Here’s a pundit who thinks housing prices have bottomed. I’m not sure I buy her entire argument but she’s probably right that the foreclosure process has so clogged the courts that houses will enter the market in a trickle, not a flood, which should help avoid a drastic collapse. Hope so, anyway.
Tag Archives: housing market
Another real estate columnist in town (no link because his paper won’t put him on line) says that we’ve reached bottom and now is the time for buyers to “pull the trigger”. That worked on those Somali pirates, for sure, but I’m not as positive as he. I think I’ll wait until something starts selling before I conclude that we’re on the way back. It’s a certainly a good time to look for bargains, but except for those, I’d hold off. But if I’m wrong, you’re missing the opportunity of the decade, so feel free to disagree.
In Manhattan, for instance, sales of condominiums and co-operative apartments fell 52 percent in January, according to Miller Samuel, an appraisal firm.
The market has been hammered by layoffs on Wall Street, tighter lending standards and a glut of new buildings, said Jonathan J. Miller, chief executive of the firm.
“The leverage is being squeezed out of the economy.”
New York is not alone. Real estate sales have also slumped in cities like San Francisco and Seattle, which previously seemed impervious. California’s recent experience might offer one roadmap of how the housing slump will play out in other places. But the process will be painful and slow.
So April, when buying traditionally picks up, could be the cruelest month yet for the housing market.
“You are really looking at a very, very ugly outlook,” said Ivy Zelman, chief executive of Zelman & Associates, a housing research firm.
In recent months, many banks and mortgage companies have suspended foreclosures voluntarily or because of state moratoriums meant to encourage negotiations between delinquent borrowers and lenders. Experience, however, shows that these suspensions merely delay foreclosures, and that foreclosed homes soon flood the market.
Another big concern is that homeowners with solid credit records will fall behind on their mortgages in greater numbers as unemployment rises.
So for now, the American dream of homeownership is a dream deferred for many people. Growth in the number of households — defined as families or unrelated people living together — slowed last year, to 1.1 million, from an average of 1.4 million a year from 2000 to 2006, according to George Masnick, a researcher at the Joint Center for Housing Studies at Harvard University. Economists say the growth rate will likely fall further in 2009.
Many of the vacant homes are concentrated in far-flung suburbs in the Southwest and in Florida, which means that prices there may not return to their highs for many years. It also suggests that much of the country does not have as large an oversupply of homes.
Troubled housing markets do not rebound quickly. The first thing to turn up are sales of homes as banks and individuals acknowledge that prices are no longer what they were; some of that is already happening in California and Florida.
Home prices tend to lag sales by a couple of years. That is what happened in Massachusetts and California in the early 1990s.
How long will the current slump last?
A futures market for home prices provides one sobering forecast. Trading in contracts that track home prices in 25 metropolitan areas suggests that home prices will fall about 15 percent this year and hit bottom in 2010, according to Radar Logic, a firm that created the index on which the trading is based. The market is also predicting that the Los Angeles area is closer to the bottom than New York.
The parent of Century 21, Sotheby’s and Coldwell Banker is out with its latest 10K. Understand that I am not picking on Realogy here – I doubt any other firm is doing much better, if at all. But as the largest franchiser of real estate brokerage firms, its data provides the best over view of what’s going on.
I’ll start with the conclusion because it sums up as well as anything I’ve read the current uncertainty of where the market’s headed and when, or if, it will recover.
We believe that long-term demand for housing and the growth of our industry is primarily driven by affordability, the economic health of the domestic economy, positive demographic trends such as population growth, increasing home ownership rates, interest rate trends and locally based dynamics such as housing demand relative to housing supply. Although we see improvement in affordability and a slight lessening in the overhang of housing inventory, we are not certain when credit markets and the job market will return to a more normal state or the general economy will improve. Consequently, we cannot predict when the market and related economic forces will return the residential real estate industry to a growth period.
Highlights from the report include:
HomesalesDuring the first half of this decade, based on information published by NAR, existing homesales volumes have risen to their highest levels in history. That growth rate reversed in 2006 and continued to decline through 2008 as reflected in the table below. Our recent financial results confirm that this negative trend continued into 2008 as evidenced by homesale side declines in our Real Estate Franchise Services and Company Owned Real Estate Brokerage Services businesses which for the year ended December 31, 2008 experienced closed homesale side decreases of (18%) and (16%), respectively, compared to the year ended December 31, 2007.2008 vs. 2007 2007 vs. 2006 2006 vs. 2005 Number of Homesales Industry NAR (13 %)(a) (13 %) (9 %) FNMA (13 %)(a) (13 %) (9 %) Realogy Real Estate Franchise Services (18 %) (19 %) (18 %) Company Owned Real Estate Brokerage Services (16 %) (17 %) (17 %)Existing homesale volume was reported by NAR to be approximately 4.9 million homes for 2008 compared to 5.7 million homes for 2007, which was down from 6.5 million homes in 2006 versus the high of 7.1 million homes in 2005. Our recent financial results confirm this trend as evidenced by our homesale side declines in our Real Estate Franchise Services and Company Owned Real Estate Brokerage Services businesses.Homesale PriceBased upon information published by NAR, the national median price of existing homes increased from 2001 to 2005 at a compound annual growth rate, or CAGR, of 7.3% compared to a CAGR of 3.0% from 1972 to 2000. According to NAR, the rate of increase slowed significantly in 2006 and declined for the first time since 1972 in 2007 and 2008 as reflected in the table below. Our recent financial results confirm that this declining pricing trend continued into 2008 as evidenced by homesale price declines in our Real Estate Franchise Services and Company Owned Real Estate Brokerage Services businesses which for the year ended December 31, 2008 experienced average closed homesale price decreases of (7%) and (10%), respectively, compared to the year ended December 31, 2007. Furthermore, the decrease in average homesale price for the Company Owned Real Estate Brokerage Services segment is also being impacted by a shift in the mix and volume of its overall homesale activity from higher price point areas to lower price point areas as well as an increase in REO activities.2008 vs. 2007 2007 vs. 2006 2006 vs. 2005 Price of Homes Industry NAR (9 %)(a) (1 %) 1 % FNMA (9 %)(a) (1 %) 1 % Realogy Real Estate Franchise Services (7 %) (1 %) 3 % Company Owned Real Estate Brokerage Services (10 %) 8 % 5 %
Update: Loss of $1.9 billion for the year. Ouch. UPDATE II: Apollo to support Realogy with more money. Which is only fair, since it was Apollo who piled all that junk debt on Realogy to begin with.