US Housing Crash Over?

[Sphere]

Housing Prices Rise in May

Spoiler Alert, click show to read: 

NEW YORK (CNNMoney.com) -- The value of U.S. homes grew on a monthly basis in May for the first time in nearly three years, according to 20-city index released Tuesday.

The month-over-month increase was 0.5%, according to the report from financial data company Standard & Poor's and economists Case-Shiller. It was the first increase in the monthly index since July 2006.

On an annual basis, home prices in the 20 cities fell 17.1%, but it was the fourth straight month that the year-over-year decline lessened.

This could be an indication that home price declines are finally stabilizing," said David Blitzer, chairman of the index committee S&P, in a prepared statement.

While acknowledging that the report was good news, Mark Zandi, chief economist for Moody's Economy.com, downplayed the importance of a single month's statistics.

"I think it's a temporary respite," he said. "It reflects the recent decline in foreclosure sales, and prices will continue to fall over the next several months."

Robert Shiller, the Yale economist who co-founded the index and who's famous for warning that the housing boom was, in fact, a bubble, said the decrease in foreclosure sales does show up in the index statistics as a plus for home prices. That's one reason he did not want to sound too optimistic; foreclosures could take off again.

"And we could get more economic bad news, but it does look encouraging," he said.
He added that he thought that Washington's efforts have boosted the nation's spirits, an important factor for the housing market.

"The government has done a lot to support the housing market," he said. "Confidence has improved. People are talking about 'green shoots.' People are thinking it's time the recession came to an end. The stock market is up."

The improvement was as broad as it was deep, with 13 metro areas showing gains, compared with eight in April. Two, New York and Tampa, Fla., showed no change.

The biggest winner was long-suffering Cleveland, where prices rose 4.1%. The city still falling the most was Las Vegas, where prices declined 2.6%.

The report added to the list of positive housing market indicators. These include rising new home sales, increased home building and increased pending sales.

Washington's goal: Stabilizing the housing market has been a primary goal of Washington policy makers. Congress has tried to stimulate homebuying by creating a temporary tax credit of $8,000 for people who have not owned a home for at least three years.

The administration has also tried to tackle the foreclosure problem, creating a program to help mortgage borrowers avoid defaulting on their loan payments and losing their homes.

Zandi added that lenders are still figuring out the administration's foreclosure prevention plan, and have suspended the foreclosure process for many borrowers in default. That means fewer distressed properties, which tend to bring in lower prices, than usual.

One of the most positive things the government has done, according to Shiller, was to take control of the failing mortgage companies Fannie Mae and Freddie Mac.

These were government sponsored enterprises that guaranteed a flow of mortgage lending by buying or backing mortgages in the secondary market. Without government backing up these companies, mortgage lending would have dried up, which would have devastated home sales.

Lower prices: Prices have also fallen so far in so many places that it's drawing people back into the market.

In Las Vegas, prices are off about 53% from their peak, set in August 2006. Phoenix prices are down 54%.

Overall, the 20-city index is down more than 32% from its high.

Interest rates were very low in May, which also could have helped the housing market. The rate for a 30-year mortgage was well below 5% during the month, which encouraged buyers and drove up demand.
Zandi is hopeful that the market is stabilizing. "It feels like the cycle is winding down," he said. "I think it depends on how well the mortgage modification plan will work and I'm guessing it will work reasonably well."

This whole recession was triggered by the bursting of a housing bubble in the US. Recent figures would suggest that this bubble has finally run it's course. There were other flaws exposed during this crisis (the financial markets, the auto industry, debt levels etc.), but none the less, seeing the housing market start to turn around, even while we are most likely still in a recession is a signal of some sort. How important is this? Combined with the record profits on Wall Street, a DOW above 9,000, and Ford posting a profit, are we in a recovery? Or is this an Indian Spring?

[Buddhababe]

I believe we are starting a recovery. But the recovery will be slow. The important aspect to look at in the coming months is how the housing market and DOW improvement is reflected in the job market. If there is still a hemorhage of jobs and few new hires, the recession will be long for the average person. It is hard to have comsumer confidence, which is what our economy runs on, when you can't pay the bills.

[Last Roman]

I believe we are starting a recovery. But the recovery will be slow. The important aspect to look at in the coming months is how the housing market and DOW improvement is reflected in the job market. If there is still a hemorhage of jobs and few new hires, the recession will be long for the average person. It is hard to have comsumer confidence, which is what our economy runs on, when you can't pay the bills.

on the nose. this may be a sign that we are finally headed to recovery, but it'll still be a long time comin' before we get to where we need to be.

[Darth Red]

I dont mean to burst your bubble, but the housing market crashed because too many McMansions were being build for people who couldn't afford them. They borrowed 125 to 150 pecent of the value of the home in hopes the market would continue to climb. They were approved for loans they new they couldn't afford, shame on them, and banks and morgage brokers were fudging numbers to get them approved for the quick commision. Same thing with Fannie Mae, and Freddie Mac, thank you very much Barney Frank and Chris Dobbs. The only reason that Ford is posting a profit is because.... they are the only American car company not to take government money and loose control of running thier own company!

Edit by me: that was Chris Dodd not Dobbs

[B5C]

Also note the stimulus as slowed down the recovery. With all the debt we have were going to wait years before we recover.

[Last Roman]

Also note the stimulus as slowed down the recovery.

we don't know that for sure.

[♔Jean-Luc Picard♔]

we don't know that for sure.

No, we don't but I don't see the added debt as a good thing. I actually happen to drive past some of our new infrastructure projects from the stimulus bill on my way to church. They are building a whole new exit ramp to King, NC right next to the old one. There is nothing wrong with the old one. It needed to be repaved and nothing more. That is why I foresee this 'stimulus' as slowing the economy's recovery. I might end up being wrong, but I don't think I will be.

[Sphere]

I dont mean to burst your bubble, but the housing market crashed because too many McMansions were being build for people who couldn't afford them. They borrowed 125 to 150 pecent of the value of the home in hopes the market would continue to climb. They were approved for loans they new they couldn't afford, shame on them, and banks and morgage brokers were fudging numbers to get them approved for the quick commision. Same thing with Fannie Mae, and Freddie Mac, thank you very much Barney Frank and Chris Dobbs. The only reason that Ford is posting a profit is because.... they are the only American car company not to take government money and loose control of running thier own company!

I know this is the Mudpit, but generally you make a counter-argument after an argument is made. Otherwise it sounds like you have got into a spat with an imagninary friend.

This thread is about signs of recovery, not about what caused the recession.

Also note the stimulus as slowed down the recovery. With all the debt we have were going to wait years before we recover.

I don't see how that rings true. All the forecasts I saw on the stimulus showed increased short term growth at some expense of long term growth when the debt must be serviced.

[Darth Red]

I know this is the Mudpit, but generally you make a counter-argument after an argument is made. Otherwise it sounds like you have got into a spat with an imagninary friend.

This thread is about signs of recovery, not about what caused the recession.

True, point taken. I was trying to imply that, in my opinion, throwing more government money around would be detrimental to the US economy. I am not for the $8,000 rebate for first time homeowners. Where are we going to get this money from? I suspect from the taxpayers. Multiply 8000 times the nubmer of first time homeowners and what is that figure, and who is going to pay? I belive that will suffocate small buisnesses already overburdened with taxes as it is.

[Generaal Van Heutsz]

This whole recession was triggered by the bursting of a housing bubble in the US. Recent figures would suggest that this bubble has finally run it's course. There were other flaws exposed during this crisis (the financial markets, the auto industry, debt levels etc.), but none the less, seeing the housing market start to turn around, even while we are most likely still in a recession is a signal of some sort. How important is this? Combined with the record profits on Wall Street, a DOW above 9,000, and Ford posting a profit, are we in a recovery? Or is this an Indian Spring?

The crisis can't be over, a large part of the US economy is based on borrowing money and then spending that money on homes and other consumer goods. You can't go on borrowing and people can't continue to work in sectors which depended on borrowing consumers to buy stuff from them. It's simply not viable. The economy needs to restructure from a borrowing/overconsuming services based economy to a saving/underconsuming manufacturing economy to pay off the debt. Untill those inbalances have been addressed do not believe the crisis is over...the problem then is merely continuing. It's like a drunk who has to sober up but decides drinking just makes him feel better, he might feel better but the problems merely grow (and they grow exponentially for the US actually!)


Why the DOW is rising I explain here

[Sphere]

The crisis can't be over, a large part of the US economy is based on borrowing money and then spending that money on homes and other consumer goods. You can't go on borrowing and people can't continue to work in sectors which depended on borrowing consumers to buy stuff from them. It's simply not viable. The economy needs to restructure from a borrowing/overconsuming services based economy to a saving/underconsuming manufacturing economy to pay off the debt.

You mean when the US savings rate turns positive? It has already happened. The US economy is still incredibly productive, I don't see why we can't experience economic growth while at the same time increasing savings and paying down debt.

[Generaal Van Heutsz]

You mean when the US savings rate turns positive? It has already happened.

The US still have a massive debt to repay!

No, we don't but I don't see the added debt as a good thing. I actually happen to drive past some of our new infrastructure projects from the stimulus bill on my way to church. They are building a whole new exit ramp to King, NC right next to the old one. There is nothing wrong with the old one. It needed to be repaved and nothing more. That is why I foresee this 'stimulus' as slowing the economy's recovery. I might end up being wrong, but I don't think I will be.

Keynesian (and mainstream) economomists are of opinion that it doesn't really matter what the money is being spend on, as long as it's spend: for all they care some digs a whole and someone else fill the hole back up again, as long as money is spent.


I will just leave it to your common sense to figure if they are right...

[Sphere]

The US still have a massive debt to repay!

In terms of %GDP, the US national debt is not in bad shape compared to other industrialized nations (Japan and the UK are in much worst shape IIRC). My memory for the personal debt figures are much more fuzzy, but they I think those debt levels are still on a resonable level, while admittedly being above average.

But again, servicing debt is a burden on the economy, no doubt, but I don't see how it can stop the US from returning to positive growth. The US economy is highly flexible, adaptive and productive.

[Darth Red]

In terms of %GDP, the US national debt is not in bad shape compared to other industrialized nations (Japan and the UK are in much worst shape IIRC). My memory for the personal debt figures are much more fuzzy, but they I think those debt levels are still on a resonable level, while admittedly being above average.

But again, servicing debt is a burden on the economy, no doubt, but I don't see how it can stop the US from returning to positive growth. The US economy is highly flexible, adaptive and productive.

Yes very true. However wouldn't it be impossible for a buisness to rebound with no capitol, more restrictions on banks and lending practices with stingy loan guidelines due to government bailout restrictions. Is it a streach to say that perhaps the worst thing this country could do is give more power to the government with these terms?

[Generaal Van Heutsz]

In terms of %GDP, the US national debt is not in bad shape compared to other industrialized nations (Japan and the UK are in much worst shape IIRC). My memory for the personal debt figures are much more fuzzy, but they I think those debt levels are still on a resonable level, while admittedly being above average.

But again, servicing debt is a burden on the economy, no doubt, but I don't see how it can stop the US from returning to positive growth. The US economy is highly flexible, adaptive and productive.

GDP is a meaningless number, the US is mainly a service economy (iirc 70%) that's 70% of people scratching eachother's back, adding to the GDP, without anything being actually made, just backscratching. That's no economy!

[JP226]

Housing Prices Rise in May

Spoiler Alert, click show to read: 

NEW YORK (CNNMoney.com) -- The value of U.S. homes grew on a monthly basis in May for the first time in nearly three years, according to 20-city index released Tuesday.

The month-over-month increase was 0.5%, according to the report from financial data company Standard & Poor's and economists Case-Shiller. It was the first increase in the monthly index since July 2006.

On an annual basis, home prices in the 20 cities fell 17.1%, but it was the fourth straight month that the year-over-year decline lessened.

This could be an indication that home price declines are finally stabilizing," said David Blitzer, chairman of the index committee S&P, in a prepared statement.

While acknowledging that the report was good news, Mark Zandi, chief economist for Moody's Economy.com, downplayed the importance of a single month's statistics.

"I think it's a temporary respite," he said. "It reflects the recent decline in foreclosure sales, and prices will continue to fall over the next several months."

Robert Shiller, the Yale economist who co-founded the index and who's famous for warning that the housing boom was, in fact, a bubble, said the decrease in foreclosure sales does show up in the index statistics as a plus for home prices. That's one reason he did not want to sound too optimistic; foreclosures could take off again.

"And we could get more economic bad news, but it does look encouraging," he said.
He added that he thought that Washington's efforts have boosted the nation's spirits, an important factor for the housing market.

"The government has done a lot to support the housing market," he said. "Confidence has improved. People are talking about 'green shoots.' People are thinking it's time the recession came to an end. The stock market is up."

The improvement was as broad as it was deep, with 13 metro areas showing gains, compared with eight in April. Two, New York and Tampa, Fla., showed no change.

The biggest winner was long-suffering Cleveland, where prices rose 4.1%. The city still falling the most was Las Vegas, where prices declined 2.6%.

The report added to the list of positive housing market indicators. These include rising new home sales, increased home building and increased pending sales.

Washington's goal: Stabilizing the housing market has been a primary goal of Washington policy makers. Congress has tried to stimulate homebuying by creating a temporary tax credit of $8,000 for people who have not owned a home for at least three years.

The administration has also tried to tackle the foreclosure problem, creating a program to help mortgage borrowers avoid defaulting on their loan payments and losing their homes.

Zandi added that lenders are still figuring out the administration's foreclosure prevention plan, and have suspended the foreclosure process for many borrowers in default. That means fewer distressed properties, which tend to bring in lower prices, than usual.

One of the most positive things the government has done, according to Shiller, was to take control of the failing mortgage companies Fannie Mae and Freddie Mac.

These were government sponsored enterprises that guaranteed a flow of mortgage lending by buying or backing mortgages in the secondary market. Without government backing up these companies, mortgage lending would have dried up, which would have devastated home sales.

Lower prices: Prices have also fallen so far in so many places that it's drawing people back into the market.

In Las Vegas, prices are off about 53% from their peak, set in August 2006. Phoenix prices are down 54%.

Overall, the 20-city index is down more than 32% from its high.

Interest rates were very low in May, which also could have helped the housing market. The rate for a 30-year mortgage was well below 5% during the month, which encouraged buyers and drove up demand.
Zandi is hopeful that the market is stabilizing. "It feels like the cycle is winding down," he said. "I think it depends on how well the mortgage modification plan will work and I'm guessing it will work reasonably well."

This whole recession was triggered by the bursting of a housing bubble in the US. Recent figures would suggest that this bubble has finally run it's course. There were other flaws exposed during this crisis (the financial markets, the auto industry, debt levels etc.), but none the less, seeing the housing market start to turn around, even while we are most likely still in a recession is a signal of some sort. How important is this? Combined with the record profits on Wall Street, a DOW above 9,000, and Ford posting a profit, are we in a recovery? Or is this an Indian Spring?

Housing crisis may have a quarter or two more to fall. There hasn't really been a noticeable change outside of "noise." In some markets of Florida, housing prices are still 60 and 70% of peak. Once housing prices stabilize and turn around we'll then have issues with housing starts, which doesn't bode well for construction, a large economic engine.

[Generaal Van Heutsz]

Housing crisis may have a quarter or two more to fall. There hasn't really been a noticeable change outside of "noise." In some markets of Florida, housing prices are still 60 and 70% of peak. Once housing prices stabilize and turn around we'll then have issues with housing starts, which doesn't bode well for construction, a large economic engine.

Construction is not an economic engine. You can't export contruction really(except maybe in the case of vacation homes or office buildings for foreign companies), they only manufacture big non-movable (in essence) luxury goods.

[Sphere]

Housing crisis may have a quarter or two more to fall. There hasn't really been a noticeable change outside of "noise." In some markets of Florida, housing prices are still 60 and 70% of peak. Once housing prices stabilize and turn around we'll then have issues with housing starts, which doesn't bode well for construction, a large economic engine.

That might be a little too conservative of an estimate, but I tend to agree. I don't think that the national house prices are in full recovery yet, and I wouldn't be suprised with a negative number for June or July. However, I think it is better to consider the US housing market in regions, many of which are in full recovery. If the most damaged markets (like Las Vegas and Cleveland) find a bottom, the rest of the counrty will be able to carry the national figures.

[JP226]

That might be a little too conservative of an estimate, but I tend to agree. I don't think that the national house prices are in full recovery yet, and I wouldn't be suprised with a negative number for June or July. However, I think it is better to consider the US housing market in regions, many of which are in full recovery. If the most damaged markets (like Las Vegas and Cleveland) find a bottom, the rest of the counrty will be able to carry the national figures.

The real driving forces of the housing market are your employment rates, disposable income, rates and consumer confidence. Employment is really the key as to why the housing market, and starts, are going to stay sluggish. With rates that look like they are going to stay upwards of 10 to 10.5% into 2010 and possibly the beginning of 2011, there isn't a whole lot of room for the housing market to go up, not yet anyhow. There are some wild cards running around, specifically the China's of the world, and who knows what's going to happen with Freddie and Fannie and their whole line of mortgage/ loan products.

[Generaal Van Heutsz]

The real driving forces of the housing market are your employment rates, disposable income, rates and consumer confidence. [Employment is really the key to the housing market and more importantly starts.

What are you suggesting, that the housing market drives the economy, creating jobs driving the housing market? That's just circular reasoning! Even when you are not arguing this, I already explained to you numerous times consumption does not stimulate the economy, it might increase GDP but it does nothing to increase the real economy. GDP is basically useless for measuring economic growth, as I already explained you before too, it doesn't measure value being added or value being destroyed, it only measures money changing hands, nothing more, nothing less. This is of course the reason why keynesians and other socialists and statist believe that destruction stimulates economic growth because it shows up as growth in their statistics. In normal sciences when you get such contra intuitive and contradictory results, in would drive scientists to question their assumptions and reasoning but not keynesians, they will promote it as a good.

With rates that look like they are going to stay upwards of 10 to 10.5% into 2010 and possibly the beginning of 2011, there isn't a whole lot of room for the housing market to go up, not yet anyhow.

You do not want the housing market to go but down way down, so resources are freed up to manufacture "stuff you can export" and pay off your debt.

There are some wild cards running around, specifically the China's of the world, and who knows what's going to happen with Freddie and Fannie and their whole line of mortgage/ loan products.

I don't think it's very hard to guess what China is going to do: they are slowly, without trying to disrupt the market too much or even causing a panic, going to get rid of their dollar denominated holdings.