Friday, April 11, 2008

Bending over and kissing the housing bottom goodbye

Hattip to Barry Ritholtz and his friends for this link to the past.

It's October 2006 and the housing foundations are only just beginning to quake after too many months of rumbling.

But the true believers, or those who would have you truly believe the improbable, are saying it's all over now, Baby Blue.

Market may be stabilizing, realtors group says

Pending sales of U.S. existing homes rose by 4.3% in August, indicating the housing market may be stabilizing, the National Association of Realtors said Monday.

"Our sense is that home sales may have reached a low in August," said David Lereah, chief economist for the NAR in a statement.

"With fewer new listings coming on the market, we should be able to draw down the inventory supply early next year to the point where home prices will rise, but at a slower pace than historic norms," Lereah said.

A week ago, the real estate group reported that existing-home sales fell 0.5% in August to a seasonally adjusted annual rate of 6.30 million, the lowest since January 2004. Meanwhile, median sales prices fell 1.7% on a year-on-year basis, the first decline in 11 years. The inventory of unsold homes rose to a 7.5-month supply, the most in 13 years.
Following a couple of days later, Alan Greenspan was joining the cheering squad.
Greenspan sounds optimistic note on housing: report

Former Federal Reserve Chairman Alan Greenspan said that last week's rise in weekly mortgage applications could signal that the "worst may well be over" for the U.S. housing industry, according to a report of a speech Greenspan gave in Canada on Friday.

Greenspan was referring to an Oc.t 4 report from the Mortgage Bankers Association which showed that mortgage applications rose a seasonally-adjusted 11.9% for the week ending Sept. 29, the largest increase in more than a year.

Refinancing applications were up 17.5% from the week before and accounted for almost 47% of all U.S. mortgage applications, their highest share since February 2005.

Greenspan, speaking at a conference in Calgary, saw this "flattening out" of mortgage activity compared to the steep declines seen in recent months as a good sign, according to a story published Friday by Bloomberg News.

Greenspan's remarks come as current Fed bankers and other economists try to figure out how much the current housing slowdown will hurt the economy.
As Barry's post pointed out, the fuller Greenspan quote was,
"I suspect that we are coming to the end of this downtrend, as applications for new mortgages, the most important series, have flattened out. I don't know, but I think the worst of this may well be over."

Guambat smirked on reading Barry's summation:
The only thing he got right in that sentence was the phrase "I don't know."

The WSJ had this to report about the current condition of the housing market today:
The increases in mortgage delinquencies and foreclosures were the biggest since at least 2000, when the firms began collecting these data. A report released Wednesday by UBS AG suggests that foreclosures won't peak until the middle of next year.

The latest increases in delinquencies are being driven in part by falling home prices and rising unemployment. The U.S. economy lost 80,000 jobs last month, according to the Labor Department, the biggest drop in five years. Meanwhile, some 8.8 million borrowers had mortgages that exceeded the value of their homes in the first quarter, with the number expected to increase to 10.6 million in the second quarter, according to Moody's

The problems are also spilling over into other sectors, with delinquencies rising for credit cards, autos and student loans. A record $715 billion of consumer debt is now in delinquency or default, according to Equifax and Moody's, up from nearly $300 billion three years ago.

But on a brighter (contrarian) note suggesting things are soon to turn to the better, the WSJ is also reporting, "The weakening U.S. economy has further to fall, according to the majority of economists in the latest Wall Street Journal forecasting survey."


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