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 numbersthe 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%.
I do get the impression that, for many months, someone who posted an article on the housing situation risked being flamed. Many on freerepublic interpreted such a posting as a dig at Pres. Bush. But talking about the housing market is just that - talking about the housing market. Bush isn't responsible for the laws of supply and demand that have been causing a housing slowdown. And it's not "anti-Bush" to report on the state of housing prices. I personally think it's healthy for housing prices to flatten or go down. A continued run-up at the levels we'd seen for the previous three years was unstustainable, and it would have made housing unaffordable for most people, if it had continued.
How big a home? No. of bedrooms, and square foot of interior?
We're not going to start a flame war here on this thread.
Is that clear?
4 BR, 2 1/2 bath, 2250 sq ft. I also got an oversized lot that is 120'x70'.
Yes it is. I am a patient man. Very.
No, it's not anti-Bush at all, it is simply the truth about what is going on. Bush has nothing to do with housing prices, per se. Greedy speculators, stupid banks and (indescribeable) real estate agents are to blame.
As a Realtor in Idaho, I fully agree with these comments and see an adjustment period extending into '07.
My friend who owns a home in California just cut his price $60,000 from the $350,000 he had been asking and is going to give the house back to the bank as it is not selling and he can't continue to make payments on it. That is a pretty big percentage drop in price in my opinion.
Wouldn't do that either.
What with, FR housing tribunals? And how will property owners have a "financial fall" if they maintain ownership? I don't see too many FReepers as the type to buy more house than they can afford so I don't think many would be forced to sell in the future. At worst all they should have to do is hold on and let inflation catch up.
Where in California?
That's oversized? In Texas?
For a house is suburbia Dallas, yeah it's a good lot size. I remember the house I bought back in '98 was a zero lot. I could step out the backdoor and knock on my neighbor's window.
There is no single "housing market." Here in Charlotte, NC we are not seeing anywhere near the same type of slowdown that they're seeing in California or South Florida.
I'm continuing to buy when it's prudent to do so.
Amen.
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.