32% of Homeowners Expect Home Prices to Drop Next Year, Highest Short-Term Pessimism Ever; Recognition Phase Underway
by ilene - October 16th, 2010 11:27 pm
32% of Homeowners Expect Home Prices to Drop Next Year, Highest Short-Term Pessimism Ever; Recognition Phase Underway
Courtesy of Mish
Rasmussen Reports recently released an interesting survey that shows Homeowners Are More Pessimistic Than Ever About the Short-Term Housing Market
A new Rasmussen Reports survey finds that 32% expect the value of their home to decrease over the next year, the highest finding since Rasmussen Reports began asking the question regularly in December 2008.
Just 21% believe the value of their home will go up over the next year.
Looking longer term, people are feeling a bit better. Fifty-two percent (52%) of homeowners say the value of their home will increase over the next five years, the highest level of optimism measured since May.
For the second month in a row, only 55% of homeowners say their home is worth more than their mortgage. A third (33%), however, report that the mortgage is bigger than the home value.
Over half of Americans know someone who has lost their home because they could not pay their mortgage, but just 20% believe that when banks foreclose on a home, it’s generally due to unfair lending practices.
Recognition Phase
Some will look at the survey results and see a contrarian indicator. I rather doubt it. I do not think we bottom until homeowners sour on long-term optimism.
Given current conditions, housing inventory, shadow inventory, another jobless "recovery", and changing social attitudes from younger generations, home prices will likely stay depressed for a while.
So instead of the survey being a contrarian indicator, I view these attitudes as part of the recognition phase. Consumers are starting to realize the economic headwinds and what that will do to housing prices in the short-term, even if they have not yet figured out the long-term demographic mess.
Time and Price is the Only Legitimate Cure
The most encouraging sign in the report is that "a majority of Americans continue to oppose any government intervention in the housing market."
The only legitimate cure for what ails housing is price and time. Prices need to fall to the point there is genuine demand. When that happens, the bottom will be in, although appreciation off that bottom will be quite slow.
In the meantime, the Fed’s misguided attempt to prop up prices, in conjunction with all the interference by Congress, just stretches out the bottoming timeline.
Mike…
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The Swelling Backlog
by ilene - September 18th, 2010 4:53 am
The Swelling Backlog
Courtesy of MIKE WHITNEY writing at CounterPunch
Home ownership has become an albatross. Prices are falling, demand is weak, foreclosures are soaring, and inventory is backed up to the moon. If there’s an upside, it’s a mystery to me.
Many of the people who bought homes in the last 6 to 7 years, realize now that they were caught in a massive mortgage laundering scam. The banks lured unqualified applicants into "easy-term" loans to so they could peddle their "fishwrap" mortgage paper to clueless investors. The con worked so well, that housing prices doubled or--in some cases--tripled in value. But the inflated prices did not reflect supply/demand fundamentals. They reflected fraud-- industrial-scale fraud that created an $8 trillion housing bubble. Now the bubble has burst and prices are returning to trend. That means foreclosures will rise while millions of homeowners will slip deeper into the red.
This is from Bloomberg News:
"The slide in U.S. home prices may have another three years to go as sellers add as many as 12 million more properties to the market. Shadow inventory—the supply of homes in default or foreclosure that may be offered for sale—is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.
“The best thing that could happen is for prices to get to a level that clears the market,” said Joshua Shapiro chief U.S. economist of Maria Fiorini Ramirez Inc, who predicts prices may fall another 10 percent to 15 percent. “Right now, buyers know it hasn’t hit bottom, so they’re sitting on the sidelines.” (U.S. Home Prices Face 3-Year Drop as Inventory Surge Looms, John Gittlesohn and Kathleen Howley, Bloomberg)
The Obama administration has tried everything to boost housing sales--incentives, subsidies, tax breaks, even record-low interest rates--but nothing has worked. Now it looks like they’re ready to throw in the towel and let prices fall, but that presents risks, too. Presently, there’s a backlog of 4 million homes listed with brokers. (At the current pace, it would take 12 months to sell that number of homes.) However, as Bloomberg notes, there’s another 12 million properties that have been kept off the market. As those homes…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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