It is hard to imagine that such a booming economy with relatively low unemployment is facing the debt struggles that we are facing. One of the main reasons is that employment in the housing sector has boomed in the last decade. It goes without saying that a slower housing market will equal unemployment for those in the housing industry.
Policy makers are providing their solutions to this mortgage crises. Initially what started as a subprime problem is now spilling over into multiple sectors. This has the potential of pushing the economy into recession and more and more economist are chiming in with future odds. What are some of the current solutions on the plate? These solutions may help but they only put a bandaid on the overall broken housing market.
In a politically charged environment with so much at stake next year, both sides of the political spectrum are treading water carefully. Even though they publicly echo fears of inflation, policy moves and data point toward a more permeating fear of deflation. I truly believe Americans do not want to see their fellow citizens fail and suffer. In fact, I believe most Americans have a strong work ethic and hold that people that sacrifice and work diligently should be rewarded.
What frustrates most Americans is a game where the uber-wealthy are given corporate welfare when times are tough but poorer Americans by these same groups are seen as not being able to pull themselves up from their own bootstraps.
The solution to this, even though people do not want to hear this, is a market correction. This means that local income levels and the new tighter credit standards will dictate future housing prices.
In some areas this means 10 percent drops while in others this can reach 50 percent or higher. Will this happen? The data is already pointing toward this. Even if property drops 30 percent over 5 years, combined with inflation adjustments this is close to a 50 percent drop.
Some areas in Los Angeles are already seeing 20 percent adjustments year-over-year. By looking at the reset charts, we realize that the housing correction still has a long way to go. What will happen in the next year through policy and market sentiment will set the tone for the next decade of housing in America.
Posted by Dr Housing Bubble at 18 Comments. Labels: housing , housing-data , market analysis , psychology , real-estate. Powered by Blogger. DownRight Blogger Theme v3. Labels baby-boomers california-equity-giants foreclosures Great Depression housing housing-data housing-humor mainstream-media market analysis mortgage-fraud mortgages psychology real-estate real-homes-of-genius realtors revolving-debt social-security soft-landing southern-california-housing Zillow.
Subscribe to Dr. Housing, Politics, and Wealth Links Bull! Not Bull! Translate Dr. Introducing the new Website www. What a gorgeous day in Southern California.
It was a mild day with a touch of fall permeating through the morning marine layer. It is becoming evident that some people believe this wonderful climate is reason enough to ask for bizarre and economically devoid prices. Some sellers still seem to think that Johnny Subprime is around the corner, eager to jump on an overpriced 50 year old home simply to obtain the proverbial Mr. Homeowner label. Alas, this story like all Shakespearean dramas seems to have a tragic ending and the foreshadowing is already darker than a full eclipse.
You might have noticed on the right hand column a weekly short-sale and inventory count. An emerging trend is brewing. We are reaching a critical mass of inventory and I am sure housing pundits are going to run with this like a child eager to show his parents their first A in fractions.
But there will be two backhanded retorts to this premature excitement in October. First, the percent of short-sales coming on the market is staggering. Next, we are going to have the 3 rd quarter foreclosure numbers sometime in the middle of the month and they will be brutal. How do we know? Just take a look at this article on mortgage resets , price-to-income ratios , and the list of Real Homes of Genius. And speaking of Real Homes of Genius , let us take a look at a short-sale home to highlight the current market.
Today we salute you Torrance with our Real Home of Genius award. Great things come in pairs. We really have to examine why this tactic is being taken. The problem with those in the housing complex is that they are living with an inflated perspective of a reality based housing market. The market is simply adjusting to market fundamentals. Sadly, many are grasping at an industry that is entering a fierce bear market. It turns out that easy credit, human nature, and greed are powerful forces.
They figured if you could monetize something with a powerful emotional component many people would pay to play no matter what. It worked. From the article: "With housing prices lower in many parts of the country and still-low interest rates, we are clearly in a buyer's market," said Dan Hanson, managing director of Countrywide Home Loans.
Missing the Bulls-eye Keep in mind that Countrywide even as late as May of this year was expanding its subprime mortgage outfit and talking about year loans. With that said, let us take another look at what is being said today: "We're pleased to assist our local real estate professionals, and we encourage buyers to work with an expert who is seasoned in helping buyers with the home purchase transaction," said Hanson.
Posted by Dr Housing Bubble at 19 Comments Labels: mainstream-media , market analysis If you like this article exercise your vote and: Digg This! Before the subprime issues, there were many articles and research papers highlighting the impending challenge the mortgage market would face once rates started their inevitable reset descent.
Two camps emerged; one believed that the subprime market would be contained while the other camp saw it as the tip of something much larger. There is no point in rehashing which side won this debate since it is already clear. The next step is to focus on a market analysis and assess the current situation. But what does the future potentially hold? There is a great article that was published in the O. Register talking to a BofA analyst, Robert Lacoursiere discussing the future of the mortgage correction.
Register From past articles and projections, we already knew that September through December of would see the largest number of subprime resets. If we take a look at notice of defaults NODs in Southern California , we are seeing an exponential jump: The illuminating thing of this data is that many of these NODs are turning into foreclosures.
Option Two — Sell Last month sales volume fell over 50 percent in Los Angeles on a year-over-year basis. The growing number of foreclosures doesn't help: Sellers are also competing with short-sales and foreclosures. Option Three — Foreclosure It goes without saying that most people do not want to lose their home through foreclosure. Let us take a look at the national mortgage debt load for the entire country: As you can see from the above chart mortgage debt has tripled from Solutions Policy makers are providing their solutions to this mortgage crises.
Posted by Dr Housing Bubble at 18 Comments Labels: housing , housing-data , market analysis , psychology , real-estate If you like this article exercise your vote and: Digg This! Older Posts Home. Subscribe to: Posts Atom. Housing Bubble Blog is provided as general information only and should not be taken as investment advice.
What made you decide to join the ranks of housing watchers? How would you summarize your approach to the current housing market, and how has your background informed this approach? As an owner of investment property, I also have an idea of the changes that have gone on in the real estate industry through personal experience.
My current approach to housing is how I approach all investment properties; look at value and local data based on jobs and incomes. Home prices should have a connection to the local economy. Do you think that the recovery, whenever it cements itself, will also adhere to this pattern? Do you think that based on your familiarity with Southern California, any meaningful extrapolations can be made? You have to look at local area economies and household incomes. Some areas seem to have more sensible metrics but many big metro areas like Southern California are still largely in housing bubbles even after steep price corrections.
It is no accident that the states with the deepest recessions i. Will housing recoveries follow a pattern? That is doubtful. Some states will have tougher times solidifying an economy strong enough to support growing home prices. The choice for many areas is to grow incomes to justify current prices or dropping home prices to meet the new financial reality.
Mortgage Calculator : You have suggested that housing prices will continue to fall. Is this based on the forecasting tools available on your website, other experts, or your own intuition?
There is no data on a national housing bubble because we have never been in a national housing bubble, until now. For most of the history on housing, the gold standard was the 30 year fixed mortgage.
That seemed to work well. Housing appeared to be stable when households took on a mortgage no more than 3 times their annual household income. But in the last decade, the amount of toxic mortgages broke out of this metric and led us down into the housing bubble.
We are now reverting back to that price point but it will be long and painful. Can you elaborate? That is, until we get too obsessed with real estate as we did leading up to the last housing bubble.
The good news however is that the market is adapting to providing more rentals to Americans and the demand is not slowing down. October 18th, What do you think? Posted in: southern-california-housing , Zillow. Posted in: housing-data , market analysis. Posted in: housing valuation , mortgages. Posted in: investors , real estate investors , renting. Comments Top Commentators Topics Popular.
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