Posted on 09/28/2006 9:31:53 AM PDT by Hydroshock
One of the many benefits of the now-cooling housing boom — both to consumers and the U.S. economy — was the huge pile of cash extracted in the form of home equity loans and “cash-out” mortgage refinancings. But with home prices flattening, and that multibillion-dollar piggy bank drying up, can consumers continue the shopping spree that accounts for more than two-thirds of the U.S. economy?
There was fresh evidence of the housing slump this week, as separate government reports showed prices of both new and existing homes fell year-over year in August. For existing homes, it was the first year-over-year price drop in more than 11 years.
So far, consumer spending and confidence seem to be holding up. But the slump in home prices — and the break in what had been a relentless rise in homeowners' equity value — has some analysts voicing concerns that the end of the housing boom could also spell the end of the extended consumer shopping spree that has been a mainstay of the U.S. economy. Retailers, many of whom have already locked in plans for the holiday shopping season, are keeping a close eye on the numbers.
(Excerpt) Read more at msnbc.msn.com ...
Also, it may not be the best world for home sellers, who won't get the extra cash they want, but is seems that the effect on the economy will be pretty neutral because the buyers will have extra cash to spend.
Exactly where is the problem?
C.A.R. REPORTS HOME SALES DECREASED 30.1 PERCENT IN AUGUST The median price of an existing single-family home in California increased 1.6 percent in August and sales decreased 30.1 percent compared with the same period a year ago, C.A.R. recently reported. "We experienced the greatest year-to-year sales decline last month since August 1982, when sales fell 30.4 percent," said C.A.R. President Vince Malta. "This is another indication that we're in the initial stages of a long-anticipated adjustment in the market."
According to the report, the median price of an existing, single-family detached home in California during August 2006 was $576,360, a 1.6 percent increase over the revised $567,320 median for August 2005. Also in August, closed escrow sales of existing, single-family detached homes in California totaled 442,150 at a seasonally adjusted annualized rate, down 30.1 percent compared with the sales pace recorded one year earlier and down 2.6 percent from home resale activity in July.
"Although the median price in the state and in several regions hit an all-time record in August, we expect softer prices toward the end of the year," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "The median price typically peaks somewhere between June and August before declining toward the end of the year. Some areas of the state already have experienced year-to-year declines for more than two months. This is in stark contrast to the past several years when there were constant double-digit increases. The long-term trend remains to be seen."
Fast Facts
Calif. median home price - August 06: $576,360 (Source: C.A.R.)
Calif. highest median home price by C.A.R. region August 06:
Santa Barbara So. Coast $1,190,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region August 06: High Desert $332,900 (Source: C.A.R.)
Calif. First-time Buyer Affordability Index - Second Quarter 06:
23 percent (Source: C.A.R.)
Mortgage rates - week ending 9/21:
30-yr. fixed: 6.4%; Fees/points: 0.5%
15-yr. fixed: 6.06%; Fees/points: 0.5%
1-yr. adjustable: 5.54%; Fees/points: 0.8% (Source: Freddie Mac)
Housing is still up from 2000...spin away....
I can't help but gasp, laugh, choke, and chuckle at this. In Ohio the average home is in the mid to upper $100s. You can get THIS for $589,900 here...
But it is in: Akron, OH 44333
How many 6-figure plus jobs available?
>>NEW home sales have still gone up, which indicates that the market is still in good shape<<
It could also mean they are being sold in "fire sales". Large incentives can increase sales, especially if the price has also dropped.
As an example, if you cut your prices in half and sell more of your product, it doesn't mean the market for your product is in good shape.
Looks like money is leaving real estate for stocks.
Housing is still up from 1950. Spin away.
So prices have gone up while inventories have skyrocketed. Looks like someone is gonna have to blink. And we just entered the "slow season" in real estate. I sure hope most of the sellers don't HAVE TO sell or this could get real ugly, real fast.
I am doing a condo development in NC. You can get real nice for about $400,000, on a lake etc.
How many people in CA make enough for an AVERAGE home there?
There aren't many of them here, but I saw somewhere recently that less than 5% of the population of San Francisco can afford the median-priced home.
Meaning six-figure jobs.
We've got 3 RE transactions and five loans working. About 6 buyer leads trying to get focused.
Some people have equity and can afford to upgrade. In other cases I see the grandparents living in and contributing to the payment.
This is short term speculation. RE can provide a 9X leverage for your investment. If you're not chasing the market, you know to buy and hold and you'll do very well.
Renters always waiting for a downturn....
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