A few days ago I wrote about the supposed "housing recovery". I continue those thoughts here...
This "recovery" is also going to be temporary because the Great Recession will continue pushing unemployment rates much higher. Currently we are a little over 8% nationally in the unemployment rate. There is not one reputable national economist who is predicting less than a 10% unemployment rate before the recession bottoms out. Lastly, as the housing crash continues, even more homeowners will continue walking away from their homes (20% of homeowners nationwide are now underwater on their mortgages), thus putting even more homes into the "for sale" inventory. Across America right now it is estimated that there are ten million homeowners that actually can afford to make their mortgage, but have lost so much equity - and fear that there will be no real estate rebound for a decade or more - that they very well may just “walk away”. If just one million of those ten million walk away, this will be another devastating blow to the housing market.
And I have yet to even talk about the “shadow inventory” of homes that banks are holding back from putting on the market. They are doing this because they know they cannot sell these homes right now and it will just further destroy their balance sheets and push the housing bust further down quicker. When these homes eventually do hit the market, imagine what that this sudden influx do to supply (and prices/sales).
In regards to the "shadow inventory" problem, check out this recent quote from Stan Humphries, Zillow vice president, in the Tampa Bay Tribune…
“Additional information we have this quarter on ’shadow inventory,’ with one-third of homeowners indicating they would like to put their home on the market if conditions improve, confirms our earlier fears that a bottom in home values could be quite protracted,”
Then, we can begin to talk about the upcoming mountain of mortgage resets in alt-a loans and the ugly option arm mortgages. These resets are scheduled to peak in 2010 and 2011 respectively. Think about it and then tell me what kind of impact do you think these mortgage resets are going to have on the already strained housing crisis?
This is no recover...just a slight slowing of the housing crash. 1999 prices, here we come – maybe a bit slower now, but we are still heading there.
Sunday, May 10, 2009
Thursday, May 7, 2009
Is the "housing recovery" for real?
Are we really witnessing a turnaround from the housing crash and/or economy? For many obvious reasons, I don’t think so. Now what I do think we might be seeing are a couple of short-term results of the pumping of massive taxpayer dollars into failing banks and sustained, artificially low interest rates.
By the way, let us not forget that these two actions will be responsible for some highly undesirable consequences that will affect you directly. The pumping of trillions of dollars into the economy by the government will make you significantly poorer via the soon-to-come hyperinflation (Peter Schiff & Ron Paul predict this will happen in 1-4 years). And by maintaining absurdly low interest rates (just one of the ways the government is refusing to let the housing market find a real bottom (which naturally will take time).
But, getting back to our original question, I think we are seeing 2 things going on in the markets right now.
The first is that we are seeing a refinancing boom due to the insanely low interest rates. This refinancing boom is what is largely driving the relatively good bank balance sheets that we are seeing – and Wall Street is cheering this on as if they are ignorant that this is one-time revenue. If there is a homeowner out there with equity in his home right now (and at least 80% LTV), in many cases he would be insane to NOT refinance right now. And so they are – by the millions Americans are refinancing again. But don’t be fooled. There are not that many out there who can qualify for a refinance (read on for more on this) and once they do, that’s it… no more revenue for the banks from that source. So, this rally that we are seeing in the banks and the stock market is just that – a rally. Be prepared.
The second phenomenon we are seeing deserves a little more thorough explanation. It is the possible existence of 2 separate housing markets. The first is a foreclosure/short-sale market. This is the market that has been spiraling down the numbers in home sales and prices that we have been seeing for the last 2 years of the housing crash. The 2nd market may just be emerging. That market COULD be a temporary recover in housing IN SPECIFIC AREAS and only under $250,000, as even the strongest advocates of a current bottoming of the housing bubble that nothing is moving in the higher-priced real estate market arena.
IF such a “housing recovery” is actually occurring, it will be very short-lived. This is because much of the pickup in sales numbers we are seeing are being driven by first-time home buyers. Once all the first-time home buyers have moved into their home and received the $8,000 tax credit, sales will slow again. This “recovery” also will be short-lived because banks are requiring extraordinarily high down payments and there are simply less buyers out there now that credit scores across the nation are plummeting due to late or unpaid mortgage payments. (See "Banks Fear Housing Market Crash as Mortgage Providers Target 40% Deposit")
Tomorrow we’ll continue looking at reasons why this “housing recovery” is false.
By the way, let us not forget that these two actions will be responsible for some highly undesirable consequences that will affect you directly. The pumping of trillions of dollars into the economy by the government will make you significantly poorer via the soon-to-come hyperinflation (Peter Schiff & Ron Paul predict this will happen in 1-4 years). And by maintaining absurdly low interest rates (just one of the ways the government is refusing to let the housing market find a real bottom (which naturally will take time).
But, getting back to our original question, I think we are seeing 2 things going on in the markets right now.
The first is that we are seeing a refinancing boom due to the insanely low interest rates. This refinancing boom is what is largely driving the relatively good bank balance sheets that we are seeing – and Wall Street is cheering this on as if they are ignorant that this is one-time revenue. If there is a homeowner out there with equity in his home right now (and at least 80% LTV), in many cases he would be insane to NOT refinance right now. And so they are – by the millions Americans are refinancing again. But don’t be fooled. There are not that many out there who can qualify for a refinance (read on for more on this) and once they do, that’s it… no more revenue for the banks from that source. So, this rally that we are seeing in the banks and the stock market is just that – a rally. Be prepared.
The second phenomenon we are seeing deserves a little more thorough explanation. It is the possible existence of 2 separate housing markets. The first is a foreclosure/short-sale market. This is the market that has been spiraling down the numbers in home sales and prices that we have been seeing for the last 2 years of the housing crash. The 2nd market may just be emerging. That market COULD be a temporary recover in housing IN SPECIFIC AREAS and only under $250,000, as even the strongest advocates of a current bottoming of the housing bubble that nothing is moving in the higher-priced real estate market arena.
IF such a “housing recovery” is actually occurring, it will be very short-lived. This is because much of the pickup in sales numbers we are seeing are being driven by first-time home buyers. Once all the first-time home buyers have moved into their home and received the $8,000 tax credit, sales will slow again. This “recovery” also will be short-lived because banks are requiring extraordinarily high down payments and there are simply less buyers out there now that credit scores across the nation are plummeting due to late or unpaid mortgage payments. (See "Banks Fear Housing Market Crash as Mortgage Providers Target 40% Deposit")
Tomorrow we’ll continue looking at reasons why this “housing recovery” is false.
Tuesday, May 5, 2009
Why the housing crisis has to continue - or else
I just saw the 6 minute clip of Glenn Beck (who I usually dislike a good deal) from early March. Beck takes on Obama’s plan to “stem the tide”…to stop the freefall of the housing crash. And, he is spot on here with his graph that documents the inflation adjusted price of housing over the last 110 years. And he goes on further to do a decent job of breaking down WHY the housing crisis is nowhere near finished yet. BUT, if you have the 17 minutes to spare, it would be worth your time to watch a better, more in-depth explanation that is listed as the #1 item YOU NEED TO KNOW at www.housingcrisisnews.com…
Here is that direct link.
“Green shoots” in the housing market
Go to any financial news daily or (if you dare to be exposed) any realtor news site right now and you bound to see some write up about a “turning of the tide” or “stemming of losses” or “green shoots” in the real estate market. The thoughts that are generating these write ups are nothing more than hoping on news that was bound to come. That is, with yesterday’s news that we did not have another month-to-month loss for only the 2nd time in over two years, many are thinking this is a sign that an end to the housing crisis is close by.
Don’t be so easily fooled. As Bill Gross of PIMCO Investments said yesterday, fixed income is still the investment order of the day. Basically, things have been SO bad in the real estate world, that people are jumping on any amount of good news. For an insightful look at exactly why it may not be the smartest thing to fall for this bear market rally, have a look at today’s article “US Home Prices May Be Lost for a Generation” by Bloomberg columnist John Wasik.
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