Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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