Skip to comments.GARY SHILLING: Here's Why There's No Housing Recovery And Prices Will Collapse Another 20% (Oops!)
Posted on 09/20/2012 10:47:53 AM PDT by blam
GARY SHILLING: Here's Why There's No Housing Recovery And Prices Will Collapse Another 20%
Sep. 19, 2012, 5:18 PM
Everyone thinks the housing market in the U.S. looks like it's starting to bottom.
Famed economist Gary Shilling is not one of themyou could call him notably bearish on housing.
In fact, he expects prices to drop another 20 percent from here and doesn't think we will see a bottom in the market for another several years.
The main reasons Shilling is so pessimistic: There is a huge supply of excess inventory not being accounted for, and prices still have not fallen to anywhere near long-term historical averages.
In his monthly INSIGHT client newsletter, Shilling outlined his bearish housing thesis and used several charts to illustrate why he thinks there is no bottom in sight for the U.S. housing market, and more pain is ahead for American homeowners.
Gary Shillings Charts
(Excerpt) Read more at businessinsider.com ...
I can’t thank God enough for giving me the means to pay mine off.
"Brebner and Xiao are pretty frank about how levered up the financial system is at the moment, and they warn that the next shock will be totally involuntary and unexpected. "
Mr too and that BS about housing is back with no jobs do they think we are stupid?
No jobs, no housing recovery.
Simple as that. The rest is hype and BS.
Meanwhile, there are THOUSANDS of nice homes for under $200K in the Dallas/Ft Worth metroplex:
i own 5 in califonira
the last 4 i bought were
palmdale 3/1 53k (it ent for 270 in o7)
2-lancaster 4/2 49k (went for 265 in 06)
3-2/2 adelanto 45k
4-last week 3/2 california city with pool 40k
making about 17% roi
all paid for
life is good
It's kinda sad to think that even then you don't own it... just try not paying property tax and see what happens.
average home price must equal average home shopper’s ability to buy one. No bottom in sight.
They also have to be confident that they will have a job in 2-3 years.
It must be true because I read it on the internet!
Come on, follow the numbers not some numbskull in a tinfoil hat.
As long as the gangbangers and illegals who live out there can keep up with the payments. :)
We bought our home in 1997, right when real estate started to uptick. Paid $125k for it and it is still worth between $170-200. I still think houses are expensive.
The home we had before this one....lived there 10 yrs and sold it for exactly what we had paid for it.
I guess it depends on your definition of "here".
I guess it's 20% from here, eh?
My friend closed on his house in Florida today that has been sitting vacant for about six years.
At one time, it had been appraised in the high $800k range and I believe he sold in the high $300k range
A couple issues:
(1) DEMOGRAPHICS: Houses are only worthwhile insofar as people exist to live in them. The birth rate in this country has collapsed since 2007: parents simply aren’t making babies, so families don’t exist to move into larger homes to accommodate more children. Moreover, the student loan debacle and labor-market collapse in most of the country have compelled young adults to postpone indefinitely dating, marriage, and childbearing en masse. And birthrates in Mexico have collapsed over the past generation, so even if the labor market improves in this country, progressively fewer Mexicans will exist to jump the border (legally or otherwise) to seek work or settle in this country. And now Obama comes to the rescue with a plan to murder even more American babies, driving the live-birth rate even lower.
(2) LABOR MARKETS: Some combination of building costs and local incomes (usually wages and salaries) drives a healthy housing market. In areas with rising population, building costs drive the market, and local incomes determine the size and amenities of the newly constructed housing; however, in areas without population expansion sufficient to drive a significant house-building industry, local incomes alone drive the market. Wherever incomes and labor markets decline as precipitously as has happened in the past several years, house prices must decline concomitantly so that ordinary persons can afford houses. An increasing lack of job stability and career development prospects also reduces the proportion of prospective owner-residents among buyers. Also, in neighborhoods distant from job sites, one must consider commuting costs when calculating the value of the property: higher petroleum costs and automobile prices (EPA, anyone?) decrease the capacity of prospective owner-residents to afford the houses.
(3) TAXES, INTEREST, and UNCERTAINTY: Mortgage interest rates already rank among the lowest in many decades; any increase in mortgage interest rates would lead to higher regular mortgage payments, which, if higher incomes to not offset these payments, would tend to reduce prices. On the other hand, interest rates now are so low that lower, even zero, rates will not lower payments significantly enough to inflate housing prices (assuming that lenders demand regular repayment of principal). Property taxes, however, continue to escalate, and make property worth less. How much is the obligation to pay $12,000/year worth to you? Something very negative, right? What if some local politicians can and habitually do raise that payment on a whim? Very high property taxes, especially in markets with labor market weakness or instability, tend to suppress prices for the object of the taxation. The greater the uncertainty associated with the financial capacity of a prospective owner-resident to maintain the property (taxes, heat, utilities, access to work, et cetera), the lower the price goes.
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