Posted on 07/26/2008 5:00:33 PM PDT by NormsRevenge
WASHINGTON (Reuters) - The downward spiral of U.S. housing prices still has a way to go and homes were overvalued by between 8 percent to 20 percent in the first quarter of this year, according to research by an International Monetary Fund economist published on Friday.
In his report "What goes up must come down? House price dynamics in the United States," IMF economist Vladimir Klyuev used several economic techniques to determine by how much U.S. home prices are overvalued.
Klyuev drew from a government study of single-family home prices to conclude that values were "around 14 percent above equilibrium in the first quarter of 2008, with a plausible range of 8 to 20 percent."
His research showed that home prices became considerably overvalued from 2001 and while the housing market has started to correct itself, there is still a long way to go.
U.S. policy-makers are now trying to guide the housing market into a soft-landing after a five-year run-up in home values that ended in 2006.
The report also said that it is likely home prices will swing well below their equilibrium level before they start to recover.
(Excerpt) Read more at news.yahoo.com ...
Thanks IMF for screwing with our mortgage mess even more.
The price of Canadian lumber is high enough that new construction is much higher than a two year old house.
if vladimir putin would just comment on the u.s. housing crisis,
house values would drop even more!
I believe it is call,, piling on.
Oh oh... when Jack and Jill look across the street and see that the new neighbors paid half as much for a similar house as theirs... they are going to mail in the keys...
Is the IMF ever right? Perhaps this is a sign of the bottom.
That's right. With loan brokers finding any human body with a pulse to sign on the dotted line to create mortgages to sell to gullible Wall Street investors, every burger flipper at MacDonalds could get a $400,000 mortgage loan to bid up the price of a $200,000 house and every average middle class person with an average middle class job could get $800,000 mortgage loan to bid up the price on a $400,000 house.
If the principal and interest payments on a mortgage on the price of an average middle class house drives the average middle class buyer into bankruptcy or foreclosure as soon as the "interest only" and "low-low introductory interest rate" gimmicks expires, then the asking price for that house house was obviously overpriced.
If houses had not been waaaay overpriced, there would be no "mortgage crisis" right now. People would simply be making the principal and interest payments every month and getting on with life just like people routinely did before this Credit / Housing Bubble started.
Are you aware of how much foreign money was involved with the mortgage funding? A tremendous amount of the increase was due to rich overseas people seeking to invest in our real estate.
A home is worth what someone will pay for it. It has nothing to do with anything else. Look in all the mirrors you want.
The IMF has never helped anyone except the banking elites in Belgium.
And no, a home isn't worth what someone will pay for it. It is worth its replacement cost plus a modest profit on capital for the builders. If the price ever gets higher than that, men will print houses until the supply swamps the demand.
And men will only pay for housing what they can realistically afford for it, in the long run. Mortgage payments won't go much above rents and neither can go much above a quarter of average take home income.
Ponzi finance, with the next rube paying to let the previous speculator get out, only works for a few years tops, and always falls to pieces. Always.
And you can always tell when someone is trying to sell you Ponzi nonsense. They will say, "it is worth whatever anyone will pay for it". That's how men paid the equivalent of a million dollars in today's money for one tulip bulb in Holland, long ago. But it is simply folly.
“The IMF has helped hundreds of millions of people,”
You mean they’ve helped people make hundreds of millions.
“And no, a home isn’t worth what someone will pay for it. It is worth its replacement cost plus a modest profit on capital for the builders.”
Not if nobody wants to pay that amount.
“And you can always tell when someone is trying to sell you Ponzi nonsense.”
You sound like a communist. The amount people are willing to pay is variable.
I bet you support debtors prison too.
What Goes Up Must Come Down? House Price Dynamics in the United States [PDF file]
International Monetary Fund ^ | July 25, 2008 | Vladimir Klyuev
Posted on Friday, July 25, 2008 6:20:25 PM by seacapn
Today, Saturday, I drove on the Massachusetts turnpike, I-90. Traffic was backed up about 12 miles eastbound west of I-495. It was backed up 5 miles westbound before I-84. I called the 511 number for a traffic report. The state police reported construction delays. With my own eyes I saw no construction workers on the pike today, just toll collectors. The long lines ended once you passed the toll collector. This is a fine example of your sober technocrats, excuse me hacks, creating the problem and lying about it. I wonder, are you a hack?
Hmmm....the IMF is collecting tolls on the Mass Pike?
What will they get up to next?
I sure do. A good percentage of those gullible investors buying financial instruments based on U.S. mortgage debt were foreign investors trying to buy a supposedly low risk investments that paid more than T-Bills and were less volatile than stocks.
What the foreign investors did not know was that the mortgage brokers were creating "mortgages" by getting unemployed or under-employed deadbeats or middle class borrowers borrowing waaaay more than they could afford to sign on the dotted line by whatever means necessary.
"No job?"
"No problem! We don't care!! We'll help you falsify the loan application. After all, it's not our money we are lending. We make our money on commissions and YOU, Sir, represent a commission!! Sign right here!!!"
"You can't afford the $5,000 a month mortgage payment once the "interest only" period expires?"
"No problem!! By that time, the house will have appreciated in price 20% and the worst that can happen to you is that you then sell the house and pocket a big profit!!!"
A tremendous amount of the increase was due to rich overseas people seeking to invest in our real estate.
Which they did buy buying up the worthless IOU's created by the brokers.
In some markets like New York or Miami Beach or Key Biscayne, the foreigners were actually buying the real estate but, on Main Street, USA, you can't blame the foreigners for that.
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