Posted on 10/10/2007 7:35:41 AM PDT by Hydroshock
WASHINGTON (AP) -- The decline in 2007 sales of existing homes will be steeper than previously anticipated, a trade group for real estate agents said Tuesday.
The eighth straight downwardly revised forecast from the National Association of Realtors calls for U.S. existing home sales to be 10.8 percent lower than last year as housing market struggles persist.
In its October report, the association predicts 5.78 million existing homes to be sold in 2007, down from 6.48 million last year. Last month, the association predicted an 8.6 percent drop from a year ago.
This year's sales would be the lowest since 2002, when sales hit 5.63 million. Sale prices for existing homes are forecast to drop 1.3 percent to a median of $210,200 this year.
Next year, the trade group expects existing home sales to climb to 6.12 million, down 2.4 percent from last month's prediction for 2008 sales
(Excerpt) Read more at money.cnn.com ...
Mortgage/Credit/Housing PING
If you want on or off this ping list let me know.
Dear Editor:
The subprime/ adjustable/ HELOC/ ALT-A and other mortgage schemes have an estimate loss of 2.8 trillion dollars (see below). Today, only a few banks and mortgage companies have reported losses of some 20 billion dollars (see below). The vast majority of these crazy loans (that never should have been made) will not reset until 2008.
For comparison, the entire lose for S&L crisis was $150 Billion in 1988 dollars (see below). We are in the 1st inning of a massive write down of wealth that will affect nearly every aspect of financial life.
Consumer spending is 70% of our economy. For the last 5 years this has been greatly driven by these housing bubble and by people taking out Home Equity Loans on their ever increasing house equity to buy stuff. This has now come to a screeching halt.
The music has stopped. In fact - we are going in the exact opposite direction. I expect, on average, houses to lose 50% of their value from peak. Now imagine how that will affect the economy. Add in oil at near historical highs, the stock market at historic highs, gold at near historical highs, the dollar at historic lows and long term interest rates moving higher – something has got to give.
Regards,
2banana
http://www.truthout.org/docs_2006/091107R.shtml
Recession Time! The Housing Bubble Bursts the Economy
By Dean Baker
Subprime mortgages accounted for one-fourth of all mortgages issued in 2006. The equally troubled Alt-A mortgage category accounted for another 15 percent. With segments that account for 40 percent of the mortgage market going into convulsion, there was no way that the housing market as a whole would not be affected. Of course, record supplies of unsold new homes and vacant homes also ensured that there would be substantial downward pressure on house prices.
However, the direct impact on the housing sector is just the tip of the iceberg. The housing bubble created more than $7 trillion in housing wealth. Homeowners have used this bubble wealth to support a surge in consumption over the last five years, pushing the saving rate to near zero. They borrowed against their home equity to pay for vacations, new cars, or just to meet necessary expenses. As this bubble wealth disappears, consumption of all forms will be cut back, slowing growth and leading to more job losses.
40% x $7 trillion = minimum of $2.8 trillion in losses (yes - nearly all of these loans will go bad). This does not include $4-5 trillion in lost “wealth”; note that $6T has been extracted in MEWs in the last five years, so this is not at all unreasonable. This assumes a 30-50% decline in inflation-adjusted prices from ‘05 levels, which is already in process. We are at 30% here already.
Bank of America, JPMorgan face $3B hit - report
Combined loss would bring total writedowns from subprime-related securities to $20 billion, says the Financial Times.
October 8 2007: 6:55 PM EDT
http://money.cnn.com/2007/10/08/news/companies/banks/index.htm?source=yahoo_quote
NEW YORK (CNNMoney.com) — Bank of America and JPMorgan Chase are thought to be on the verge of announcing combined losses of $3 billion from mortgage-backed securities and leveraged loans when they report third-quarter earnings this month, according to a news report today.
The announcements would bring total losses at the world’s leading banks from subprime-related assets to $20 billion, said the Financial Times.
JPMorgan (Charts, Fortune 500) is expected to announce losses on leveraged loans of $1.4 billion, Sanford Bernstein analyst Howard Mason said in the report. He also anticipates it will suffer an additional $700 million in writedowns on mortgages and mortgage-backed securities, said FT.
Bank of America (Charts, Fortune 500) is expected to see around $700 million in leveraged loan losses and mortgage writedowns of $300 million.
JPMorgan and BoA do a lot of lending to private equity firms, so most of their writedowns will come from leveraged loan commitments they’d have to take a loss on if they sold now, the paper reported.
Merrill Lynch (Charts, Fortune 500) reported the largest credit-related losses at $5 billion. UBS (Charts) said it had $3.7 billion in writedowns, while Deutsche Bank (Charts) had $3.1 billion
and Citigroup (Charts, Fortune 500) reported $2.7 billion. Washington Mutual (Charts, Fortune 500) reported a hit of $410 million last week.
Smaller banks such as Wachovia (Charts, Fortune 500) are also expected to announce writedowns proportionate to their size.
http://en.wikipedia.org/wiki/Savings_and_Loan_crisis
The Savings and Loan crisis of the 1980s was a wave of savings and loan association failures in the United States in which over 1,000 savings and loan institutions failed in “the largest and costliest venture in public misfeasance, malfeasance and larceny of all time.”[1] The ultimate cost of the crisis is estimated to have totaled around USD$150 billion, about $125 billion of which was consequently and directly subsidized by the U.S. government, which contributed to the large budget deficits of the early 1990s. The concomitant slowdown in the finance industry and the real estate market may have been a contributing cause of the 1990-1991 economic recession.
That, my friend, is silly.
Not in some markets.
I agree completely.
As I posted to you yesterday, gold is NOT at historic highs.
In many markets, house prices are down only slightly or not at all. Long before houses devalue by 50%, builders will stop building and owners of existing homes who are paying their mortgages (and that’s the vast majority of homeowners) will stay put.
And the slime ball developers still want to build a 1000 houses in the corn field behind me.
I hope they lose their butts.
But 'some markets' will have to decline much less than -50% for houses 'on average' to lose 50% of value.
Not that silly. This thing will drag out to 2011 at least. Some market will be crushed. This thing is far from over.
Things are going to get very ugly for many Americans. And if the gubmint tries to bail them out, things will get even uglier.
Bring it on! I’m sick of renting and my landlord is a cheapskate.
“The decline in 2007 sales of existing homes will be steeper than previously anticipated,”
The decline of “existing homes” always occurs when the builders have excess new homes they need to unload; which in some regions is exactly the case right now. As builders do all they can to get THEIR inventories down, sales of existing homes will go down. Its really not a mystery.
I agree. The market will adjust to demand. There will be fewer new homes built, and a lot of illegal aliens who work in construction will lose their jobs, but 50% nationwide is not likely.
Yep. So, in a "good" market, say DFW, we are looking at about what, two years till the best deals on buying a 3 - 4 bdrm brick?
I don’t see why this causes any concern at all.
It appears that we’re only finally back to 2002 “existing” home sales levels - after being WAY above that. This means that there’s no “collapse” of home buying at all - merely a return to more realistic levels rather than the nutty, unsustainable levels achieved while the Fed had the discount rate at under 1%. Now that they’ve returned that to a more reasonable spot, home sales are returning to a more reasonable level, too.
What’s the heartburn?
My wife and I are renting now and probably will continue till ‘09. Right now it is cheaper to rent. I am not saying that ‘09 will be the bottom (it probably won’t) but I think a good part of the damage will be done by then and it will be a good time to own a house again. I think a lot of the subprimes start to kick in at end of ‘08.
LOL, you doom and gloomers are so predictable and typically (though you may inform me that you are different) do not put your money where your mouth is.
If you guys are so cocksure about the market heading south for 50% (on average) or even 20% on average, you should make a fortune! In fact, if you really believed that was what was about to happen, you would not tell anyone and privately be buying short on all real estate capital you possibly can. Remember, you told us -- it's a sure thing. So if it is such a sure thing, go short with real estate and get all-in. You will make a fortune.
If you are unwilling to do so, then at least have the integrity to temper your posts with at least a semblance of doubt. If you reply that you are heavily short on real estate and are banking on this sure thing then post away, my hat is off to you and you have earned my respect. I don't agree with you, but I will at least respect that you are willing to not just talk.
I watched the show sell my house the other night and they had 3 homes for sale in 3 different parts of the country, Tenn, SC, Fl, they had been on the market for most of the year, 1 for 2 years. They did all kinds of crazy marking to get these things sold, 2 sold for almost less than their high and the one in Fl was rented out and just covered the mortgage.
BigMack
Don't confuse people with reason. The financial markets are doomed. Only 2banana, hydroshock, and others on this thread really understand it you see. The millions and millions of people putting real money in the markets and sending them to record levels are all stupid. These guys that know with absolute certainty that the real estate market is heading south (50% on average!) and stand to make a fortune only Bill Gates could dream about if they are even half right are instead posting like Chicken Little on FR instead of investing by going short in real estate.
Well, I have. But HOW DO YOU SHORT Real Estate? I did short CFC and some home builders and made some cash - but not a lot. Shorting is a dangerous business and I am not a big gambler. I bought my house 15 years ago and it is almost paid off. I am not selling - I still need a place to live (and so does my family).
As far as other investments: I am slowly getting out of the US stocks and investing in short term bonds and foreign currencies and stock. So far - it has worked out pretty good. I would not touch US financial, housing or high end consumer stocks (lie HOG) with a 10 ft pole...
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