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November 28, 2006

Housing Bust Far From Crisis, Survey Says

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A recent Wall Street Journal poll of 49 economists paints a fairly sanguine picture of the housing market. Although more than 2/3 of the economists said they thought the worst was behind us, as a group they still see prices on a national level falling slightly in 2007. "We're nearing the end of the slowdown for most markets," said Ethan S. Harris at Lehman Brothers. The consensus seems to be that unless you are in a particularly bubblicious market like Florida or Arizona, the pain should be fairly muted. "Tthis is a small bubble--Prices are just about 20% too high," says Harris. "In the history of bubbles, this will go down as one of the smaller ones."
Economists Say the Worst Of Housing Bust Is Over [Real Estate Journal]
Photo by jekemp




Posted by Brownstoner at 8:54 AM | Comments (15)
Categories: Market

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And then keep saying "it's over!" so you can sell some more...ridiculous. How can anyone know? Any why would this real estate cycle be different from others? Aren't they generally 5-7 years in length? So what makes this a 10 year boom with a less than one year down cycle?

Posted by: Anon at November 28, 2006 9:42 AM

If you can name the other 'cycles' perhaps someone could say how different.
But other than the price appreciation in 80's what other 'cycles' historically are you referring to?
And with real estate - are we referring to 'price' cycles or construction booms? Not necessarily same time frames.

Posted by: Anonymous at November 28, 2006 10:50 AM

Perhaps the price declines that went on from 90-96, after the rise in prices from 84-89? That's recent, and that was no short cycle. No one has been able to tell me how this was different except the same old "new economy" nonsense. Yeah, I think I heard that one a few years ago, didn't I?

I just think it's very irresponsible to call a bottom or a top - it's practically making promises to people and it's ridiculous, because who really knows? No one.

Posted by: Anon at November 28, 2006 11:33 AM

Sales of existing homes posted a tiny increase in October but the median home price fell by a record amount. Analysts forecast more price declines in coming months as the once-booming housing market undergoes a painful correction.

The National Association of Realtors said Tuesday that existing home sales edged up 0.5 percent to a seasonally adjusted annual rate of 6.24 million last month. It was the first increase after seven consecutive monthly declines.

However, the median price for a home sold dropped to $221,000 in October, a decline of 3.5 percent from a year ago. That was the biggest year-over-year price decline on record.

It marked the third straight month that median prices have fallen compared with the same period a year ago, the longest stretch of such declines on record. The median is the point where half the homes sold for more and half for less.

David Lereah, chief economist for the Realtors, said he expected home prices to continue falling for the rest of the year as sellers, accustomed to the booming market conditions of previous years, reluctantly cut their prices.

http://www.forbes.com/home/feeds/ap/2006/11/28/ap3209371.html

Posted by: bubbles at November 28, 2006 12:27 PM

Well said anon 11:33, no one knows what will happens. All these talking heads have a 50% chance of being right and each side of the aisle have made convincing arguments to support the result that they WANT to see.

Posted by: Anonymous at November 28, 2006 12:27 PM

”The worst of the housing bust is over...But they still predict that the average selling price of a house will fall next year.”

Can somebody please help me make sense of this?

How can Mr. Sinai say...

“…housing remains a big risk to the economy.”

but

“…a solid jobs market will [help] support the economy” ?

Doesn’t employment stability lag economic results?

“…weakness in the housing sector is being offset by other areas of the economy.”

What other areas? Please elaborate. How does this composite index break down?

"People say all bubbles end in disaster, but this is a small bubble…in the history of bubbles, this will go down as one of the smaller ones," said Lehman's Mr. Harris.

Maybe small if you go back to the Roman Empire. The last century has seen some big housing bubbles, but not like this.

Why do…

“57% [of the economists] expect Fed policy to be the biggest factor in the economy and markets over the next year, topping Iraq or the budget and tax legislation”

but only…

“eight of 56 economists expect the Federal Reserve to raise rates beyond the current 5.25% rate before June 2007.”?

Seems more like cheerleading than objective reporting.

Posted by: Anonymous at November 28, 2006 12:36 PM

Even with talk about the bubble burst I still can't get a brownstone in a bad area for under $550K.

The houses in these pics are nice but wonder if this style would fly in bkln.

Posted by: anonymous at November 28, 2006 3:03 PM

"Even with talk about the bubble burst I still can't get a brownstone in a bad area for under $550K."

5 years later...

"Even with talk about the brownstone market rebounding, I still can't sell a brownstone in a bad area for over $550K."

It took 5 years for the run-up. Why would it burst overnight? Real estate markets work in slow motion.

Posted by: Anonymous at November 28, 2006 4:29 PM

What, this debate again? Are houses not selling? They're totally selling. So what's the speculation about? Just look outside your window and in your own neighborhood to see what is selling and after how much time and for how much. No need to read the Wall Street Journal to find out what's going on. Sheesh. 'nuff said.

As for those cycles everyone likes to talk about, the last one which was SUPPOSEDLY '90-'96, my house in L.A. at that time went up in value 30% between '94 and '96 and houses in my 'hood there were selling like hotcakes. So whatever. Again, what I need to know about my own neighborhood's real estate market, I like to observe for myself with my own two eyes. And not listen to the armchair-speculation.

Posted by: Anonymous at November 28, 2006 5:15 PM

Talked to a friend/broker about the market for 2bd/2 bath 1000+ sq ft coops/condos. Used to be there only a few and all $1MM+. Said yes -- and many are not even being put on web sites -- particulalry new ones -- so it doesn't look as bad as it is! We have not even begun to scratch the bottom...

Posted by: Anonymous at November 28, 2006 5:55 PM

"So what's the speculation about?"

Prices, not sales.

"...my house in L.A. at that time went up in value 30% between '94 and '96..."

That was from the bottom. Your predecessor(s) couldn't say the same from '87 to '91. That's pretty much the stage where we are now.

Posted by: Anonymous at November 28, 2006 6:10 PM

Housing in the U.S. was undervalued before 1999 so the run up that ended in 2005 was appropriate. Sure, now it's a little too high and that's why we're seeing an adjustment (it's certainly not because of interest rates which are still very low). But the downward cycle shouldn't be long-lasting unless something goes haywire with the economy as a whole. That said, prices might continue to come down because of the glut of new construction about to come onto the market. But it won't effect brownstone prices much because supply is always so very finite. Look at housing prices in the UK and especially London. There are ups and downs there -- and boy do they obsessively study the monthly stats -- but overall it's ever upwards, in spite of the fact that fewer and fewer Brits can now get on the property ladder at all.

Posted by: relax at November 28, 2006 6:16 PM

This is all pointless. Buy a home and live in it for 10+ years and you'll make money no matter what cylce anyone here is talking about. If you're not going to live in a house for an extended time, don't buy. With the closing costs in NYC you need 10% appreciation just to break even.

Posted by: Anonymous at November 28, 2006 9:26 PM

I saw this and thought the same as 6:10. What, this discussion AGAIN? The wild west period is over, we are experiencing a correction, if you want to buy and flip, forget it, but so what?
If it is your long term housing solution, you are fine, particularly if you have tenants.

Posted by: anon at November 29, 2006 4:54 AM

from CNN/Money, via The Big Picture:

"While month-to-month declines in home prices are not uncommon, year-to-year drops had been rare before the recent housing slump. Last August was the first month in 11 years to see such a decline."

permalink: http://bigpicture.typepad.com/comments/2006/11/existing_home_s_1.html

Posted by: sylvia at November 30, 2006 11:08 AM

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