NYT: Housing Not Out of the Woods Yet
“Plenty of pain yet to come,” is how one economist summed it up in an article in the New York Times this morning about the country’s housing market. The article’s main point is that the improving data we’ve seen over the past three months may very well be a head-fake rather than the first leg…
“Plenty of pain yet to come,” is how one economist summed it up in an article in the New York Times this morning about the country’s housing market. The article’s main point is that the improving data we’ve seen over the past three months may very well be a head-fake rather than the first leg of a recovery:
Artificially low interest rates and a government tax credit are luring buyers, but both those inducements are scheduled to end. Defaults and distress sales are rising in the middle and upper price ranges. And millions of people have lost so much equity that they are locked into their homes for years, a modern variation of the Victorian debtor’s prison that is freezing a large swath of the market.
Closer to home, the data from Case-Shiller show that New York City is still holding up relatively well, with prices down just 10 percent over the last year, as compared to 30 percent in Las Vegas and 15 percent in Seattle.
Fears of a New Chill in Home Sales [NY Times]
Graph from the New York Times
BHO no doubt. besides, credit ratings are such a joke. you can mail in your keys and start borrowing again with a clean slate in 7 years. great country.
one thing to add — those “head fakes” have another name — “seasonality”. they’re all between may and august.
I’m on loan for team Bull. Like when you show up for a little league game and the other team only has 7 players, so they forfeit the game and a couple of your guys switch so you can still play.
The prices have basically bottomed.
“We’re all gonna die!!!!! Run for the hills!”
LOL. Maybe Carl and Bob need to adjust their “seasonal adjustment” formula ’cause this headfake looks mighty regular.
***Bill Thompson for Mayor***
mopar — I know, I was stretching a little to squeeze in a rant that I haven’t found a home for. forgive me. But most of the US treasury debt in the US is owned by pensions and other similar long term investors — it’s not as circular as you make it sound.
I agree that there is a limit to how much mortgage debt can be bought by the treasury (this program has kept the spread down), and there is a limit to how many mortgages can essentially be written (via fannie mae etc) by the government. The private mortgage market is still dead, and the de facto lender is uncle sam itself. but I don’t think the current programs are in any imminent danger of collapse. The US still borrows very very cheaply.
Deja Vu! May thru September!
New York Metro Case-Shiller:
MONTH, READING, FROM PEAK, YOY, REMARK
May-08 194.22 -10.01% -7.74% HEAD FAKE
Jun-08 194.74 -9.77% -7.04% HEAD FAKE
Jul-08 193.70 -10.25% -7.04% HEAD FAKE
Aug-08 193.48 -10.36% -6.61% HEAD FAKE
Sep-08 191.66 -11.20% -7.14% BACK TO REALITY
Oct-08 189.67 -12.12% -7.72%
Nov-08 186.52 -13.58% -8.74%
Dec-08 183.46 -15.00% -9.22%
Jan-09 180.94 -16.17% -9.73%
Feb-09 177.83 -17.61% -10.32%
Mar-09 173.59 -19.57% -11.66%
Apr-09 170.66 -20.93% -12.36%
May-09 171.15 -20.70% -11.88% HEAD FAKE?
Jun-09 172.36 -19.93% -11.49% HEAD FAKE?
Jul-09 173.94 -18.85% -10.20% HEAD FAKE?
Aug-09 174.89 -18.31% -9.61% HEAD FAKE?
Speaking of “Closer to home”, there was a story last night on PBS about UPPER EAST SIDERS (posers!) struggling with the economy called, guess what, yup “Close to Home”. But the offsheet balance games and foreclosure backlogs by banks (haven’t yet realized toxic losses and don’t want to dump more inventory on already stifling inventory), the FED-manipulated stockmarket and a temporary “recovery” on taxpayer life support would have you thinking that everything is alright.
I overheard a discussion on the train this morning between a man and woman. The woman and her friend were struggling to sell and/or rent their apartments and the guy goes “Just hold on ’til next year. The market will get better.” It’s amazing but sad how mass psychology can be so swayed by TV and big name newspapers/magazines. This “recovery” blip is to be sold into. Take profits or minimize loss.
And nobody is “trapped” in their home. Turn up the volume on Morris Day and stop the bleeding. Throwing away more cash in the futile attempt to stop your inevitable crash? Not smart. You have bigger problems over the next decade than your credit rating. Better yet, live rent free until you hear that knock on the door – the judges can’t decide who owns your mortgage anyway. I know a guy who knows a guy in NYC who hasn’t paid his mortgage in over a year.
***Bill Thompson for Mayor***
wow, it has been 2 hours since this post and still not a single comment from the perma bulls.
Joe , this article isn’t propounding the Treasury apocalypse theory. It merely says interest rates will rise when the US stops buying its own debt. Perfectly reasonable.
also, there’s no such thing as “artificially low interest rates”. government interest rates are set by policy, so either they’re all “artificial” or none of them are. Japan has had near zero interest rates for almost 20 years.
The popularity of the US treasury armageddon scenario is way way out of proportion. Did you know that China only owns 7% of our debt, and that fully two thirds of it is owned by americans themselves? And China fully admits that there is really not much else out there to buy with 700Bn of surplus. Further, to buy US treasuries you have to first buy dollars and sell Yuan — that keeps China’s currency down, supporting their exports. They need that. Don’t listen to Lou Dobbs. “Communist China” is not bringing our economy down by dumping treasuries. (and speaking of anti-china press, how many of you knew that Japan owns the same amount of our government debt that China does — but do you hear about it in the news?)
Next. There is no such thing as a “treasury bubble”. Bond markets can’t have bubbles, because every bond matures at 100c on the dollar. Our “bubble” long bond is at 119, meaning it will lose a little over 20% between now and its 2040 maturity. not really a big deal.
We’re all gonna die!!!!! Run for the hills!
I wouldn’t make that much of the expiry of the new homebuyer tax credit. it’s not that expensive and it’s good bang-for-the-buck for the government, since it moves a lot of low-priced homes. today they reported 400K annual pace for new homes. If a third of that qualified for the 8000 credit, it would only cost 1 Billion. They need to threaten to take the program away to get people to use it. It’s an empty threat — this is one of their better tools, and they’ll keep using it to prop up the market.