Housing prices continue to fall, emphasis is put on the fact that they are falling at a slower rate
How bleak is the long term picture on housing?
The good news? According to the closely watched Case-Shiller Home Price Index, which tracks home prices across 20 major cities nationwide, the three-year housing slump slowed sharply in April and May.
May's decline was just 0.2%, the slowest in two years. . . . .
Prices may -- may -- be nearing the bottom in many markets. But beyond the headlines, there are plenty of reasons to stay cautious. There may even be fresh dangers just ahead.
And even if prices have stopped falling, it may be years before they start rising sharply again.
First, late spring is traditionally the strongest season in the real-estate market.
And it's hardly a surprise the market saw some green shoots this time around. It's enjoying not one, but two, gigantic taxpayer subsidies -- an $8,000 refundable tax credit, or gift, for first-time buyers, as well as those cheap mortgage rates. The Federal Reserve has been spending billions of dollars to keep interest rates down.
Both are only short-term fixes. Any sustained economic upturn would be expected to send long-term mortgage rates rising again, dousing the real-estate market with fresh cold water. . . .
The picture on inventories isn't as good as it sounds, either. A lot of unsold homes have simply been put up for rent instead, especially in the most difficult markets like Miami. The result? A glut of empty rentals as well.
New waves of foreclosures and distressed sales may be coming, too. In states such as California, it can take many months for delinquencies to turn to foreclosures, which means last winter's bad news may still be coming down the pike. Meanwhile, vast tranches of teaser-rate mortgages are due to reset later this year and in 2010.
As for the economy: Both unemployment and household debt levels remain at extremely high levels by the standards of postwar history. Either is bad news for housing. The combination is very bad. . . . .
Labels: Economy, mortgagecrisis
posted by John Lott at 12:22 AM
1 Comments:
In my town, it looks like there will only be 15 single-family houses sold this year. For the past 20 years, the average has been around 60 houses sold per year. Selling prices are off about 20% since the financial meltdown of last fall.
To clear out the inventory of 100+ unsold houses is going to take more price chopping. However, most sellers in town are unrealistic. The median list price right now is almost double the median sales price.
In the last real estate bubble that began in the late '80s, it took 5 years of declines in my town to hit bottom and another 7 years to climb out of the hole for prices to match their 1987 peak.
This time around I don't see price appreciation for a long time.
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