You can watch the news to find out how the new home sale market is "stabilizing" and homebuilder sentiment is "improving", or you can do like I do and take a peek into L’s junk mail for a more realistic view of where builders think the market is headed: [Thanks L- it's great to have you back!]
When the market was hot, the homebuilders wouldn’t give agents the time of day. When the market cooled and builders were stuck with bloated inventories, they started offering higher commissions, gas cards and other perks. Guess which mode Maracay is in?
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I think before any meaningful recovery in real estate prices can take root, we need to overcome three major obstacles…
“Rebound Obstacle #1: Inventory Glut. Nearly 10% of all homes built this decade are sitting vacant, compared to a historical average of 2.2%. In total, we’re sitting on almost 10 months worth of inventory versus a historical average of four months. If we factor in the “shadow inventory” – the roughly 600,000 homes that banks are withholding from the market – the problem worsens. Excess supply always erodes prices.
Rebound Obstacle #2: Loan Resets. Forget subprime. We’ve already worked through 80% of those resets and written down $1.47 trillion in the process. Now we’re facing a $2.5 trillion mountain of Alt-A loan resets. The first big wave hits mid-2011, with the peak expected to come in early 2013. So we’ve still got time, but the early stats hardly instill confidence. More than 20% of Alt-A loans are already 60-plus days late, up from an average of about 3% for the last decade. If interest rates creep up even modestly in the next two years – a near cinch given the likelihood of inflation – payments will increase notably. In turn, so too will default rates.
Bottom line, another wave of massive writedowns looms on the horizon.
Rebound Obstacle #3: Foreclosures. One in four homeowners are now underwater. If we break it out by loan type the picture gets worse – 25% of prime loans, 45% of Alt-A loans, 50% of subprime loans are severely underwater. Add in the 6.5 million Americans out of work since the recession began and it doesn’t take an Einstein to predict where foreclosures are heading. Credit Suisse estimates that we’re in store for a total of 6.5 million by 2012.Even the Mortgage Bankers Association (MBA) concedes the obvious in its first quarter update, saying, “Looking forward, it does not appear the level of mortgage defaults will begin to fall until after the employment situation begins to improve.” Since the rosiest prediction doesn’t expect unemployment to peak until early 2010, as the MBA acknowledges, “…It is unlikely we will see much of an improvement [in foreclosure rates] until after that.”
The fact that the social stigma attached with “walking away” has been severely (and sadly) diminished over the past decade only adds to the foreclosure heap. And more foreclosures will inevitably push prices lower.”
Read More http://www.housingnewslive.com/articles/reasons-housing-market-going-down.php
Novemberrain-
To your list I would add “employment”. Even people who are employed are in many cases concerned about their jobs. I believe it is likely that we could have a negative rate of household formation in the U.S. as more family members share housing and young people stay at home- certainly it has slowed down.
FNM said that the number one cause of foreclosures now was loss of income. Until employment improves, housing will not improve.