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Housing market crosscurrents

Posted by Scott Van Voorhis  July 17, 2009 09:00 AM

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Just call it the battle of the dueling statistics.

As the housing market hits bottom, you can alternately become either extremely depressed or mildly elated depending on what stat you look at.

Just take Thursday, when another gloomy batch of foreclosure numbers was offset by signs of renewed confidence among home builders and a modest rally on Wall Street after a new prediction the recession will end in a matter of months.

On the downer side, RealtyTrac released another of its devastating reports on the foreclosure epidemic.

Across the country, foreclosures are up 15 percent over the first six months of the year. More than 1.5 million properties across the country either received a foreclosure notice was seized by a lender through June.

Nearly a third of all new foreclosure filing now involve fixed rate loans to credit-worthy borrowers, according to the Bloomberg report on the new numbers.

Yet the same day another survey shows a surprising rebound in confidence among home builders, some of the hardest hit of anyone in this current downturn. Confidence among builders is back to where it was in September, when the global financial crisis erupted.

And stocks, while they ended flat, reversed an earlier slide after New York University economist Nouriel Roubini (credited with predicting the financial crisis) predicted the recession will end later this year. He also tempered his remarks by adding a second stimulus of $200 billion to $250 billion might still be needed to broaden a recovery.

Anyway, it’s a mixed bag when it comes to housing market/economic news these days.


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9 comments so far...
  1. To keep the foreclosure numbers in numbers in perspective, even if half (or quarter) of this many houses (1.5 million in six months) end up getting foreclosed, that will be three times (or one and half times) the total sales rate estimate by the National Association of Realtors. And another information (IIRC) is that the recission rate among the re-worked mortgages is around 50%.

    Posted by TS@Waltham July 17, 09 09:52 AM
  1. it's really not much of a battle is it? The bearish data and facts grossly outweigh the hype and hope of the NAR and the media by a mile...

    Posted by Hung Wang July 17, 09 10:26 AM
  1. Roubini said no such thing. Just more truthiness from a press that fabricates falsehoods and then repeats them even after they have been debunked until they become conventional wisdom.

    From Roubini's statement after the markets closed up yesterday following CNBC's fabricated reports of his bullish turn:

    “It has been widely reported today that I have stated that the recession will be over 'this year' and that I have 'improved' my economic outlook. Despite those reports - however – my views expressed today are no different than the views I have expressed previously. If anything my views were taken out of context.

    “I have said on numerous occasions that the recession would last roughly 24 months. Therefore, we are 19 months into that recession. If, as I predicted, the recession is over by the end of the year, it will have lasted 24 months with a recovery only beginning in 2010. Simply put I am not forecasting economic growth before year’s end.

    ..."“I have also consistently argued – including in my remarks today - that while the consensus is that the U.S. economy will go back close to potential growth by next year, I see instead a shallow, below-par and below-trend recovery where growth will average about 1% in the next couple of years when potential is probably closer to 2.75%.

    “I have also consistently argued that there is a risk of a double-dip W-shaped recession toward the end of 2010....

    “Also, as I fleshed out in detail in recent remarks the labor market is still very weak. I predict a peak unemployment rate of close to 11% in 2010. Such a large unemployment rate will have negative effects on labor income and consumption growth; will postpone the bottoming out of the housing sector; will lead to larger defaults and losses on bank loans....

    So, clearly, the proper press response to this statement is a 24-point headline blaring, "Dr. Doom Calls the Bottom!!"

    Posted by Marcus July 17, 09 10:32 AM
  1. Yet another example of people confusing facts with speculation. See those foreclosure numbers? Those are facts. The first six months of last year were no walk in the park when it came to foreclosures, and the first six months of this year were significantly worse.

    Now, take a look at the good news. A national survey of home builders shows that 84% of them think the building market is in bad shape, as opposed to 87% a month ago, or the 85% that wall street predicted. Even if this survey mattered, the results are hardly significant. But the survey itself is nonsense: who cares what the builders think? They rode the ups and downs of the housing bubble more than anyone, and have therefore lost all credibility as a predictive source. I can see tomorrow's "good news" headline already: ""Madoff says market has hit bottom."

    Posted by James July 17, 09 01:43 PM
  1. Agree James. The very same experts that couldn't see the housing bubble, recession and financial crisis are the same ones who we have in charge of trying to solve the problem and who somehow can now see the end to the crisis.

    While Roubini was one of the prominent few that foresaw the crisis, his calls for stimulus, leads me to believe that he has misdiagnosed the problem. The problem is obvious: too much credit, too much debt, and too much leverage. Why Roubini thinks the answer is more credit and more debt is beyond me.

    Posted by John July 17, 09 03:51 PM
  1. Roubini is simply stating the obvious. Absent sufficient stimulus, the US is perilously close to a deflationary cycle. These cycles are not self-correcting, the way high prices are; instead, they are self-reinforcing. A deflationary cycle is how you get the GD II. Capacity utilization is at record lows, so there is little chance of crowding out for the next year or two. But Roubini has also pointed to the fact that policy stands on a knife-edge--growing debt may put upward pressure on interest rates, and has to be ratcheted back at precisely the right time, avoiding both a 1937-style recollapse caused by deficit hawks, as well as skyrocketing rates. The chances of a Goldilocks policy response are pretty slim, as he recognizes. Had we not run up a $10 trillion deficit before this crisis, we would be in a far better position to manage it.

    Back to the main point: There are many moving parts to a bubble blowing and bursting. Housing starts have probably bottomed already. Prices most certainly have not. It is impossible to get the press to understand such concepts, since they cannot be expressed in five words or less.


    Posted by Marcus July 17, 09 04:18 PM
  1. Why are lower prices (ie. price deflation) bad? Prices are irrelevant. What matters is the purchasing power of dollars. We would be no better or worse off if everyone in the world suddenly got a 50% pay cut or everyone suddenly got a 50% pay raise. Prices would adjust accordingly.

    Had governments and central bankers around the world stepped aside and let the collapse run it's course, the S&P would be at 300, unemployment would be 20%, people would see their wages cut by 30%, gas would be $0.75 a gallon, home prices would be down another 30%, a 60" plasma TV would be $200, etc. etc. AND we would actually be on the road to a real recovery, not on the road to an inflationary depression.

    This fall will bring the next leg of this crisis. Are you prepared?

    Posted by John July 17, 09 10:53 PM
  1. I love the fact that homebuilder confidence is taken seriously as a predictor of the housing market. Beautiful irony. Any guesses where homebuilder confidence was back in 2005? Predicted the crash beautifully...

    Whereas, as said above, foreclosures are real data - that's excess supply that's about to be dumped onto a market with too much supply.

    So of coursebthey are treated equally. The level of denial continues to amaze me. I really thought reality would be closing in by now.

    Posted by Charles July 18, 09 10:01 AM
  1. John #7: Deflation is "bad" because it hurts borrowers. The nominal value of a borrower's debt obligation stays the same as prices (including collateral for the loan) and income used to repay the debt fall. The only people who benefit during a deflationary period are savers. And they are obviously the minority in the US.

    There is much economic and philosophical speculation about what would happen if deflation were left to run it's course. But I think the critical point is this: the US Government is the largest debtor in the world and it also controls the printing press. As long as this arrangement remains in place we will never see a prolonged period of broad price deflation in the US... The government will just keep printing more money.

    But that is not to say that deflation can not occur within specific asset classes. There is rapid price deflation happening now in housing... And predictably, savers are being rewarded and borrowers are getting clobbered.

    Posted by Lance Stapleton July 20, 09 09:32 AM
 
About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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