Posted on 04/29/2012 8:37:38 AM PDT by SeekAndFind
The Housing market is likely to remain weak and may take a generation or more to rebound, Yale economics professor Robert Shiller told Reuters Insider on Tuesday.
Shiller, the co-creator of the Standard & Poor's/Case-Shiller home price index, said a weak labor market, high gas prices and a general sense of unease among consumers was outweighing low mortgage rates and would likely keep a lid on prices for the foreseeable future.
"I worry that we might not see a really major turnaround in our lifetimes," Shiller said.
The S&P/Case-Shiller composite index of 20 metropolitan areas gained 0.2 percent in February on a seasonally adjusted basis, the first uptick in prices in 10 months.
But Shiller called it "a very mixed bag." Nine of the 20 cities recorded falling or flat prices on the month.
(Excerpt) Read more at articles.chicagotribune.com ...
Translation: “it’s nothing Obama can fix, you see. Don’t hold it against him.”
It is my contention that regardless the economic picture, we still have a huge oversupply of home inventory (thanks to the bubble) that will take a very long time to work thru. We also will have the baby boomers giving up their homes and going off to nursing homes or dying off. This will add to the glut.
I agree with this article - but only if you look at the “average” home price. The fact is, a huge rebound has already started - for some homes. And a huge decline continues for others. When you average it all, it works out to a decline.
During the go-go years (down here anyway) the builders threw together these ugly, crappy built homes, into some of the worst designed neighborhoods possible. Narrow streets, yards the size of a postage stamp, every house exactly the same. And thanks to creative financing and liar loans, fools went out and paid $200K - $300k for these cheese boxes. Now they are dropping like a rock ($290k home sold for $85k)
Yet in the neighborhoods that were developed in the 70’s and early 80’s (decent sized yards, wide streets, variety of styles) the prices never really fell and they’ve been climbing for the last three years.
When you average it all together, it comes out as going down. But it is really more a matter of what you own. The overall average prices probably won’t start back up until all these crappy houses built in the 90’s and the 2000’s get sold at their true value.
I agree it will take 4-10 years to fix this mess depending on whether Obama wins a 2nd term or not.
Now with US student loan debt exceeding the total of US credit card debt, don’t look for the “Me Generation” to soak up the excess housing inventory. More debt equals lower/no house payments.
BanBam will take care of that though...
This guy summarized it well.
It’s a mix. SOME recovery, SOME continued tanking.
Here’s a weird stat... I have several friends who buy houses as investments. They almost always buy with 100% cash and then rent them out.
One friend has about 50 houses, another about 22. The others only about a dozen or so, etc.
They buy about 1 house per month. Lately, they all have been complaining about NOT being able to close the deals.
They’ll find a house listed, often by a bank for sale. They make an offer, usually full price and with cash, and then the bank pulls the house off the market.
It’s happened dozens of times in the last few months. One investor made above price listed offers and the same thing happens.
Wonder what’s going on?
Or bulldozed, which i guess represents the true value of those houses. I have seen some of that here. My aging once middle class neighborhood houses have lost value only with inflation. Their dollar values have not changed. Some McMansion neighborhoods have many for sale signs and few showings. A few fairly new houses have been torn down and the lots remain unbuilt upon.
Yale? Bastion of liberal bullsh*t? Truth matters not - protection of liberals is all that matters...
Yawn.
Down here, during the go-go 90’s and 2000’s, the biggest problem was building ‘em fast enough, so the builders got ‘creative.’ Like piling a bunch of dirt in the middle before they poured the slab to save concrete. They also glued this composite wood sheet to the studs and then bricked over it. Now the glue is turning loose inviting all kinds of insects into the home.
Maybe back then people didn’t know about this stuff - but they do now. There are companies advertising home inspections on billboards everywhere. They bring in some kind of ultrasonic doo-dad and can tell you exactly how thick your slab is, as well as revel many other ‘shortcuts.’ In most cases the builders went broke long ago, so lawsuits are pointless.
Most of these kinds of homes are being sold for a song to investors that turn them into cheap rent houses. A cheaply made house being turned into a cheap rent house - yea that will last a long time.
The saddest part is you’ll drive through one of these neighborhoods and see one or two really nicely maintained homes. That’s some poor sod trying to do the right thing. Sorry buddy, but you probably haven’t got a chance.
And yes, most of them will eventually be bulldozed. I just wonder how many thousands more there are across the country.
The banks are selling ‘distressed’ properties and have to list a ‘loss’ on their books on a sale where the house was originally sold for more than double today’s market price.
Combined with new regulations in some areas where banks can’t hold properties more than 6 months and questionable ‘titles’ still under threat of litigation, gives you a dormant housing market with a glut while waiting for price recovery (maybe by the year 2020).
Banks can list but never sell as past scams begin to be exposed.
Here is one theory:
The bank my be carrying the mortgage on its book at a value much higher than the sales price. So if they sell the property they have to recognize the loss. This means unwinding a complex security (if the loan was securitized which is likely) and no doubt a hit on the banks capital. So the bank may prefer to "extend and pretend" as long as the complicit regulators and the Fed are willing to play along.
ding ding!! We have a winner!
I made a correction. Those who think a rebound is coming soon simply don't know really all the problems there are.
When ever there is an article written by a “expert” assuring us that all is lost. I see great hope, as these folks are invariably wrong and driven by a desire to protect the folks who created the screwup in the first place.
RE: Here’s a weird stat... I have several friends who buy houses as investments. They almost always buy with 100% cash and then rent them out.
I think they dud some calculations — consider this — you have $120,000, if you put this in a bank, you make about 1% in interest. With inflation growing, you’re really LOSING value.
You take a risk and buy a house somewhere in Nevada or Florida that used to be $180,000 and is now selling for $120,000. You rent it out for say, $1,000 a month. That’s about 8.4% for your money ( let’s say you deduct property taxes and maintenance, I bet the return would still be above 5.5%).
Of course you must have the cash to do this. Not sure if you will come out positive if you mortgage from a bank (or if the bank will even lend the money to you ).
Those with the cash are in a good place to be today.
The housing market is another disaster waiting to happen. FHA insured loans have been about 25% of the mortgage market for the last few years. The average down payment has been about 4%. Some of these loans are already a bit under water. If we get another economic down turn, it gets ugly again..
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