Your Realtor's new look
Nationally, used home sales increased and inventory was reduced to just over six months, which is good news for the economy. But 35% of that increase was attributable to foreclosure sales, which haven’t arrived here yet, not because we don’t have plenty of homeowners in trouble but because banks hate taking multi-million-dollar hits to their assets, so they’re still carrying these loans on their books and pretending they’re still performing. That can’t last.
I’m no housing bull but Goldman Sachs put out a great research piece on household formation having bottomed in 2011. They see all the excess inventory being sopped up over the next 3.5 yrs….
If prices drop, sure. Right now, we have something like a seven-year inventory of houses asking $7 million and above. I’ll run some numbers tomorrow on the other price brackets.
Chris,
Be aware that the NAR revised last month’s 5% gain to a -0.5% decline in order for today’s number to be a positive factor. Last month’s 461k was revised lower to 437k, allowing the 457k print to look more favorable.
Aren’t you glad your representative agency is so above board?
The incredibly low interest rates are allowing people to hang on (barely) to properties they have over-levereged with debt. I know people who put tiny sums down on houses and then took out second mortgages or burned through home equity lines of credit. They won’t even break even if they sell so they must stay in their homes. They’ve restructured their mortgages into interest only loans at crazy low rates — they are making their monthly payments and praying that their home value will increase in the next 5-7 years so they can get out. Then again, I know of other people who have simply stopped paying their mortgages altogether with seemingly no ramifications (yet). One acquaintance has not paid his mortgage in 3 years and still vacations at the Ritz every year while he is “in negotiations with the bank.” I’m never sure who actually owns their home anymore. It’s all smoke and mirrors.
With the fed lending dollars at zero, it can last indefinitely.
Actually Annon 7:02pm, that is way off base. There is an excellent article in the WSJ discussing how mortgage rates are trading at 107 bps above the current coupon yield, the benchmark for setting mortgage rates. These levels were last seen near the 2008 crisis peak. The historical average is closer to 50 bps. And although a bank’s fully loaded cost of capital, even from the Fed, is closer to 0.40% per annum, they are tying up capital that could in theory be making 200bps or more per annum.
This real estate market is going to get clobbered (again). We are not out of the woods yet!
Anon 6:52 is spot on. Most owners who could, refinanced and are making ridiculously low monthly payments some at 25-35% below market rental value. Those who have stopped making payments are riding it out with the banks unwilling to take the keys and write down the loans on their books. Greenwich housing inventory is going to be parked for years to come.
The NAR is not a credible source for RE information. They are known mainly for what they are, a special interest group with a history of distorting stats.
Anonymous @ 6:52, ABSOLUTELY CORRECT. Difference up here in Ridgefield is that nobody gets to sit in his house for three years or even one if he stops paying the mortgage. Mortgages aren’t in the millions like they are in Greenwich, thus the bank doesn’t take such a hit when it takes back the keys.