US expert warns of fresh shocks (If Housing Price Continue To Fall)

http://www.ft.com/cms/s/0/31d8aba4-66b6-11dc-a218-0000779fd2ac.html ^ | 9-19-07 | Eoin Callan

[Hydroshock]

Fresh economic shocks on the scale of the current credit squeeze will occur if US house prices continue to fall, one of the country’s leading housing experts warned on Wednesday.

Robert Shiller, a Yale university economist, told a US congressional panel that he feared “the collapse of home prices might turn out to be the most severe since the Great Depression”.

“The decline in house prices stands to create future dislocations, like the credit crisis we have just seen,” he told the Senate’s joint economic committee.

The warning underlines an increasingly widespread view that the turmoil in financial markets and tightening lending conditions are early consequences of a slump in the US housing market that is gathering momentum.

Warning signs There were fresh signs of weakness ahead for the US housing sector as figures showed applications for building permits fell to a 12-year-low.

Housing starts also dropped to the lowest level since June 1995, declining 2.6 per cent to an annual rate of 1.331m units.

The decline in construction activity appeared to be spreading to the north-east, where starts were 38 per cent lower.

Patrick Newport, an economist at Global Insight, said: “The eye of the storm is just ahead.”

But investors were cheered by the prospect of future interest rate cuts, as consumer price figures suggested a moderate inflation trend.

The government’s consumer price index fell last month by 0.1 per cent as prices at the pump dropped by nearly 5 per cent.

Core prices increased by 0.2 per cent. But the annual underlying inflation rate edged down to a 17-month low of 2.1 per cent from 2.2 per cent.

[dangus]

Because those who are the “we” got their home already, and want to pull the ladder up after themselves.

[dangus]

(Doncha hate all those people who bought at $200,000, saw their property peak at $800,000, and are ruinously miserable because they can only sell for $790,000?)

[dangus]

>> I wish that I could figure out a way to make money off of you naysayers! <<

Ummm... there is: Buy their homes.

[henkster]

I’ve got a house and it won’t suck for me. The mortgage gets paid off in less than 10 years, and most importantly it’s a fixed-rate mortgage. OK, I’m being redundant. Fixed-rate is the only kind there is. Everything else is gambling or rent. We have firm roots where we are and don’t plan to move. The value may drop slightly but it’s unlikely to drop below the balance of our mortgage at this point.

The housing market is cyclical, just like the stock market. It may have a blip where it goes down, but eventually home values rebound and exceed the previous high point. And like the stock market, you should take the long term view and not the short term panic.

There are other far more serious flaws with our economic health. Budget deficits, underfunded socialistic security mandates, trade deficits, the failure of the education system to turn out productive citizens, loss of manufacturing base, dependence on foreign energy sources not friendly to the interests of the US, the uncontrolled influx of immigrants who will be a net economic drain, crippling environmental regulation and plaintiff products liability litigation are some just to go off the top of my head.

[PayNoAttentionManBehindCurtain]

Aw c’mon man. The whole we’re Doooomed (tm) thing is really old with the whole housing market. The housing is less than 10% of the GDP, if it were to go to 0.00 there wouldn’t be a ‘depression’. And it’s not all that likely we’ll even have a recession. The markets are certainly not pricing that in.

((((crickets))))

BigMack

[Perdogg]

Didn’t the FT publish a story in August saying the market was going to collapse after the Labor Day holiday, then we would know the full extent of ‘housing crises’???

Did the ‘housing crises’ used to be called supply and demand??

These people are trying to talk down the US economy

[Perdogg]

I am not saying that we have repealed the business cycle, but we keep hearing doom and gloom from everybody from the doomicrats and the gold peddlers that doesn’t pan out.

People are responsible for their finances and if you give money to people who cannot pay it back, or, you buy too much house you cannot afford, well, that’s life.

[TexanToTheCore]

“These people are trying to talk down the US economy.”

You get a gold star on your forehead for the best performance of the day. That is exactly what they are trying to do.

Our economy is extremely strong and will continue so for a long time. The big probblem we have is that homes in Cali and the Northeast are over priced. That is it. It will be corrected.

[Mark was here]

Why do we fight inflation everywhere else, but want inflation in the cost of housing?

Because people like the idea of something from nothing. They pat themselves on the back for being clever, while inflation is doing the dirty work.

Who really needs a Dollar to hold it's value when there is free money avsilisble?

[mek1959]

Agreed. We’re also trying to pay off our mortgage and hopefully, will have it finished by the end of 2009. Good luck to you with your plans.

[finnman69]

http://money.cnn.com/2007/09/19/real_estate/steep_home_price_drops_coming/index.htm?postversion=2007091915

100 largest metro areas by population that are forecast to witness a decline in the median existing single-family house price

Rank	Area	State	Peak	Bottom	Peak to bottom home price decline
1	Stockton	CA	06Q1	08Q4	-25.0
2	Palm Bay-Melbourne-Titusville	FL	06Q1	08Q4	-24.9
3	Sarasota-Bradenton-Venice	FL	06Q1	08Q3	-24.8
4	Reno-Sparks	NV	06Q1	09Q1	-22.4
5	Modesto	CA	06Q2	08Q3	-22.3
6	Detroit-Livonia-Dearborn	MI	05Q3	09Q1	-21.3
7	Fresno	CA	06Q2	09Q1	-20.0
8	Oxnard-Thousand Oaks-Ventura	CA	06Q2	08Q3	-19.2
9	Sacramento--Arden-Arcade--Roseville	CA	06Q1	08Q4	-19.1
10	Las Vegas-Paradise	NV	06Q2	08Q4	-18.7
11	Deltona-Daytona Beach-Ormond Beach	FL	06Q1	08Q3	-17.9
12	Phoenix-Mesa-Scottsdale	AZ	06Q2	08Q2	-17.8
13	Hartford-West Hartford-East Hartford	CT	07Q1	08Q4	-17.6
14	Cape Coral-Fort Myers	FL	06Q1	08Q4	-17.3
15	Visalia-Porterville	CA	06Q2	08Q4	-16.1
16	Riverside-San Bernardino-Ontario	CA	07Q1	09Q2	-15.9
17	Bethesda-Gaithersburg-Frederick	MD	06Q2	08Q4	-15.9
18	Lansing-East Lansing	MI	05Q3	09Q1	-15.7
19	Bakersfield	CA	06Q2	09Q1	-15.6
20	Warren-Farmington Hills-Troy	MI	05Q4	09Q1	-15.4
21	Newark-Union	NJ-PA	07Q1	08Q4	-15.4
22	Vallejo-Fairfield	CA	06Q1	09Q2	-15.3
23	Orlando-Kissimmee	FL	07Q1	09Q1	-15.1
24	Santa Rosa-Petaluma	CA	06Q1	08Q4	-14.0
25	Poughkeepsie-Newburgh-Middletown	NY	06Q2	08Q3	-13.9
26	Edison	NJ	06Q3	08Q4	-13.3
27	Worcester	MA	05Q4	08Q3	-13.0
28	Baltimore-Towson	MD	07Q2	09Q2	-12.8
29	Peabody	MA	05Q4	08Q3	-12.5
30	Nassau-Suffolk	NY	07Q2	09Q1	-12.3
31	West Palm Beach-Boca Raton-Boynton Beach	FL	06Q1	08Q3	-12.2
32	Tampa-St. Petersburg-Clearwater	FL	06Q4	08Q3	-11.7
33	Tucson	AZ	06Q2	08Q4	-11.7
34	Santa Ana-Anaheim-Irvine	CA	06Q2	09Q1	-11.6
35	Washington-Arlington-Alexandria	DC-VA-MD-WV	07Q3	09Q4	-11.5
36	Fort Lauderdale-Pompano Beach-Deerfield Beach	FL	06Q1	08Q4	-11.5
37	Flint	MI	06Q1	08Q2	-11.3
38	Cleveland-Elyria-Mentor	OH	05Q3	07Q4	-11.3
39	San Diego-Carlsbad-San Marcos	CA	06Q1	08Q4	-10.9
40	Los Angeles-Long Beach-Glendale	CA	07Q3	09Q1	-10.6
41	Oakland-Fremont-Hayward	CA	07Q3	08Q4	-10.3
42	Portland-South Portland-Biddeford	ME	06Q1	08Q3	-10.2
43	Rockingham County-Strafford County	NH	06Q1	08Q3	-10.2
44	Miami-Miami Beach-Kendall	FL	07Q2	08Q4	-9.9
45	Boston-Quincy	MA	05Q3	08Q4	-9.4
46	Providence-New Bedford-Fall River	RI-MA	06Q1	08Q3	-9.4
47	New Orleans-Metairie-Kenner	LA	06Q2	07Q3	-9.4
48	Wilmington	DE-MD-NJ	06Q3	08Q3	-9.2
49	Cambridge-Newton-Framingham	MA	05Q3	08Q3	-9.0
50	Youngstown-Warren-Boardman	OH-PA	05Q1	07Q4	-8.7
51	Toledo	OH	05Q4	07Q4	-8.3
52	Salinas	CA	07Q3	08Q4	-8.1
53	Colorado Springs	CO	07Q1	08Q3	-7.8
54	Boise City-Nampa	ID	07Q2	08Q4	-7.7
55	Winston-Salem	NC	05Q2	07Q4	-7.6
56	Denver-Aurora	CO	06Q2	08Q3	-7.6
57	Lakeland	FL	07Q2	08Q3	-7.5
58	Portland-Vancouver-Beaverton	OR-WA	07Q3	08Q4	-7.2
59	Pensacola-Ferry Pass-Brent	FL	06Q1	08Q3	-7.0
60	New Haven-Milford	CT	07Q3	08Q3	-6.7
61	Jacksonville	FL	07Q3	08Q3	-6.4
62	Camden	NJ	07Q2	08Q3	-6.3
63	Minneapolis-St. Paul-Bloomington	MN-WI	06Q3	09Q2	-6.0
64	Albuquerque	NM	07Q3	08Q3	-5.9
65	Tacoma	WA	07Q3	08Q3	-5.5
66	New York-White Plains-Wayne	NY-NJ	07Q3	08Q4	-5.3
67	Grand Rapids-Wyoming	MI	05Q4	07Q3	-5.3
68	Bridgeport-Stamford-Norwalk	CT	07Q3	08Q4	-5.1
69	Lexington-Fayette	KY	06Q1	08Q1	-5.1
70	Fayetteville-Springdale-Rogers	AR-MO	06Q2	07Q4	-4.6
71	San Jose-Sunnyvale-Santa Clara	CA	07Q3	08Q4	-4.4
72	Virginia Beach-Norfolk-Newport News	VA-NC	07Q3	08Q3	-4.1
73	Columbus	OH	05Q4	07Q1	-3.7
74	Dayton	OH	06Q4	07Q3	-3.7
75	Indianapolis	IN	05Q3	06Q4	-3.7
76	Provo-Orem	UT	07Q3	08Q3	-3.6
77	Chattanooga	TN-GA	06Q3	07Q4	-3.5
78	Tulsa	OK	06Q3	07Q4	-3.4
79	Salt Lake City	UT	07Q3	08Q3	-3.4
80	Allentown-Bethlehem-Easton	PA-NJ	07Q3	08Q4	-3.3
81	Philadelphia	PA	07Q3	08Q3	-3.1
82	Lake County-Kenosha County	IL-WI	06Q3	08Q2	-3.1
83	Wichita	KS	07Q1	07Q4	-2.9
84	Seattle-Bellevue-Everett	WA	07Q3	08Q3	-2.9
85	Ogden-Clearfield	UT	07Q3	08Q3	-2.9
86	Milwaukee-Waukesha-West Allis	WI	06Q3	07Q1	-2.9
87	Birmingham-Hoover	AL	06Q3	07Q3	-2.9
88	Jackson	MS	06Q3	07Q4	-2.9
89	Richmond	VA	07Q2	10Q3	-2.8
90	Cincinnati-Middletown	OH-KY-IN	05Q3	07Q2	-2.8
91	San Francisco-San Mateo-Redwood City	CA	07Q3	08Q2	-2.7
92	Albany-Schenectady-Troy	NY	07Q2	07Q4	-2.7
93	Springfield	MA	07Q3	08Q2	-2.6
94	Spokane	WA	07Q3	08Q3	-2.6
95	Omaha-Council Bluffs	NE-IA	06Q2	07Q4	-2.1
96	Kansas City	MO-KS	06Q1	07Q2	-2.0
97	McAllen-Edinburg-Mission	TX	05Q1	07Q2	-2.0
98	Fort Worth-Arlington	TX	06Q2	07Q1	-1.9
99	Oklahoma City	OK	07Q3	07Q4	-1.6
100	Memphis	TN-MS-AR	06Q2	07Q3	-1.1

[fightinbluhen51]

Hey, I’m in the top 30 market, that’s great! Bring on the housing pricing drops since I don’t have one yet.

[RightWhale]

The world should be so simple. The Red Sox appear to be in collapse in spite of the $100 million injection of pitching. This is a model of the world economy. The main effect of the injection of the 50 basis points appears to be the $EU at 1.41.

[L,TOWM]

Why, I don’t see Dallas - Collin County TX on this list at all.

Does this mean I’m not doomed?

[RockinRight]

Might also sink the economy to where you won’t have a job with which to buy said house.

[RockinRight]

Might also sink the economy to where you won’t have a job with which to buy said house.

[Son House]

Being I am dollar cost averaging at this time, I prefer a down market, brings down my average cost.

[pfony1]

If you go here:

http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html

and click on:
“S&P/Case-Shiller® Home Price Indices Methodology”

you will find on page 6:

“...These sales pairs are further examined to eliminate outliers that might distort the calculations. Outliers include...suspected data errors where the order of magnitude in values appears unrealistic.”

==> In other words, if the actual numbers “appear unrealistic” to the statisticians, they are ignored. Hmmm... I wonder if THESE statisticians are less biased than the “global warming” statisticians....

You will also find on page 7:

“...The Weighting of Sales Pairs

The indices are designed to reflect the average change in all home prices in a particular geographic market. However, individual home prices are used in these calculations and can fluctuate for a number of reasons. In many of these cases, the change in value of the individual home does not reflect a change in the housing market of that area; it only
reflects a change in that individual home. The index methodology addresses these concerns by weighting sales pairs...”

==> In other words, if the price “increase” for a particular house is above what the statisticians expect, then that increase will be given less “weight” in the overall calculation of change.

My conclusion: The S&P/Case-Schiller “index” of price changes in real estate is about as valid as an “index” prepared by Lewis Carroll’s “Queen of Hearts”.

Or my garbageman...

[Freedom_Is_Not_Free]

I am hoping we can avoid 70s style economic hardship with massive inflation. But much more than that, if we do return to return to 70s style economic hardship, I am HOPING and PRAYING we do not see a return to Disco music because then I would have to kill myself!

[Hydroshock]

Don’t even get me started on leisure suits.