--then again we can also look at housing starts:
There's a lot to this. Construction Spending for April was up 2.7%, and April existing home sales was up 5.77M after 5.36M for March. OK, so we all hate Obama; we need to keep our eyes open too.
Posted on 06/05/2010 3:06:45 AM PDT by 2ndDivisionVet
The market was ecstatic on Wednesday in anticipation of Friday’s big job’s report. But while the market rallied 2.5%+ there was a potentially far more important story than the census driven job’s report: the real estate data. While the data came in “better than expected”, primarily due to the end of the home buyers tax credit, there was an underlying red flag. As the end of Spring buying season coincided with the tax credit the buyers have literally become non-existent in the housing market. This was clear in the most recent mortgage applications data also released on Wednesday. Diana Olick at CNBC has done a fantastic job covering the housing market. She had the details yesterday:
“Mortgage applications to purchase a home began to sink. Now, four weeks later, mortgage purchase applications are down nearly 40 percent from a month ago to their lowest level since April of 1997. Yes, you can argue that a larger-than normal share of buyers today are all cash, but those are largely investors.
That means real organic buyers are exiting in droves.”
And she isn’t the only one noting the red flag. In Thursday’s missive David Rosenberg also pointed to the plummeting mortgage applications:
The good news at least is that U.S. mortgage applications for refinancing purposes rose 2.4% during the May 28th week — the fourth increase in a row and while hardly a major boom that should cause any forecast shift and it does add a bit of coinage in household pocketbooks. But the big problem is with housing demand given that the homebuyer tax credits are behind us — mortgage applications for new purchases fell 4.1% and down for four weeks running. This is where the rubber meets the road for new home sales — a fresh 13-year low.
The year-on-year trend in purchases is -34% and that is compound off a late-May 2009 trend of -20%. How bad is that? And this is with mortgage rates at 4.83%? No doubt there are scars left over from the misery of being a homebuyer following the detonation of the last bubble and attitudes towards debt and housing have been altered semi-permanently.”
(CHART AT LINK)
Is the housing market already double dipping? That certainly appears to be the case – and exactly on cue as the government steps aside. While the mortgage applications are no guarantee of a renewed trend the warning flags are popping up all over the place. In addition to the negative seasonal trends ahead of us, we are also seeing lumber prices off 33% in the last month, continuing high historical inventories, a slew of mortgage resets in the coming years, and the biggie – the end of government intervention.
Earlier this year I detailed my outlook on housing and why I believe the real estate market is on the precipice of a double dip. I said we were likely in for further declines of 7-15% starting with the end of government stimulus:
“House prices decline 7%-15%. This is the most probable outcome in my opinion. In this scenario the private sector remains weak, labor markets rebound slowly, wage growth remains tepid, the economy grows below trend, government stimulus stops bolstering markets in 2011/2012, the economy perhaps double dips or re-recessions in 2012, and house prices ultimately succumb to the laws of supply and demand and decline another 15% or so.”
Investors are keenly focused on the potential time bomb in Europe, but housing is the domino that set the whole collapse in motion in 2007. The housing market was largely stabilized by government intervention. The consumer is likely to move in tandem with their largest asset. If we experience the 7-15% price decline over the coming 24 months that I expect we should see a retrenchment in consumer balance sheets and further tightening of the credit markets.
I have maintained that the housing stimulus was an enormous waste of money and nothing more than price fixing that would temporarily stabilize the markets. The government is about to find out why bailing out the losers ultimately works to the detriment of markets. Let’s just hope the downturn isn’t more severe than I suspect. And let’s all pray it doesn’t coincide with increasing contagion across Europe…..
People are now defaulting on those 1-2% mortgages before the reset.
Banks already own more houses than the private sector.
Commercial real estate loan defaults are quickening in their pace.
We can for get construction jobs coming back to public works too as most states, the federal goobermint are already in the red as they are too busy paying salaries that are higher than those in the private sector.
Goobermint is also giving away tons of money to illegals and the increasing number of unemployed.
Goobemints are mow paying out retirement benefits that were hedged with funds to pay those retirement accounts through large investment firms that bought CDS's, CDO's, derivatives, and repackaged liar loan mortgage backed securities provided by Fannie . Freddie...etc., etc.
Inflows at the state & local levels are down now too because of unemployment, reduced revenues from corporate income taxes, reduced sales taxes, etc.
The Great Goobermint Contrived Ponzi Scheme Credit Bubble pyramid is now crumbling.
I have a gut feeling that between the housing market, unemployment, rising state and city debt and the mess in Europe. Its becoming the perfect storm, one that will do far more damage to our economy in a double dip than the initial blast did to it the first go around.
Housing credit expired. Takes awhile for that to work out since it front loads demand. Not saying prices won’t go down some but its expected at this point just as employment numbers will look awful in Aug due to census working losing their jobs.
People need to see something positive happening. Victories in November would help!
I hate to say this, but if we have to wait till November at the rate we are going unemployment alone will kill us, no matter who wins.
i can’t see us not being over 100% come Sept,then another stimulus to help the dems come election. It will only put off the day of reckoning and probably make it worse.
ummm 10%....stuck key.
To keep up the facade of normalcy, they will have to roll out Stimulus #2. At what point do we just run out of $$?
--then again we can also look at housing starts:
There's a lot to this. Construction Spending for April was up 2.7%, and April existing home sales was up 5.77M after 5.36M for March. OK, so we all hate Obama; we need to keep our eyes open too.
Wait, it only gets better! DeathCare taxes, Bush tax cuts expire, Stimulus requirements for federal inspectors prior to sale, Cap and Trade proposes massive expenditures and taxes before a seller can sell his home, etc.
Reverse mortgages may become increasingly popular for two reasons: 1)they are predicated on homes appreciating - not depreciating and 2) You never have to repay more than the market value. After all, if you can’t(or government won’t let you)sell your house, who cares what the housing market does?
“UNEXPECTED”.
LLS
Construction funded by future tax receipts for BIG GOVERNMENT projects.. whooop peeeeee!
LLS
My point there being no hopes of an ROI on the 4.3 million units.
Gov’t stimulus dries up in 2011-2012? I thought it dries up in 2010-2011!
To a RE agent "For Sale" signs means money leeched off of a sale. To the rest of us it's a sign of trouble.
The resources that were misallocated during the housing bubble need to be re-allocated to other sectors of (what's left of) the economy.
Part of the “double dip” may have more than one cause.
My son and his wife wanted to refi their house at the new low interest rate. This is a 200K house that they owe about 90K on. He was turned down by four banks.
The 5th (who gave the refi) couldn’t believe it. I couldn’t either.
The facts:
- It’s a 200K house that they owe about 90K on.
- They have ONE other bill - a 35K mini van that they owe about 6 more payments on.
- He makes over 100K a year.
- They’ve never been late on anything.
- Their credit score is over 800.
- No jail, no drugs, no... nothing.
- He owns other property outright, one other vehicle, too.
Does this make any sense?
Ya gotta keep an eye on PERSONAL INCOME. Nobody seems to be doing this.
The house price should be 3X the buyer’s income, PERIOD.
If this ratio does not work, you get all this smoke and mirrors BS and huge numbers of upside down mortgages.
Until incomes rise-FAAHGEDDABAAATIT!
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