxes, and now house insurance, the market is dead as a doornail.
Last month after 13 years with no claims, we were cancelled by Nationwide. Just got a quote from Citizens (insurer if last resort) yesterday. Nowhere near waterfront or a flood zone.
Our insurance went from $3,800 to $13,758. Per year.
We, along with everyone else, can't afford to live here anymore, yet no houses are selling so we can't move.
I haven't seen anyone "lying about the housing market" on FR. People have different knowlege and opinions about the housing industry and we all have the right to express our views.
I just bought a new home in N. Texas. The builder put up $15,000 in incentives, which I used on a few upgrades and down payment. The mortgage is for $149,000. The appraisal came in at $162,000.
Interesting story there....reverse condo conversions.
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