Best of the Week
Most Popular
1.UK General Election BBC Exit Polls Forecast Accuracy - Nadeem_Walayat
2.UK General Election 2017 Seats Final Forecast, Labour, Conservative Lib-Dem, SNP - Nadeem_Walayat
3.UK General Election 2017 Forecast: Conservative 358, Labour 212 Seats - Nadeem_Walayat
4.Theresa May to Resign, Fatal Error Was to Believe Worthless Opinion Polls! - Nadeem_Walayat
5.UK House Prices Forecast General Election 2017 Conservative Seats Result - Nadeem_Walayat
6.The Stock Market Crash of 2017 That Never Was But Could it Still Come to Pass? - Sol_Palha
7.[TRADE ALERT] Write This Gold Stock Ticker Down Now - WallStreetNation
8.UK General Election Results Map 2017 vs 2015 vs Opinion Polls - Nadeem_Walayat
9.Orphaned Poisoned Waters,Severe Chronic Water Shortage Imminent - Richard_Mills
10.How The Smart Money Is Playing The Lithium Boom - OilPrice_Com
Last 7 days
Mainstream Media Feeding Frenzy in the Echo Chamber - 28th Jun 17
The Fed Has Undermined the US Economy’s Ability to Grow - 28th Jun 17
“Secular Stagnation” Is Nonsense… Here’s the Real Reason Behind the US Downturn - 28th Jun 17
Sheffield Broomhall Hanover Flats Tower Block Cladding Could Take Months to Remove! - 28th Jun 17
Shrinkflation In UK – Real Inflation Much Higher Than Reported - 28th Jun 17
Are the UK Elections a Forgone Conclusion? - 28th Jun 17
Is the Tech Stock Market Bloodbath is Finally Here? - 28th Jun 17
Crude Oil Sinks 20%: Why "Oversupply" Isn't the Half of It - 28th Jun 17
Important Money Management Tips For Teenagers - 28th Jun 17
The Coming Battery Bonanza - 28th Jun 17
Overlooked Stock Investments To Keep An Eye On in 2017 - 27th Jun 17
The Federal Reserve And Drug Addiction – A Prediction - 27th Jun 17
Charts Show Why Emerging Markets Will Be an Essential Part of Your Portfolio Going Forward - 27th Jun 17
Former Lehman Brothers Trader: I Bet My Reputation That Stocks Bubble Will Pop In A Year - 27th Jun 17
US Bonds and Related Market Indicators - 27th Jun 17
Stocks At Record Highs: Market Sentiment Still Bullish - 27th Jun 17
Stock Market Running Out of Steam - 27th Jun 17
Gold Back With A Vengeance As Bitcoin Bubble Bursts - 26th Jun 17
Crude Oil Trade & Nasdaq QQQ Update - 26th Jun 17
Gold and Silver Ongoing Consolidation May End Soon - 25th Jun 17
Dollar May Become “Local Currency of the U.S.” Only - 25th Jun 17
Sheffield Great Flood of 2007, 10 Years On - Unique Timeline of What Happened - 24th Jun 17
US Stock Market Correction Could be Underway - 24th Jun 17
Proof That This Economic Recovery Narrative is False - 24th Jun 17
Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - 24th Jun 17
Gold Summer Doldrums - 23rd Jun 17
Hedgers Net Short the Euro, US Market Rotates; 2 Horsemen Set to Ride? - 23rd Jun 17
Nether Edge By Election Result: Labour Win Sheffield City Council Seat by 132 Votes - 23rd Jun 17
Grenfell Fire: 600 of 4000 Tower Blocks Ticking Time Bomb Death Traps! - 22nd Jun 17
Car Sales About To Go Over The Cliff - 22nd Jun 17
LOG 0.786 support in CRUDE OIL and COCOA - 22nd Jun 17
More Stock Market Fluctuations Along New Record Highs - 22nd Jun 17
Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - 22nd Jun 17
Green Party Could Control Sheffield City Council Balance of Power Local Election 2018 - 22nd Jun 17
Ratio Combo Charts : Hidden Clues to the Gold Market Puzzle - 22nd Jun 17
Steem Hard Forks & Now People Are Making Even More Money On Blockchain Steemit - 22nd Jun 17
4 Steps for Comparing Binary Options Providers - 22nd Jun 17
Nether Edge & Sharrow By-Election, Will Labour Lose Safe Council Seat, Sheffield? - 21st Jun 17
Stock Market SPX Making New Lows - 21st Jun 17
Your Future Wealth Depends on what You Decide to Keep and Invest in Now - 21st Jun 17
Either Bitcoin Will Fail OR Bitcoin Is A Government Invention Meant To Enslave... - 21st Jun 17
Strength in Gold and Silver Mining Stocks and Its Implications - 21st Jun 17
Inflation is No Longer in Stealth Mode - 21st Jun 17
CRUDE OIL UPDATE- “0.30 risk is cheap for changing implication!” - 20th Jun 17
Crude Oil Verifies Price Breakdown – Or Is It Something More? - 20th Jun 17
Trump Backs ISIS As He Pushes US Onto Brink of World War III With Russia - 20th Jun 17
Most Popular Auto Trading Tools for trading with Stock Markets - 20th Jun 17
GDXJ Gold Stocks Massacre: The Aftermath - 20th Jun 17
Why Walkers Crisps Pay Packet Promotion is RUBBISH! - 20th Jun 17

Market Oracle FREE Newsletter

The MRI 3D Report

U.S. Housing Market Continues to Rot, No Rebound in 2011

Housing-Market / US Housing Nov 18, 2010 - 06:22 AM GMT

By: Money_Morning

Housing-Market

Best Financial Markets Analysis ArticleLarry D. Spears writes: The year of 2010 saw very little improvement in the housing sector, and that's not likely to change in 2011.

The industry's weaknesses - high unemployment, tight credit, ineffectual government programs, soaring inventories, plunging prices, and so on - are simply too gaping to be resolved by next year.


Even the normally ultra-optimistic National Association of Realtors (NAR) came out of its annual conference in New Orleans in early November with a frown on its face, predicting that, "nationwide, homeowners can expect little, if any, increase in home values in 2011."

The real estate research and online brokerage firm Zillow agreed, issuing a report on Nov. 10 noting that U.S. home values fell by 4.3% in the third quarter and chances for improvement over the winter are slim.

"The unceasing declines in home values signal that we're in for a long, bleak winter of continued troubles for the housing market," said Zillow Chief Economist Stan Humphries. "The length and depth of the current housing recession is rivaling the Great Depression's real estate downturn and, with encouraging signs fading, will easily eclipse it in the coming months."

Undermined by Unemployment
Chief among the obstacles to a housing market recovery is high unemployment. Unemployment has driven foreclosure statistics to dizzying heights, and in conjunction with tight credit, kept new buyers out of the market.

Currently at 9.5% the national unemployment rate likely will remain near double-digits in 2011. In the meantime, credit markets remain tight, making it even more difficult for Americans to buy new homes or refinance their existing mortgages.

Although mortgage rates remain near their all-time lows - a recent average of 4.17% for 30-year fixed-rate loans and 3.57% for 15-year mortgages - actually getting one of those loans is another story. Banks are still trying to absorb losses from the earlier collapse of the mortgage market and dealing with record foreclosure levels, so they're demanding demonstrated job security and impeccable credit before granting loans to new homebuyers.

Lower interest rates have dramatically increased refinancing applications, which have doubled since the start of 2010 according to the Mortgage Bankers Association (MBA). However, less than half of those applications are being approved. And government programs have done little, if anything, to help.

Pitiful Programs
The government's Home Affordable Modification Program (HAMP), which was set up in March 2009 to help homeowners in trouble restructure their mortgages and avoid foreclosure, has been an abject failure.

Roughly 3 million of the 7 million homeowners facing foreclosure at the start of 2009 applied for relief under HAMP, but only 1.4 million were approved for temporary or trial modifications - and more than half of those have been canceled. By late October, only 466,708 homeowners had been granted permanent modifications.

Almost a quarter of the homes on which modification requests were cancelled are now in foreclosure - and, even worse, many homeowners who got modifications still wound up in foreclosure because of fees, late charges, and interest accrued while homeowners were waiting for approvals.

Meanwhile, the one government incentive that effectively cheered up the dour housing market - the federal homebuyers' tax credit - has fully expired. This program, which provided up to $8,000 in credits to first-time homebuyers and $6,500 for repeat purchasers, pushed many people to accelerate their buying decisions. However, the tax credit expired at the end of June and the market has cooled considerably as a result.

Absent the credit, the NAR says existing home sales for 2010 will total just 4.8 million, a 7% drop from 2009's 5.16 million. Pending home sales also fell in September and October, virtually guaranteeing a slow start in 2011.

For the year as a whole, the NAR sees existing-home sales climbing back to 5.1 million - but only if new jobs continue to be created. (Note: Several states, including California, also had smaller homebuyer incentives that have now expired.)

Still, sales and home prices will continue to languish next year, as foreclosures and housing inventory remain considerably high.

Foreclosures, Inventory, and Prices
Zillow said in its third-quarter report that 23% of U.S. residential mortgage holders are now "under water" on their loans - the highest level this year - and many will likely be forced into foreclosure in the year ahead.

"The high percentage of homeowners in negative equity ... represents a huge number of people who are not only more vulnerable to foreclosure, but who are essentially trapped in their current homes and are prevented from selling and buying a new home," said Zillow's Humphries. "This has profound implications for future demand and will be a millstone around the neck of the housing market."

NAR Chief Economist Lawrence Yun agreed, saying it will take at least another two years to clear the foreclosures and short sales currently on the market.

With tight credit keeping many qualified buyers at bay and foreclosures hitting an all-time high in the third quarter of 2010, the inventory of homes available for sale stood at 4.04 million units in September. That was a slight drop (1.9%) from August - but still represents a 10.7-month supply at current sales rates.

The average sales price for a home fell to $171,700 from $178,600 in September, and actual number of existing home sales was down 19.1% from year-ago levels.

The number of new-home sales actually rose 6.6% to an adjusted annual rate of 307,000 units, and the median price for those homes climbed from $220,500 to $223,800. However, the overall impact of the increase was minimal, since August sales were the third-lowest since the government began to track new-home numbers in 1963.

"Sales did rise, which is good," Celia Chen, a senior director at Moody's Analytics told CNN, "but the pace is still very weak ... still close to a record low. It just doesn't seem that demand is really firming."

That weak pace has also prompted the National Association of Home Builders (NAHB) to reassess its earlier estimate that 906,000 new homes would be built in 2011, saying in early October that their forecast "is less certain today."

A Sinking Feeling
It doesn't seem to matter which area of the country you consider, the outlook is dim from coast to coast. Zillow's Home Value Index of housing pricings in the 25 largest metropolitan areas found just six positive numbers in the third quarter - in Boston, Pittsburgh and four California cities - but even those numbers are misleading since the Zillow Index factors out foreclosure sales.

Local realtor surveys by The Boston Globe, The New York Times, The San Diego Union-Tribune and The Miami Heraldall had trouble finding anyone with optimistic forecasts for their areas.

Johnathan J. Miller, president of the real estate appraisal firm Miller Samuel, told The Times that despite small bursts of "happy housing news" in 2010, he expects "the 2011 New York market will be weaker."

Rick Loughlin, president of Coldwell Banker Residential Brokerage New England, echoed that sentiment to The Globe.

"We're in the choppy bottom, improving, but at a very slow pace," he said. "The real key issues are jobs and consumer confidence; when jobs come back, you'll see more of a recovery in housing."

So, given the state of the housing market, are there any stocks in that sector worth buying?

For most segments of the market - homebuilders, real estate developers, realty brokerages and mortgage companies - the answer right now is probably no.

In fact, the only remotely positive recommendation we've seen recently was given to Barron's by Deutsche Bank AG (NYSE: DB) analyst Nishu Sood, who said the time has come to "start nibbling" at the housing stocks.

"Five years into the housing market's fall, we believe it is finally near the point from which it can sustainably recover," said Sood.

Action to Take: The best approach to begin 2011 is probably to heed the words of Coldwell Banker's Loughlin and wait until you see some steady improvement in new-job creation. When it's clear that more people are going back to work - and keeping their jobs - start checking out the major housing stocks because lots of folks will want new homes to go along with their new positions.

If you want to get an early jump on the rest of the crowd, look first at the stocks of firms that supply the homebuilders - Weyerhaeuser Co. (NYSE: WY), recent price $17.20, being a good example. It's trading at less than a third of its April 2010 high of $53.69, even though it has managed to remain profitable throughout this mess (reporting trailing 12-month earnings of $1.04 a share) and has had increased year-over-year revenue and earnings for three of the last four quarters.

Source : http://moneymorning.com/2010/11/18...

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife