Friday, February 26, 2010

Housing Disaster

This week saw a number of housing related headlines;   Economists surprised as new-home sales fall to lowest level in nearly 50 years ,    AIA: Architecture Billings Show Significant DeclineUPDATE 1-US January existing home sales unexpectedly plunge
I am not any kind of Real Estate expert. And every one of my friends and family is exposed to this sector in a big way and will be horribly hurt by continued deterioration, but that is what looks like must happen.
It used to be said that Real Estate is a long trending and slow to turn market. Probably still true.
Check out these charts:
 
click to enlarge


click to enlarge
Note that house prices are 3 years into a new trend following a 38 year move up. 

About 3 years ago I used to talk about what a very slow motion train wreck we were witnessing. And really it did take years for it to be even noticed by most of the participants. Now everyone is aware that the wreck has occurred, but just because you become aware of something does not mean it's over. It's still a very slow motion wreck, most of the cars have yet to land and are still up in the air.
I've attended many real estate sheriff sale auctions over the last 2 yr.s. The notable and increasing feature is that almost 90% of foreclosed properties listed for that weeks auction never come up for bid. They are either bought back by the bank or adjourned per plaintiff request, and pushed back. The banks are going long a depreciating asset that has cost associated with it. In a big way.
Maybe they will be right this time.
But with unemployment, credit contraction, the Alt A and Option ARMS resets, CRE disaster and serious systemic sovereign problems in Europe and Japan;
I wouldn't bet on it.



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