Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I suspect the lack of supply may be quickly reversed as people decide to re-list homes they have taken off the market. Also, home building would respond/increase and that would be a boon to unemployment. Rising prices would rapidly diminish the number of homes "under water". That would be a good thing too.
There may be problems, but a bubble may not be the real issue here.
The article misses some fundamental points about both the specifics of "The Bubble" that existed prior to the "The Collapse" of housing values that happen prior to the 2008 Presidential Election AS WELL AS characteristic of ALL pricing bubbles. The value of such reporting is highly suspect and is best called "reckless" if not outright "deceptive".
The specific issues of "The Bubble" that caused so much damage was the extreme degree to which SUBPRIME borrowers were fueling prices -- together with a careless disregard for prudent levels of buyer equity that was encouraged by lending practices that rewarded deception and spending imprudent sums "The Bubble" created a seriously over valued pool of mortgages of high risk that were wrongly believed to be low risk. The subsequent reselling of these mis-valued "assets" led to the collapse of two of the most important of the nation's investment banks and triggered a chain reaction that saw TRILLIONS of dollars of value swept off the books of all kinds of firms and individuals. The policies of the every level of government has been to massive alter the influence of subprime borrowers and root out deceptive loan originations.
Additionally the article fails to truthfully assess the nature of asset bubbles -- the reason that "The Bubble" existed was due to the EASE OF OBTAINING FINANCING which created an inherent "fragility". The trait of all bubbles is that there MUST be a rise well beyond the "intrinisic value" of whateve is in excess demand. Things like tulips, stocks, mortages / collaterized debt obligations are BY THEIR NATURE creations that have an 'ephemeral' quality and have NO intinsic value in themselves. The FACT is that housing that falls to an extremely low level likely does still retain "intrinsic value" -- people can not just live in such places themselves, they can be rented out. They can also be "redeveloped". They can even be "stripped out" (my grandfather actually made a living "recycling" homes built in Chicago before WWII -- it is profitable to literally resell the lumber and plumbing to others that wished to either build something else burn the wood / re-melt the metals...). The INTRINSIC value of homes in desirable areas that are "built out" has ALWAYS been higher than that of homes in newer areas that were subject to a whole range of "changes in fundamentals" and it surprised no one which areas saw massive price declines and which areas were largely resilient...
Finally I find it a little odd that the article makes no mention of "the elephant in the room" when it comes to investors buying homes. The ABSOLUTE UNDENIABLE FACT is the policies of the Federal Reserve with regard to current interest rates is 100% designed to encourage investors to put their CASH into things like houses -- with returns on "safe" investments (like government bonds and insured bank accounts) essentially NEGATIVE it makes perfect sense for investors to put their money into "hard" assets. The stated policy of the Federal Reserve is to MAINTAIN these low returns on safe investment for the foreseeable future. It is foolish to think that investors (and potential home owners..) should do other than follow the path of least resistance...
Recent housing statistics suggest a revival. New and existing home sales are up, as are homeownership, home builder confidence and prices, but most new households are renters, since new potential buyers are kept out of the property market by tight lending standards, uncertain employment and crushing student debts. Record numbers of 25-to 34-year-olds are living with their parents and very comfortable there.
The real rise in housing starts is in rental apartments, as investors buy foreclosed single-family houses to rent. Don’t take too much comfort in year-over-year price gains. House prices are vulnerable to a new wave of foreclosures now that mortgage modifications have been tried and largely failed. Also, the robo-signing flap has been settled for $25 billion, so mortgage servicers are less in the media glare and more willing to foreclose on deadbeats.
Excess inventories are the mortal enemy of prices, and I count 1.9 million vacant houses over and above the normal working level. Most aren’t listed yet but are empty, foreclosed units and previously listed vacant houses. The owners still want to sell but delisted earlier since they couldn’t stomach the bids. To return median single-family house prices to the long-term trend takes another 20% drop from here.
this guy is a perma-bear but his take on housing is usually pretty good:
Quote:
Excess inventories are the mortal enemy of prices, and I count 1.9 million vacant houses over and above the normal working level. Most aren’t listed yet but are empty, foreclosed units and previously listed vacant houses. The owners still want to sell but delisted earlier since they couldn’t stomach the bids. To return median single-family house prices to the long-term trend takes another 20% drop from here.
Beyond these valid points is the element of the reduction in population we should be working toward.
The last thing we should be doing is building even more homes.
I am suspect of the happy talkers that point out that there is recovery using the house market as a example. Oh boy home prices are rising and sales are up. Wonder if they have considered that investors have been buying homes in bundles at auctions? Could that possibly be a reason the home for sale inventory has declined?
How is it a good thing too see falling wages but increase in home prices? If this trend continues and it will there will be a correction, right? If not then there will be gobs of Americans that will be priced out of the market. Like another poster pointed out the standards have been tightened and thus making the pond smaller of potential home buyers.
Then if you have to look at the actions of the banks about what they are doing on foreclosed property. There is a thread entitled Zombie Foreclosures. In a nut shell banks have been starting the foreclosure process but not following thru and leaving the title in the owners name. If the market was so great and prices are rising why would the banks take this kind of action?
Housing is a dead horse and the happy talkers are yelling "keep beating it "
If one los at constrction its obvious that the governamnt polices that tresury announced several eayrs ago is working. That is to bring homeownership back to realiistic nber sof 655 from recent numbers in the mid 70 per centile.The real growth in building and much of the buying of existing homes is by investors for lease and rentals. of course hme pauchase price will rise from bottom as demand out strips suply has is normal. But it does not mean a bubble since fiancing has been tighten so much bu polciy.Rates are cheap but many find that they basically can't get a loan.The gaing popualtion alone will take care of US popualtion inMost fot eh industrialsised world popualtio is ion deacline as their population ages. time and that alone has created many problems.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
44,599 posts, read 81,297,702 times
Reputation: 57846
There are good reasons for the price increases. One is investors, taking advantage of the higher rental prices. As mentioned in the article, those people that are under water are not selling and hoping for the price to reach what they owe, so less homes for sale. Then there's the demand. With the improvement in the economy some companies are hiring large numbers of people that need places to live. That one is the real, valid reason for home prices to go up.
I am suspect of the happy talkers that point out that there is recovery using the house market as a example. Oh boy home prices are rising and sales are up. Wonder if they have considered that investors have been buying homes in bundles at auctions? Could that possibly be a reason the home for sale inventory has declined?
How is it a good thing too see falling wages but increase in home prices? If this trend continues and it will there will be a correction, right? If not then there will be gobs of Americans that will be priced out of the market. Like another poster pointed out the standards have been tightened and thus making the pond smaller of potential home buyers.
Then if you have to look at the actions of the banks about what they are doing on foreclosed property. There is a thread entitled Zombie Foreclosures. In a nut shell banks have been starting the foreclosure process but not following thru and leaving the title in the owners name. If the market was so great and prices are rising why would the banks take this kind of action?
Housing is a dead horse and the happy talkers are yelling "keep beating it "
With one of the greatest stock market run ups occurring a lot of people have a lot of money to buy houses with. Yes I know there are those who slept the opportunity.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
