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Thread: The Housing Omen...

  1. #1
    Vulture of The Western World Eric's Avatar
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    The Housing Omen...

    On Tuesday the National Association of Realtors announced that existing home sales in the United States dropped a whopping 27.2% in the month of July.

    The consensus among analysts was that we would see a drop of around 13 percent, so when the 27 percent figure was announced it sent a shock through world financial markets. Only 3.83 million units were sold in July, which was down from 5.26 million in June, and which was the lowest number that the National Association of Realtors has ever seen since they began tracking this statistic back in 1999. To say that the real estate industry is alarmed by these numbers would be a tremendous understatement.

    What we are seeing unfold is essentially "Armageddon" for those involved in the housing and real estate industries. The real estate market is grinding to a standstill and a shockingly low number of people are actually in the market to buy a home right now. In the months ahead home sales may pick up a little bit, but only if housing prices start to fall. Why? Because right now there are tons of houses on the market and there are very few qualified buyers available to purchase them and potential buyers are starting to realize this. Buyers are beginning to understand that they have all the leverage now and they are waiting for prices to fall.

    Anyone who has taken Economics 101 in college knows that when supply is high and demand is low prices will fall, and that is exactly the situation we have in the U.S. housing market right now.

    At the moment, most home sellers in the United States are very hesitant to lower the prices on their homes too much. Many have no intention of selling their homes below what they originally paid for them, and many others truly believe that the housing market will eventually rebound.

    But the truth is that housing prices are simply not going to rebound to 2006 levels. If anything, they are going to continue to fall.

    The following are the three basic points that every American needs to understand about the U.S. housing market right now:

    There are a staggering number of unsold homes on the market right now - over a year's worth of unsold homes flooding the marketplace.

    So who is going to buy all of those unsold homes with so few qualified purchasers in the marketplace?

    That is a very good question.

    Unfortunately, all the signs indicate that the glut of unsold homes is going to get even worse.

    As of this March, U.S. banks had an inventory of 1.1 million foreclosed homes, which was a new all-time record and which was up 20 percent from one year ago.

    And the tsunami of foreclosures and repossessions just keeps growing.

    One out of every seven mortgages were either delinquent or in foreclosure during the first quarter of 2010.

    According to RealtyTrac, a total of 1.65 million U.S. properties received foreclosure filings during the first half of 2010.

    U.S. Banks repossessed 269,962 U.S. homes during the second quarter of 2010, which was a new all-time record.

    The supply of unsold homes is already incredibly massive and it is growing at a staggering rate.

    With such a flood of homes on the market, why in the world would anyone in their right mind pay a premium price for a home in 2010?

    The banks and lending institutions that survived the subprime mortgage crisis of 2007 and 2008 learned some very valuable lessons. The days when even the family dog could get approved for a home loan are long gone. Now the pendulum has swung to the other end of the spectrum. Fearful of making more bad loans, banks and lending institutions have really, really tightened up lending standards. So a lot fewer people are getting approved for home loans these days.

    That makes a lot of business sense for banks and lending institutions, but it also means that there are a lot fewer qualified buyers out there looking for homes.

    Not only that, but millions of Americans who could potentially buy homes are waiting for the market to go down even further.

    When you add that all together, you get the kind of home sales numbers discussed at the beginning of the article.

    The Mortgage Bankers Association recently announced that demand for loans to purchase U.S. homes has sunk to a 13-year low. Unless the number of Americans getting approved for home loans starts increasing, you simply are not going to see housing numbers recover much.

    And the truth is that Americans are not even doing much browsing for homes right now. Even Internet searches for homes are way down. Internet searches on real estate websites are down about 20 percent compared to this same time period in 2009.

    So with a massive flood of houses on the market and with very few qualified buyers to purchase them, how in the world are housing prices supposed to go up?

    The answer is that the housing industry will never fully recover without a jobs recovery first.

    In order to get qualified for home loans, Americans have to have good jobs. But in this economy that is a huge problem.

    Robert Dye, a senior economist with PNC Financial Services Group, recently told USA Today what he believes the bottom line problem of this housing crisis is "Jobs, jobs, jobs."

    Today, 14 million Americans are unemployed and millions more are underemployed. Unfortunately, there are not nearly enough good jobs for all of them.

    Today it takes the average unemployed American over 8 months to find a job. The number of Americans receiving long-term unemployment benefits has risen a staggering 60 percent in the past year alone.

    Things have gotten so bad that according to one recent survey 28 percent of all U.S. households have at least one person that is searching for a full-time job.

    To get an understanding of how horrific the unemployment situation has become in the United States, take 38 seconds to watch the incredible video posted below:

    http://www.youtube.com/watch?v=9ssIh...layer_embedded

    The truth is that without jobs, Americans simply cannot buy homes.

    So is there any hope that we will see a robust jobs recovery any time soon?

    Unfortunately there is every indication that the employment market is going to get even worse.

    So the bottom line is that the housing market is going to continue to suffer.

    There is going to continue to be a massive glut of unsold homes on the market.

    There are going to continue to be very few qualified buyers in the marketplace.

    Large numbers of Americans are going to continue to be unemployed.

    Yes, that is a lot of bad news, but you aren't reading this column to get the same kind of mindless optimism that you get from the mainstream media news.

  2. #2
    Administrator Ken's Avatar
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    Quote Originally Posted by Eric View Post
    On Tuesday the National Association of Realtors announced that existing home sales in the United States dropped a whopping 27.2% in the month of July.

    The consensus among analysts was that we would see a drop of around 13 percent, so when the 27 percent figure was announced it sent a shock through world financial markets. Only 3.83 million units were sold in July, which was down from 5.26 million in June, and which was the lowest number that the National Association of Realtors has ever seen since they began tracking this statistic back in 1999. To say that the real estate industry is alarmed by these numbers would be a tremendous understatement.

    .................................................. .................................................. .

    Yes, that is a lot of bad news, but you aren't reading this column to get the same kind of mindless optimism that you get from the mainstream media news.
    Over here having a foreclosure on your property does not, as far as I am aware, negate the mortgsge debt. I understand, but would like to be corrected, that the mortgage company can sell the property for what it can get, which may be way below the 'market' value (and tens or hundreds of thousands below the mortgage debt). They can then sue the ex-householder for the diference betwen the value it was sold for and the amount of mortgage outstanding at the time of foreclosure.

    Ken.
    Die dulci fruimini!
    Ken.
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  3. #3
    Vulture of The Western World Eric's Avatar
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    Quote Originally Posted by Ken View Post
    Over here having a foreclosure on your property does not, as far as I am aware, negate the mortgsge debt. I understand, but would like to be corrected, that the mortgage company can sell the property for what it can get, which may be way below the 'market' value (and tens or hundreds of thousands below the mortgage debt). They can then sue the ex-householder for the diference betwen the value it was sold for and the amount of mortgage outstanding at the time of foreclosure.

    Ken.
    Wow.

    I'm not necessarily opposed to this.

    I mean, not to be a dick, but I think a person ought to be obliged by honor (as well as the law) to pay his debts.

    Here, you can rack up tremendous debt - by being grossly irresponsible and knowingly living well beyond your means - then declare bankruptcy and have most if not all the debt forgiven. Yes, your credit is shot and it will be impossible to get a loan for many years, but the fact remains you can walk away from tens of thousands (or hundreds of thousands) of dollars you owe, leaving others holding the bag.

    That bothers me.

    But a contributing factor is that we have a system that is explicitly built upon debt and which discourages savings, or living beneath your means. The system systematically pushes people into acquiring debt, often well beyond their ability to pay. People are conditioned from an early age to "consume," not produce - let alone save.

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    Quote Originally Posted by Ken View Post
    Over here having a foreclosure on your property does not, as far as I am aware, negate the mortgsge debt. I understand, but would like to be corrected, that the mortgage company can sell the property for what it can get, which may be way below the 'market' value (and tens or hundreds of thousands below the mortgage debt). They can then sue the ex-householder for the diference betwen the value it was sold for and the amount of mortgage outstanding at the time of foreclosure.

    Ken.
    Well they could do it here also. But there's two reasons why they don't:

    #1. Many of the mortgages were held be Fannie Mae / Freddie Mac. They are pseudo public / government agencies - and they are bankrupt from making all the subprime loans in the first place. So Fannie and Freddie are not going to 'go after' the foreclosed properties.

    #2. The current economy is so bad the banks know they can't blood out of a stone. Besides, if they lose a lot of money, they are in line for a bail out.

  5. #5
    Vulture of The Western World Eric's Avatar
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    Quote Originally Posted by dBrong View Post
    Well they could do it here also. But there's two reasons why they don't:

    #1. Many of the mortgages were held be Fannie Mae / Freddie Mac. They are pseudo public / government agencies - and they are bankrupt from making all the subprime loans in the first place. So Fannie and Freddie are not going to 'go after' the foreclosed properties.

    #2. The current economy is so bad the banks know they can't blood out of a stone. Besides, if they lose a lot of money, they are in line for a bail out.
    As I mull this whole thing over, I am more and more arriving at the conclusion that, to a great extent, people self-victimize. What I mean is this: Yes, the banksters are assholes and yes, "free trade"/corporate America has raped the middle class... .

    But - it's also true that people chose to buy big homes that required a large income to support; to have kids (often, multiple kids), two late-model cars... flat screen TVs, $400 sail fawns and all the rest of it.

    I'm no genius, but I do understand supermarket mathematics and so I have always spent modestly, saved much. This struck me as the rational, smart way to live. The system we have is obviously unstable and has been so for decades. Therefore, plan and act accordingly.

    A great many of the people now in trouble are professional people who were at one time earning high salaries; had they lived reasonably during the good times and socked away a good portion of what they earned rather than spend, spend, spend - they'd be in a much better position to ride out the storm right now.

    Am I mean-spirited for not having much sympathy for people who blew $50,000 on a Ford Explorer Eddie Bauer and $400,000 on a McMansion and then bought every electronic gadget as soon as it came out, but who now find themselves underwater, with the Explorer repo'd and the sail fawn turned off?

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    Quote Originally Posted by Eric View Post
    Am I mean-spirited for not having much sympathy for people who blew $50,000 on a Ford Explorer Eddie Bauer and $400,000 on a McMansion and then bought every electronic gadget as soon as it came out, but who now find themselves underwater, with the Explorer repo'd and the sail fawn turned off?
    One good thing - The Sharper Image went bankrupt!

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    Vulture of The Western World Eric's Avatar
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    Quote Originally Posted by dBrong View Post
    One good thing - The Sharper Image went bankrupt!
    Next up, Abercrombie & Fitch!

    Hey, maybe this economic collapse isn't so bad after all...

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    Quote Originally Posted by dBrong View Post
    One good thing - The Sharper Image went bankrupt!
    One less outlet for overpriced, cheaply made Chinese electronics. What a sham.

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    Quote Originally Posted by Eric View Post
    Next up, Abercrombie & Fitch!

    Hey, maybe this economic collapse isn't so bad after all...

    Abercrombie and Bitch deserves to go out of business as well, selling $89 shirts made in China to a bunch of vapid bimbos.

  10. #10
    Vulture of The Western World Eric's Avatar
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    Quote Originally Posted by swamprat View Post
    Abercrombie and Bitch deserves to go out of business as well, selling $89 shirts made in China to a bunch of vapid bimbos.
    I have never set foot in one of these stores; I don't get the appeal. But what do I know.... I'm just a hate-filled old redneck who wears Dickies coveralls and camo pants!

  11. #11
    Senior Member Mase's Avatar
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    When I moved to Kalifornia in 2003 it was very clear the housing market was way overheated. I decided not to get caught up in that mess even though I badly needed the mortgage deduction for taxes. When I lived in San Diego in the 80's I did indeed buy a house, and sold it for enough to get something very nice in Wisconsin with 50% down. But, not this time. Decided to rent for awhile and wait it out.

    Good decision. If I had gone the other way I am sure I would be way upside down now with no way out.

    One of the places I looked at in 2003 was a 1-bedroom condo in a senior complex. Tiny, about 1000 SF, $150.000. They are now going for under $100k when they sell at all. Maybe time to buy. Single family homes in a so-so neighborhood are still over $400k.
    Last edited by Mase; 08-27-2010 at 03:56 PM.
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