24/7 Wall Street: Housing Is Not Just Bad, It’s Getting Worse

Housing Is Not Just Bad, It’s Getting Worse
Posted: May 27, 2009 at 4:14 am


The market’s reaction to the S&P Case Shiller data showing the home prices dropped almost 19% in March was that the data is old, so there is no point in giving it much attention. The market seemed to shrug it off by posting large gains.

But, the numbers from March are like canned vegetables. It takes them a long time to spoil. That point was driven home by a study Fitch, the credit ratings agency, is preparing that shows “that between 65% and 75% of modified subprime loans will fall 60-days or more delinquent within 12 months of the loan change.” In other words, even if homeowners are given a second chance to keep their homes and enjoy lower monthly payments, they are prepared to walk away.
The market is looking for ways to claim that housing is finding a bottom and that it is possible that a recovery in home prices in in the wings. While there may be some pick-up in sales in the most depressed markets including Nevada and Florida, there is no sign that prices are rising. Clever buyers are moving in to buy homes in foreclosure, but the prices of these houses are so low that their sales may actually bring down the average price of the homes being sold in those markets.

What housing “bulls” do not want to admit is that people who have underwater mortgages will often give up on the opportunity to keep their homes because they see no financial future in staying. They may never get any equity from their residences. They are probably better off to rent under the circumstances and move back into the housing market when it begins to recover. Some owners have been burned so badly that they may rent for life. That in and of itself will keep demand for home purchases low.

Another factor that will not allow home prices to recover is the reluctance of banks to lend money to anyone except people with sterling credit ratings. Those people are harder and harder to find during a recession when paying bills late may be the only way to pay them at all.

Several economists are projecting the GDP growth in the US may stay below 2% for three of four years and that 8% unemployment will become what they call “the new normal.” Housing will not recovery much if those assessments are true. Over the last decade the unemployment rate has been closer to 5% than to 8%. The three percentage point difference in a labor force which numbers more than 100 million people is a hole in the economy that cannot be filed. People without work are not going to be home buyers.

The “new normal” in housing is that home prices which have dropped 20% or more may drop further. Even under the best of circumstances, prices will not recover.


- Douglas A. McIntyre


http://247wallst.com/2009/05/27/housing-is-not-just-bad-its-getting-worse/

The unethical loan officers encouraging people to lie about their incomes on the loan applications; the big banks; the small banks (OK, just some of them); the fucking derivative traders; the losers who had no business buying a house. I could go on.

n/t

It was a vicious circle during the boom.

Mortgage brokers and the banks sold to people who couldn't afford the homes. These same salespeople also
encouraged potential homeowners to take advantage of creative financing. Why pay full price when you can
pay interest only? How about a 3-2-1 buy down with 1 percent down? It all blew to hell.

Keeping the circle going, were the people who wanted a bigger house. Or more house. Or their first
house. Or a McMansion.

We're all to blame.

It was all a lie.

How dare they want the tax deduction, or to send their kids to a better school district?

>the losers who had no business buying a house<

Of course it's all their fault. After all, they weren't lied to. If they couldn't afford a team of attorneys to unravel frequently undecipherable mortgage lending paperwork, well, they can just go straight to Hell. Plus, if they lost their job in this economy, they can just live in the street. They don't deserve to live inside! If they'd worked harder, they'd still have a job!

:sarcasm:

it...until of course, it happens to them or someone they know...who has maintained a productive and responsible life and credit for 20 or 30 yearsonly to be brought down by this..economic heist and fiasco.....first it was the immigrants who bought houses they couldnt afford then it was the yuppies who over leveraged...much like the wmds..half the country still believes they are in iraq...once the meme gets placed in the heads of the sheep...they believe it..and the true culprits/criminals just keep on their merry way..

My husband lost his job in November. We are still awaiting the paperwork from the homeowner bailout.

We didn't buy more house than we could afford. We made our payments for the past eight years, and in the townhouse we previously owned for five years before that. It was either buy a home, or sign over DH's former paychecks to the IRS. Of course, we should have known that the bottom would drop out of the software industry. We should have known that it is increasingly difficult to find a job with any kind of living wage after age 40. We should have known to consult the experts on DU, who are the first to tell everyone what they're doing wrong.

:sarcasm:

Again, thank you. You're damn right. We have been lied to and lied to. The "third wave" of foreclosures is now here -- those of us who bought what we could afford, kept up with our payments, and are now out of work. The only thing any of us did wrong was not going to work as the CEO of a large bank or a brokerage firm.

:kick: