Housing Market Collapse: How Bad Can It Get?
The Fed lowered short-term rates for the second time in two months yesterday in an attempt to stop housing market woes from completely dragging down the rest of the economy. The cut came after a Case-Shiller survey showed that prices of homes in 20 major metropolitan areas fell 4.4 percent for the 12 months through…
The Fed lowered short-term rates for the second time in two months yesterday in an attempt to stop housing market woes from completely dragging down the rest of the economy. The cut came after a Case-Shiller survey showed that prices of homes in 20 major metropolitan areas fell 4.4 percent for the 12 months through August—the biggest drop since the survey began in 2001. And the New York City area wasn’t exempt from the trend: Home prices were down 3.8 percent for the year that ended in August. In a statement accompanying yesterday’s rate cut, officials said the housing downturn is likely to slow the economy, and most experts think the worst is still to come. So now the same old questions remain: How much worse can the national housing market possibly get, and are the heretofore unscathed upper ends of the Manhattan and Brooklyn markets finally going to feel the heat?
Home Prices Are Down, and So Is Confidence [NY Times]
Fed Lowers Key Interest Rate by a Quarter Point [NY Times]
I love how everyone assumes Wall Street bonuses are the only thing that matters when looking at demand for the housing supply. Law Firm bonuses are going to be at a record high this year:
http://www.nytimes.com/2007/10/31/business/31legal.html?ref=business
And quite frankly I think that lawyers are much more likely the type of people to live in Brooklyn (at least at a younger age) than bankers.
anecdotal observation: this condo of the day completely sold out in one building with pre-credit crunch financing (http://bstoner.wpengine.com/brownstoner/archives/2007/04/659_carroll_str.php). the one next to it got off half of its $1000/sq ft units before the crunch too. the buyers have moved into the second one, but the top two floors are still dark. $950k for ~950 sq ft, what a bargain. there are brownstone co-ops around the corner (also in 321), same size for $200k less now. it sucks to buy at the top (or maybe central air is worth 200k?)…
I work on Wall Street and I can tell you without a shadow of a doubt that everyone expects that bonuses will be significantly down this year. In fact, it’s basically a fact at this point -not a debatable issue. I think 10% is a good estimate across the boards, but it will be skewed unevenly across individuals based on how close their work is to the mortgage crisis. This means that there will be fewer buyers with happily lined pockets, and those pockets will be a bit shallower than they have been for the past few years.
This, combined with the general state of the housing market in my opinion definitely means that even the higher end markets will be affected. Only time will tell though.
How bad it can get?
NY ATTORNEY GENERAL SUES FIRST AMERICAN AND ITS SUBSIDIARY FOR CONSPIRING WITH WASHINGTON MUTUAL TO INFLATE REAL ESTATE APPRAISALS
http://www.oag.state.ny.us/press/2007/nov/nov1a_07.html
One little tidbit.
Internal E-Mails Show eAppraiseIT Executives Knew Their Scheme Was Illegal: “We have agreed to roll over and just do itâ€
Say good-bye. RIP Mutant Real Estate Bubble.
The What
Someday this war is gonna end…..
Anyone who actually works in the real estate market, as I do, knows that things have absolutely slowed down, even in the “Brownstone Brooklyn” market. People who deny this are in denial. While no one knows for certain where it’s all going and if it will get worse, prices have certainly dropped since this Spring season. I would guess the abundance of condos will be a problem because of a lack of demand and houses will be ok since there are so few on the market, but even house prices have gone down at least 10% except in very rare circumstances. I fail to see why people here can’t accept this. If you’ve bought and plan on staying long-term surely you will be ok. If you are liquid you may even get a good deal if you are looking to buy. If you are over leveraged then you may have some serious trouble.
“The US is still a major producer of Cars, Wines and Jewelry.”
IF Chukie or Joe Six Pack have no money then, Who going to buy this shit?
6 Trillion Dollars is home equity loan and mortgages have been made. That is the economy right there homeboy! No credit no money GAME OVER!
The What
Someday this war is gonna end…………..
9:29
“Housing has been overpriced relative to people’s incomes, and this has pushed down their standard of living.”
Actually, that’s not true. Many homeowners have been taking out equity loans on their homes and using it to make purchases of appliances, cars, vacations, or paying down credit card debt. Rising home values was a boon to homeowners and falling home values will depress the economy by tightening spending which leads to fewer jobs and probably a rescession.
“and your source for this comment is?”
Look at the BILLIONS OF DOLLARS in write-offs! Citi, Countrywide, Merrill Lynch, Credit Suisse do I need to go on. You must be smoking that good shit bro.
Here read this
Credit Suisse Profit Falls After Debt Market Swings
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFa2pXTIMIec&refer=home
Yeah! When I get my bonus, I’m going to but that condo in the hood. Dumbasses!
The What
Someday this war is gonna end
I knew I’d regret this but to answer your (The What) question as narrowly as possible –
The US is still a major producer of Cars, Wines and Jewelry.
So I repeat arent you ignoring the tremendous benefit that the falling dollar will have on those industries?