Posted on 09/10/2007 11:46:09 PM PDT by bruinbirdman
Homebuilders take heed. A Federal Reserve official warned Monday that the gloomy housing market is likely to get worse before it gets better.
"The ratio of house prices to rents—a kind of price-dividend ratio for housing—remains quite high by historical standards, suggesting that further price declines may be needed to bring housing markets into balance," said Janet Yellen, President of the Federal Reserve Bank of San Francisco, at a speech to the National Association for Business Economics.
Yellen said the futures markets for house prices also point to further declines in a number of metropolitan areas this year. She said the problem could be exacerbated by a decline in employment. Last week, the Labor Department reported that non-farm payroll employment decreased by 4,000 in August, the first decline since 2003. (See: "The Incredible Shrinking Job Market")
The weak housing market has already tripped up homebuilders like D.R. Horton (nyse: DHI), Pulte Homes (nyse: PHM), and Centex Corporation (nyse: CTX). The housing market started tanking this year after mortgage problems undercut demand after a period of heavy overbuilding.
Yellen is non-voting member of the Federal Open Market Committee, which sets the federal funds target rate. The Fed is widely expected to cut the rate from its current level of 5.25% by at least 25 basis points at its September meeting.
One reason the Fed is reluctant to cut rates is because lower rates spur inflation. Yellen said Monday that inflation pressures are abating. She pointed to an annualized increase of 1.9% in the personal consumption expenditures index. The Fed likes to keep year-over-year inflation under 2%. (See: "July Personal Consumption Weaker Than Expected")
Geez, you think? People earning $8 an hour and the cheapest apt. is $1300 a month. Think something might break? Yep. In California it's a given.
Builders don’t want to bother with modest homes. They only want McMansions or large condo projects.
It’s like we’re being offered to purchase either a Ferrari or a bicycle. There are no Toyotas available to buyers.
I was thinking the same thing this weekend as we drove through Santa Rosa valley and saw houses up for sale staring at 5 M. My family home is up for sale right now. $1.8M. My dad paid $60K for it. That’s ridiculous.
True. That's why illegal Mexicans in the USA put 12 wage earners in a 3 bedroom house and buy it.
Or, three illegal families on welfare have enough guaranteed government income to pool and buy a Section 8 house with a mortgage rate and loan qualifications legislated just for them.
The government has planned well in advance for the illegal slave class.
yitbos
But yet an American guy on disability can’t get food stamps. Go figure.
There are plenty bicycles, Ferraris and Toyota’s — lots of Toyotas — in my area. The problem is the bicycles are starting to be priced like used Toyotas, and the Toyotas are starting to be priced like Mercedes.
How much of the whole market does residential development really comprise?
Everything I read about Michigan suggests trhat Granholm has made a very tough situation even worse. I have a niece that is living in Grand Rapids; how bad is it up there?
Maybe they could get Paul Volcker to ring the opening bell on wall street on the 18th? That’d be bullish for the market, eh?
The Grand Rapids marketplace is a pocket of vitality in an otherwise sluggish state.
If they cut rates now, they can do it moderately, which wouldn't be inflationary. But the longer they wait the more they will have to cut, which would be inflationary (not to mention all the economic damage).
LOL.
The company I worked for opened a grocery store in Rochestor Hills last year and the sales were awful. We opened one in Grand Rapids a couple months ago and the sales have been great. RH was the first store we’ve closed in over 10 years.
We have the highest unemployment rate of any state. The cities hardest hit are auto and auto suppliers related but consider the trickle down factor. No more cottages or that extra car in the driveway, going out to a nice dinner, or taking a long drive. My house is 30 miles outside of Detroit. We have over 500 vacant bank foreclosed homes, and another 300 sheriff foreclosed homes for taxes in my small city alone. Michigan’s budget is a 1.8 Billion deficit for this fiscal year. Granholm has proposed an increase to 7% for state sales tax and an additional 1-2% increase in state income tax. Besides automotive closings—GM,Ford,Chrysler,Volkswagen—Pfizer has closed as well. I don’t shop at chinawalmart but there are 3 that were closed in my vicinity. I would like to move but even with a 30% loss of the homes value, nobody is buying. What do expect from a state with Granholm,Levin,Stabenow,Conyers, and the mom and son team of the Kilpatricks representing it. It sucks here.
Aw... the poor widdle Wobbuh Bawons of Weal Estate need a widdle bailout.
Not to salt the wounds, but what does Granholm say about it? Malaise?
When Volkswagen announced they were shutting down in MI and moving to VA, the Canadian Governor announced—’I have no control over businesses choosing to go overseas.’
That one killed me. She's not completely wrong; they will be south of the Rappahannock River and to some that is overseas.
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