Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

U.S. Housing Market Rebound Unlikely Anytime Soon

Housing-Market / US Housing Aug 03, 2011 - 12:00 PM GMT

By: Money_Morning

Housing-Market

Best Financial Markets Analysis ArticleDavid Zeiler writes: Dragged down by such anchors as a bulging pipeline of foreclosures and a dearth of buyers, it will be many more months - if not years - before a housing market rebound takes hold.

Symptoms of the limping U.S. economy, primarily an unemployment rate above 9% and weak consumer confidence, along with much stricter lending rules, have helped keep buyers scarce.


Meanwhile, the massive number of foreclosed properties on the market - more than a quarter of U.S. residential sales - keeps pushing prices down. That, in turn, has driven more homeowners into negative equity, further scaring prospective buyers and making new homes much more expensive by comparison.

Report after report tells the story of a market mired in a five-year slump that just can't seem to find any traction.

"Year-over-year, prices continue to deteriorate, although there has been a seasonal uptick over recent months," Stuart Gabriel, director ofUCLA's Ziman Center for Real Estate, told the Los Angeles Times. "This reflects a market that continues to be in search of a bottom."

Grim Statistics
The benchmark Standard & Poor's /Case-Shiller Index illustrates the market's persistent malaise. The May measure of home prices in 20 metropolitan areas rose a lackluster 1% from April - and was down 4.5% from a year ago.
Even the meager 1% monthly increase resulted from a seasonal caveat - prices usually rise in the spring. Analysts foresee little improvement in the months ahead.

"Things do not look very favorable on the housing front since the employment situation has taken a turn for the worse in May and June," Chris G. Christopher Jr., an economist with consulting firm IHS Global Insight, wrote in a research note. "The unemployment rate now stands at 9.2%, and consumer confidence is at depressed levels. Going forward, the Case-Shiller indexes are likely to post increases during the home-buying season, and then turn down again."

Similarly, the annual sales rate of new homes fell 1% from May to June, but was up 1.6% year-over-year. And the actual number - 312,000 - disappointed economists who had expected a rate of 320,000.

To really put those numbers in perspective, consider that at the peak of the housing bubble, July of 2005, the annual sales rate was a robust 1.3 million.

.Many of the issues holding down the housing market are interrelated, which makes them that much more difficult to overcome.

For example, the stubbornly high unemployment numbers, a product of a struggling economy, have meant many would-be buyers can't even think about buying a home. Most are more worried about keeping up payments on their existing home to avoid foreclosure.

Low housing sales, meanwhile, have forced homebuilders to cut back dramatically. Housing starts in June reached a six-month high - and still were less than a third of their peak during the boom.

That feeds back negatively into the U.S. economy. The National Association of Home Builders estimates that each new home on average creates three jobs for a year and generates $90,000 in taxes.

The weak housing sector has been a major drag on the overall economy. Historically housing construction has contributed between 5% and 6% of the nation's gross domestic product (GDP). For the past two years, residential construction has been below 3% of GDP; currently it's just 2.4% of GDP.

"We see no chance that a strong rebound in new-home sales will be a key driver of broader economic growth any time soon," Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote in a research note.

Demand Choked Off
Another major factor restricting demand has been the far tighter rules on lending enacted following the excesses of the subprime mortgage debacle.

Fannie Mae and Freddie Mac, which together guarantee 90% of the loans in the United States, drastically tightened numerous lending qualifications in the past several years. Borrowers must now come up with more cash for down payments and need to have higher credit scores.

"We screen out about 30% of the people who call looking for a mortgage, usually because of their credit scores," Michael D'Alonzo, president of Creative Mortgage Group, and head of the National Association of Mortgage Brokers, told Bloomberg BusinessWeek. "A lot of people don't even try, because they've heard horror stories of how hard it is to get a loan."

Making matters worse is that many local banks, unwilling to chance rejection by Fannie or Freddie, apply even more stringent standards to loans, known as "overlays."

"Lenders are scared, so they're going to have overlays," Mark Goldman, a loan broker with C2 Financial Corp., told Bloomberg. "What you get, as a result, is the most conservative underwriting in 20 years."

Also contributing to the lack of demand has been the steep decline in prices. Millions of people who bought homes during the bubble now owe far more on their mortgages than their homes are worth, effectively trapping them there.

Research firm CoreLogic estimates that 23% of homeowners - 11 million U.S. households - are "underwater" on their mortgages by an average amount of $65,000. And CoreLogic says another 2.4 million households are close to the edge, with less than 5% of equity in their homes.

A Flood of Foreclosures
Then there are the foreclosures, another whammy from the lousy economy. Millions of people in economic distress simply can't afford their mortgage payments anymore.

Not only do foreclosures add to the excess housing on the market, but the sales price of such distressed properties is 27% lower on average than a conventional sale. Foreclosures made up 28% of all U.S. residential sales in the first quarter of 2011.

While some have taken heart that the number of foreclosures has been cut almost in half this year, the reality is that the flood has simply slowed down - partly because of the fallout from the revelation of fraudulent robo-signing practices late last year, and partly because banks have adopted a more orderly approach.

But the respite in the number of foreclosures now will ultimately prolong the arrival of a housing market rebound.

"According to our numbers, if you just look at the properties in foreclosure or on the banks' books, it will take us three years to work through that inventory at the current rate of sales," Rick Sharga, senior vice president of RealtyTrac, told MSN Real Estate.

For the indefinite future, expect more of the same: stabilizing sales and prices, but no real housing market rebound, except perhaps in the few scattered markets that suffered most from the bursting of the bubble.

"Supply is a foregone conclusion to stay high for the next couple of years as foreclosure inventory continues to be there on the resale market,"Richard Dugas, chief executive officer at homebuilder PulteGroup Inc. (NYSE: PHM), said in a teleconference last month. "We're not predicting that it gets better anytime soon."

Source :http://moneymorning.com/2011/08/03/dont-expect-to-see-a-housing-market-rebound-anytime-soon/

Money Morning/The Money Map Report

©2011 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

© 2005-2019 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

6 Critical Money Making Rules