A 15.4% drop year-over-year home prices doesn’t seem like much to celebrate, but it’s making the markets happy this morning. According to Bloomberg:
Aug. 25 (Bloomberg) — Home prices in 20 U.S. cities fell in June at a slower pace than forecast, signaling the real- estate crisis that triggered the worst recession since the 1930s is dissipating.
…
“The sharp freefall in prices is over,” said Michelle Meyer, an economist at Barclays Capital Inc. in New York. “People are entering the market and that is starting to normalize prices. It’s a clear positive.”
Here’s a graph of the 10 City Index, not seasonally adjusted:
And the year-over-year percentage:
What I found particularly interesting was the month-to-month data since 2001:
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Note that some improvement in the MOM numbers is typical in the summer, and that 2009 shows a marked "improvement" over past years. However, this improvement is not being driven by normal market forces. The $8,000 tax credit [due to expire this fall] and artificially low rates are temporarily bringing more buyers into the market. In addition, banks are creating the illusion of improvement with artificially scarcity:
Bankers and mortgage companies are waging a financial war against the epidemic of foreclosures. Bankers have slowed down the foreclosure process in efforts to keep their losses in check and paint the face of an improving economy on banks’ balance sheets in an effort to show the real estate market is starting to heal, hoping consumer confidence will result.
The actions formulated by bankers directing the mortgage servicing companies are an attempt to manipulate the U.S. economy. At best the efforts are keeping another flood of foreclosures off the market for the time being as foreclosure filing notices hit new record highs, giving the Obama Administration time to strengthen its housing rescue plan. At worst a tsunami of foreclosures is being held back from the marketplace that will send housing prices lower for an extended period of time.
…
The backlog of homes waiting to be foreclosed ranges into the millions, attorneys who are handling the foreclosures say. But the attorneys are resistant to provide exact figures since they obtain their foreclosure business from the bankers.
Again, a 15.4% drop in prices is still a significant drop- we are only seeing a slight moderation. The banks cannot hold back the next wave of foreclosures forever. This is just a resting stop before the next leg down.
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Sadly, Shiller’s been drinking the Kool-aid. Sorry Bob, it is too early to call this a trend: [Thanks L!]
twist -
You, and this article in particular, just got two thumbs up at Doom’s favourite primates.
“Before You Get Too Excited About Those Housing Numbers”, Monkey Business Blog, August 25, 2009.
I think one thing that’s going on is that Larry the Money Cheney has called in a lot of old debts, and all his friends and relations are jawboning to keep sentiment high during this Catastrophe Theory cusp in capital market indices.
Moin from Germany,
i like the moment when the woman from CNBC was shocked that the futures are only pricing in a 6% increase for the year 2014…….
This was funny…..
Maybe i should start watching CNBC again…..
I´m also stunned that Shiller is calling this a trend…. Especially when you have to adjust the seasonality……
jan-martin -
Thanks for dropping by. We’ve started following this story again. I’m sure it will give you flashbacks. Doom word for the day is Re-Remic (rhymes with pandemic)
“Remember me? Wall Street repackages toxic debt”, by Matt Apuzzo, AP, August 24, 2009.
““The sharp freefall in prices is over,” said Michelle Meyer, an economist at Barclays Capital Inc. in New York. “People are entering the market and that is starting to normalize prices. It’s a clear positive.”
With what job?
Its a temporary blip thanks to the Obama sugar high of throwing money at the old bubble.
RE will bottom (priced in gold/silver)in 2015.
Too bad I don’t get quoted in Bloomberg.
YHLS
Hello,
I have been visting here on and off for awhile however I never posted anything until now
I have a question…Can we ask questions?
pack -
Fire away. Just remember that neither twist nor me nor your fellow commenters are in a position to give financial or professional advice. We’re all interpreting the same publicly available (mostly web) resources.
John- #2
No- I’m not smiling yet. I’m often accused of being a perma-bear and not recognizing the “good news”. I think it’s just a matter of not being taken in and not believing that the river is finally calm when you can hear the rapids ahead.
John M.
ok fair enought How about “opinions” not taken as advise?
I have been going back & forth about taking my house off the market and staying for who knows how long or big reduction taking about a $25,000-$35,000 loss to be completely debt free.
I purchased in 2005 thinking to sell when I retired to RV fulltime, I never bought to stay
I have a 5 yr fixed (1 yr Libor)ARM that resets Feb. 20 with a 2% cap..( oh just thought of this, I am retired with pension,no job as I live MI with 15% unemployment. Needless to say jobs are hard to find:(
I put A LOT of $$ down on the purchase and have excellent credit so obtaining a new mortgage is not a problem…however from a lot of reports I am reading and from my own opinion of our “dear leader” continued program of massive govt spending and debt, I am thinking that our whole economy is a house of cards getting ready to collapse..how soon, I don’t know… Sooooo my conundrum is …sell at loss now to be debt free at meltdown to come or wait it out hoping I am wrong and the economy will get better in 5 years or so???
Opinions (not advise) appreciated
Joan aka “apackof2″
Moin John,
i have seen this story….
Add this via Salmon
Private equity releverages with a vengeance
Warner Chilcott is paying $3.1 billion to buy the drugs business of Procter & Gamble. How much of that is its own money, and how much is debt? In the wake of the blowup of so many leveraged loans, one might expect the proportion of the sale price funded by banks to be low. After all, the banks don’t seem to be very keen to lend to anybody these days. But in fact, the banks are providing not half, not 75%, not even 95% of the total — they’re putting up a whopping 129% of the acquisition price.
to the mix and see the stock spiking up! you really can have the feeling of AMNESIA….
Moin again,
maybe we should send this link to Shiller…..
Case-Shiller Flashing The “Ultimate False Bottom” In Housing
Mark Hanson
apackof2,
all i can say is that in my opinion, i doubt the home will be worth any more in 2015 than it is worth now. what price range are we talkin? the reason i ask is because i feel the lower end stuff ($100K-200K) can only drop so much further, but i feel like the higher end homes are a LONG way from the bottom. and how long until you’ll be in the RV full time? does the interest and taxes give you any type of tax break and could you rent a similar home for less than you are paying in mortgage payments? a lot of things to consider.
It’s the shadow inventory stupid!
The only way that 6% increase for 2014 (5 years from now) works is if values go up by about 1/14 of one percent per month on average. Or if we get a nasty double dip in depreciation, say from a tsunami of shadow inventory, and then go back to a long term trend in 2013-2014. I vote for the latter.
AZSALUKI
thanks for your reply, I was beginning to hear crickets about my post and getting ready to just go back to lurking…I purchased my home for $187,500 in 2005
From my realtor:
“Hi Joan,
I understand your frustration with the economy and the housing market. When we listed your home, appraisers were not using foreclosures and short sales in their comparisons. In the last three months, not only are they using them as comparables, but now they want sales only in the last six months. They say now that we are only 51% through with the foreclosures and short sales.”
If you take a loan to purchase all or in part, a “contained” RV (bath,kitchen etc)interest can be deducted as a second home…however with gas prices surely to rise…I am thinking either buy low land or another home or just rent for awhile IF I sold my house and took the equity hit…renting a similiar home would be more expensive than my combined payment+taxes now..
Apack2: Take a look around you, where you live and such, are things growing or receding?
That should give you an idea on “the wait”.
I would keep your home on the market, painted, fixed up, and looking really clean, better than the rest.
If you stand to lose 30k, you can afford to spend an extra buck making sure it is up to snuff. Keep a keen eye on the local comps, if you price lower than them, and a buyer comes along guess who probably gets the sale?
Sell sooner than later, the market is actually still deteriorating, just allot slower. This latest trend or housing rally is just the spring/summer bump that happens every year. They will make it sound like it’s the next housing rally of all time.
Don’t take any of my info as advice, maybe information, sounds like you are like me. My home is for sale on Zillow.com for two years now and someone finally came and checked it out, I don’t need to sell, I like having a place to live.
Lately, for me, I’ve been wondering why a single guy needs 1500 sq/ft of living space, 3 bedrooms, 2 bathrooms, giant garage, and a full basement, I’ve lived much cheaper than this in the past.
Lately, I’ve noticed that condo’s were overbuilt, and I know plenty of older folks trying to sell a home so they can move into a condo.
toysarefun
Well that’s funny I’ve had the same thoughts, I’ve been wondering why a single woman needs 1560 sq/ft of living space, 3 bedrooms, 2 1/2 bathrooms, giant garage,a full basement,a HUGE yard that takes hour&1/2 to mow, so I now just pay my nephew(another bill) I’ve lived much cheaper than this in the past.
I have had good traffic lately, showings so I had an Open House, 3 couples. I am a Home Stager so my house shows great & move in pristine condition. Never get negative comments but its priced too high now so they don’t come back
I just looked at comps and had a good cry. I know I need to lower the price (again) its just pulling the trigger knowing how much I will lose…btt I will need to re-fi soon, Feb 2010,
Are things growing or receding where I live?
I live in Michigan, poster child for 7 years of liberal policies…. I love the anti-spam words here…outrage, bizarre,….bout sums it up…
Thank you all….sorry for turning the thread into a “financial Ann Landers”,not something I go around doing normally but I guess we live in abnormal times