Real Estate To Come Back Soon?

[RiversideGator]

According to the NAR's most recent report, the housing affordability index (HAI) reached 135.2 in September, which is close to a four-year high (see chart above) and just slightly below the 135.4 level in February (when 30-year mortgage rates dipped below 6%).

An HAI of 135.2 means that a family earning the median family income in September ($60,730) had 135.2%% of the income necessary to qualify for a conventional loan (at 6.22%) covering 80% of a median-priced existing single-family home in September ($190,600).

Since July 2007 when the HAI was at only 103.6 (due to higher home prices and interest rates, $228,500 and 6.8% respectively), the 31.6 point increase in housing affordability to 135.2 over the last 14 months should continue to play an important role in the recovery process for the slumping real estate market. It's a buyer's market.

Note: The NAR's report on housing affordability index released last Wednesday received no media attention; I couldn't find a single news report. But you'll find hundreds of stories on foreclosures and falling home prices. Go figure. Positive, upbeat news doesn't sell as well as gloom and doom?

http://mjperry.blogspot.com/2008/11/housing-affordability-close-to-4-year.html

[Driven1]

RSG -  you gonna have to give me something other than stuff from the NAR.  i'm still thinking 2010.

[chris]

Its at least a few years off, because while existing home sales are continuing to rise and the affordability index is rising, forclosures haven't peaked yet and businesses are still restructuring, so its not over. Builders have stopped building, so the housing supply should start to decrease, but the forclosures are continuing to flood the market with cheap homes, pushing the builders into a pinch and house prices through the floor. Unemployment will continue to rise, home starts will continue to stagnate, and the big builders will continue to lose money until people start giving away houses, which is what they've been doing lately. The construction industry, especially residential, is continuing to wither, and with commercial and civic construction being put on hold, don't look for any recovery in the near future.

On a side note, with the passage of Amendment 2 and possible implications for the sexual minority populations in Florida, look to Miami, Tampa, Orlando and Jacksonville to have a significant migration event if health benefits are eliminated as they were in Michigan. I've already talked with about a dozen people who are leaving for greener pastures after the holidays, 1) because there are jobs for democrats up North now, and 2) because the benefits that we had were the only things keeping people living in such an "unaccepting" environment.

I've heard rumors out of Disney Corporate either fighting No. 2 or setting up their own pension fund/tax shelter for their employees with their own rules in order to bypass the new regulations, if it comes to that.

It may be a bit melodramatic, but having been exposed to the real estate, construction, banking and entertainment industries in some fashion over the last ten years or so, I don't think my predicitions are far off.

Look for unemployment to cap at 10%, real wages to fall at least 6%, and inflation to continue to put pressure on food and non-durable goods prices. I don't see the dollar going lower than it did a few weeks ago, but I do think oil will rebound to a little over $100 over the winter, especially while the refineries switch over to heating oil; also expect gas prices to rise at the normal pace at the same time. Also, expect the local market to fare better than regional markets because the economy is vastly more diversified than the rest of the state. With the "good business climate" Florida has, and the low cost of living that we have locally, I don't think the impact form the recent mergers will affect Jax too much in the sense that layoffs will be rampant. However, looking at the numbers from state tax rolls, and you can expect local governments across the state to raise all sorts of taxes to help close the gap caused by the lack of state revenue coming in. We're probably looking at a 16-18% cut in tax revenue, which does not translate well for areas that depend on those monies to operate, especially when there are infrastrucutre projects already on the books that will have to be finished regardless of the economy.

*No, I'm not an economist, but I did predictd in February the $150 oil and $1000 gold that we had in June, so I think I'm pretty good at this.

[RiversideGator]

I think that real estate led us into this recession and real estate will have to lead us out.  Real estate has been in depression/recession for 1 1/2 years now which has caused in large part the credit crunch which then caused the ripples throughout the economy we are seeing now.  Past real estate downturns have not last as long as you are predicting and have often turned on a dime unexpectedly.  So, this time should not be different hopefully.

As for the homosexuals relocating and harming the Florida economy, this seems to be a stretch.  First, you are assuming that large numbers of gays will do this.  And, if even 1/2 moved away, we would only lose 1/2 of 1% of our population which would soon be replaced by new in-migration anyway.  So, this seems real far fetched to me.

[Midway ®]

Once those 12,000,000 or so foreclosed houses are all sold off it'll be great guns again for real estate! LIAR loans and NINJA mortgages will once again fuel the FIRE economy!

[RiversideGator]

And dont forget the estimated 30 million homes expected to go into foreclosure over the next 18 months.

Not to worry.  Uncle Barack will pay their mortgages.

http://www.youtube.com/v/L6ikOxi9yYk

[RiversideGator]

Once those 12,000,000 or so foreclosed houses are all sold off it'll be great guns again for real estate! LIAR loans and NINJA mortgages will once again fuel the FIRE economy!

Do you have anything productive or fact based to post?  Ever?

[uptowngirl]

Once those 12,000,000 or so foreclosed houses are all sold off it'll be great guns again for real estate! LIAR loans and NINJA mortgages will once again fuel the FIRE economy!

Well since there is a majority of Dems still in the senate and congress you may be right....afterall they started all this.

[RiversideGator]

Housing affordability continues to increase.  Now is the time to buy property cheap:

Housing Affordability Reaches All-Time Record High



Thanks to the National Association of Realtors, I was able to get monthly data on the Housing Affordability Index (HAI) back to 1988. As the chart above shows (click to enlarge), the October HAI of 141.8 (a family earning the median family income had 141.8%% of the income necessary to qualify for a conventional loan covering 80% of a median-priced single-family home) is the highest level on record, going back at least to January 1988.

As I mentioned in this recent CD post: a) the recent increase in housing affordability is good news for the real estate market, since it will help in the recovery process (i.e. a "Larry Kudlow mustard seed"), and b) this increase in housing affordability, now reaching an all-time historical high, has gone unreported by the media, I still can't find a single news report on this topic.

http://mjperry.blogspot.com/2008/12/housing-affordability-reaches-all-time.html

[jaxtrader]

It goes unreported because the NAR has zero credibilty. It consistently denounced the possibilty of a bubble when the existence of same  was manifest to anyone with open eyes and half a brain. It then spent two years repeating its most holy mantra "real estate never goes down", even as the market was crashing.

A poll cited this week in the WSJ revealed that 60% of Americans still  believe their house will appreciate in value during the next twelve months.   In the last downturn, prices in the Northeast fell from 1989-1992...in California 1990-1995. This was a much bigger runup. The bottom is a long way off.

[jtwestside]

I think we have a little way to go.

From http://theaffordablemortgagedepression.com/2008/11/24/dont-buy-a-house-yet.aspx

Foreclosures â€" House Supply
As long as there is a material number of foreclosures in the market prices will not rise.  House prices are unlikely to stabilize unless values become so cheap relative to fundamentals that people are willing to buy regardless of price.  We are not near this dynamic.  Median home prices have reverted to 2004 levels whereas the Housing Bubble and excessive appreciation rates began around 1996. 

At present we are experiencing an all-time record number of foreclosures.  There is a large source of highly visible foreclosures looming for the next several years in the form of adjustable rate mortgages.  These mortgages will continue to reset through 2012 and result in a large numbers of defaults.

The Temptation to Purchase Discounted Foreclosed Properties
Many people have resisted the temptation of buying houses that have declined in prices but have fallen victim to the allure of foreclosures.  These distressed purchases are available at below current market prices.  The important concept to understand is that the price of foreclosures is collapsing just like the price of new homes and non-distressed existing homes.

People who bought foreclosures in 2007 aren’t particularly thrilled by their “deals” especially if the properties were purchased in Florida, Nevada or California.  Price declines have more than offset the discounts possible in foreclosure transactions.  These people are underwater just like recent buyers of non-distressed houses.

Foreclosures will persist for many years as a contracting economy, rising unemployment and adjustable rate mortgages trigger defaults.  Home prices will continue to fall.  And years from now foreclosures will still be occurring.  If you find yourself interested in buying a foreclosed property, consider how much better of a deal will be available on distressed properties in 2012.

[RiversideGator]

It goes unreported because the NAR has zero credibilty. It consistently denounced the possibilty of a bubble when the existence of same  was manifest to anyone with open eyes and half a brain. It then spent two years repeating its most holy mantra "real estate never goes down", even as the market was crashing.

A poll cited this week in the WSJ revealed that 60% of Americans still  believe their house will appreciate in value during the next twelve months.   In the last downturn, prices in the Northeast fell from 1989-1992...in California 1990-1995. This was a much bigger runup. The bottom is a long way off.

The question is not whether people hate NAR for being an advocacy group for realtors, the question is is the data presented accurate.  It is clear that (1) prices have come down, (2) rates have come down and (3) income has risen over the past several years.  Therefore, housing is more affordable based on quantifiable and verifiable data.

As for public opinion about the economy, consumer sentiment can turn on a dime.  The recovery always surprises people when it begins so most people miss the initial phases as they are afraid to buy and see prices drop even further.

As for prices in various markets, real estate markets are regional as you suggested.  I think values in Jacksonville will rebound faster than those in say Miami or San Diego because we were not as much into the bubble.  I am more concerned with the local market although I would like to see a national increase also.

[RiversideGator]

I think we have a little way to go.

From http://theaffordablemortgagedepression.com/2008/11/24/dont-buy-a-house-yet.aspx

No offense jt, but if you are looking for advice from a site called "the affordable mortgage depression", you are probably going to get the most negative forecast possible.  Real estate downturns have not traditionally lasted 6 years from peak to trough, as your clip suggests with its advice to wait till 2012 to buy foreclosures.  That is frankly absurd.  Just as people were unrealistically positive on values on the way up so too they are unrealistically negative on values on the way down.  The reality is an equilibrium of housing affordability will be reached, this will generate more sales, the numbers of unsold homes will decline and prices will begin to rise again.  It is just a matter of time.

[RiversideGator]

Things were basically sound a year and a half ago.  Then we had a banking panic.  We are working out way through this now.  I dont recall anyone saying that free market economies always went up.  They generally do but it is sometimes in fits and starts.  The long run is positive though beyond doubt.

[Lunican]

"Basically sound" = "about to implode"