Housing Tidal Movements

They just do not getit, do they?  A massive inventory of bad mortgagescontinues to choke the market.  Thatinventory is simply too large to absorb in the normal course of business and noone wants to accept that reality.  As I haveposed, it is necessary to reset the process and cause that entire inventory tosell out once and for all.  This wouldimmediately relaunch the building industry and put millions back to work.
The market may fall assuggested here, but I think that continues to be unlikely because the hit onbank capital is too large.  I think that thereverse will happen.  The banks alreadyknow what they are stuck with  and it isbetter to sell into a rising market.

After all if I have allavailable stock in my inventory and all buyers must come to me, it costs littleto tape the prices higher.

Thus I am predictingthe exact opposite.  The banks know todaywhat their losses are and the only way out is to move prices upward.  Downward merely puts them under, while upwardfrees up huge amounts of new capital. Yes, buy bank stocks.  Note that Citibank is on a clear uptrend out of the cellar.

Zillow: Home Values to Plunge by $1.7Trillion This Year
Thursday,09 Dec 2010 10:48 AM

U.S. home values are poised to drop by more than $1.7trillion this year amid rising foreclosures and the expiration of homebuyer taxcredits, said Zillow Inc., a closely held provider of home price data.

This year’s estimateddecline, more than the $1.05 trillion drop in 2009, brings the loss since theJune 2006 home-price peak to $9 trillion, the Seattle-based company said todayin a statement.

The drop in homevalues pushed more buyers underwater, meaning they owe more on their mortgagesthan their homes are worth, Zillow said. The percentage of homeowners withso-called negative equity reached 23.2 percent in the third quarter, up from21.8 percent at the end of 2009.

“With foreclosuresnear an all-time high in late 2010 and high rates of negative equitypersisting, it does not appear that the first part of 2011 will bring muchrelief,” Stan Humphries, Zillow’s chief economist, said in the statement.“Government incentives can only temporarily hold back the tide.”

Housing demand hasslumped since the start of the year as the government tax credit expired andunemployment hovers near 10 percent. Sales of existing homes in October fell toan annual pace of 4.43 million, compared with 5.98 million a year earlier andan annual average of 5.81 million over the past decade, the NationalAssociation of Realtors said Nov. 23. The median price was $170,500, down from$172,000 a year earlier.

More than $1 trillionof this year’s decline in home values occurred in the second half, Zillow said.Federal tax credits of as much as $8,000 for qualified first-time homebuyersand $6,500 for repeat buyers required a sales contract by April 30.

Boston, San Diego

Only 31 metropolitanareas, or fewer than one-fourth of the 129 tracked by Zillow, had gains in homevalues this year. They include Boston and San Diego.

Zillow’s report issimilar to other forecasts for prolonged weakness in the U.S. housingmarket. U.S. home prices will decline as much as 11 percent by 2012 as weakdemand and rising inventory extend the housing slump, Morgan Stanley said in areport yesterday.

Prices will be as muchas 36 percent below their 2006 peak before finding a bottom, Morgan Stanleyanalysts led by Oliver Chang wrote. Sales will stay “depressed” through nextyear amid tightened lending standards, they said.

As many as 8 millionhomes are in default or foreclosure and may be offered for sale, known asshadow inventory, according to Morgan Stanley. The looming supply will combinewith tight credit and questions about housing-finance regulation to reduceprices 6 percent to 11 percent from current levels, the analysts said.

© Copyright 2010 Bloomberg News. All rights reserved.

No comments:

Post a Comment