NY Times: Home Prices May Be Nearing a New Dip

[marmar]

Home Prices May Be Nearing a New Dip

By DAVID STREITFELD and JAVIER C. HERNANDEZ
Published: November 24, 2009


Home prices are enduring an early winter chill, raising the odds that the economy may suffer another jolt while it is still weak.

Two price indexes released Tuesday indicated that the momentum the housing market showed over the late spring and summer is faltering, even as the government said the economy grew at a slower pace in the third quarter than previously reported.

The Standard & Poor’s/Case-Shiller home price index, a closely watched measure of the housing markets in 20 metropolitan areas, barely rose in September, rising 0.3 percent from August on a seasonally adjusted basis. Prices fell for the month in nine cities in the index, including Boston, New York, Seattle and Charlotte, N.C.

A report from the Federal Housing Financing Agency showed that prices were flat in September from August.

Real estate, which has traditionally brought the economy out of recession, seems increasingly likely this time to hold it back. The housing market’s epic boom early this decade has turned into an epic bust whose effects may take years to shake off. .............(more)

The complete piece is at: http://www.nytimes.com/2009/11/25/business/economy/25home.html?_r=1&hpw

[Robb]

1. I've said it before

...The tax credit is duping "ordinary" people into buying real estate before the real bottom is in. Meanwhile the big money has a chance to get out safely.

That $8,000 tax credit isn't going to look so good in six months when the house is work $30K less.

If you're in for the super long haul, you might make out OK. But people in for the super long haul usually do, and life has a way of interfering. If I had a dollar for everything I bought I intended to use forever or be buried in... :D

[PSPS]

2. "Real estate ... has traditionally brought the economy out of recession"

Real estate, which has traditionally brought the economy out of recession, seems increasingly likely this time to hold it back. The housing market’s epic boom early this decade has turned into an epic bust whose effects may take years to shake off.

Um, no. It only happened once and that was because anyone who could fog a mirror could get a loan, which caused a price bubble. The last thing we need is another round of inflated housing prices based on ... nothing.

[Phoebe Loosinhouse]

3. Real Estate boom and bust

When the median price matches the median salary, real estate will rise again. If salaries and wages stay stagnant or go even lower due to joblessness, then real estate has no place to go but lower. It really isn't rocket science - People buy houses when they are optimistic about their futures. Real estate is completely tied to employment.

[BeyondGeography]

4. It took about 10 years last time (early 90's) real estate went bust to turn around

No reason at all why this time it won't take at least that long.

[Phoebe Loosinhouse]

5. Exactly right.

Real estate started trending upward after the tech bust of 1999-2000 when people felt burned on the stock market and were looking for new places to put their money. That gets aided and abetted by infomercials convincing everyone and their brother that they too can earn milions in real estate and that gets aided and abetted by the banks suddenly losing their collective minds and throwing out all previous underwriting standards because they could securitize and sell off any loan, good or bad.

Since we shouldn't see a repeat of those same conditions - enough people got burned on the belief that real estate always goes up and one would hope that the banks have altered their practices voluntarily (since Elizabeth Warren has repeatedly pointed out that NOTHING HAS CHANGED in a regulatory manner) SO it should take that long or even longer. I personally do not feel we have seen the bottom and that the market is being artificially propped up with the homeowner tax credit, which they have extended and expanded beyond first time buyers.

I heard yesterday that 25% of the homeowners in the country are upside down with negative equity. I wonder if even that number is overly conservative.

[mdavies013]

6. The continued meltdown will hit both residential and commercial markets...the bottom has not been

reached but you won't see any government official telling people that. If people think that we are in a recession then they spend accordingly. If you can get people to be more optimistic they will spend more.

There are some great items from PBS and 60 Minutes related to the real estate market and the true cause of this disaster, the derivatives trading.