1. Real Estate values still falling.
- Interactive chart of housing prices from NYTimes here
- As of May 27th, home price index fell 14.4% (Bloomberg) - this is a continuing trend, for several reasons to be mentioned.
- On top of this, housing price likely to fall another 10-15% leading to negative equity. One of the worrying effects is effect on consumption.
2. Foreclosure on the rise (WSJ)
- For interactive foreclosure heat map, see HotPads
- As of April, investors and lenders owned 660,000 foreclosed homes. Although this may not sound like much, it's huge increase from 493,000 in January and 231,000 January 2007. This is also one in seven previously occupied homes available for sale.
- This shoots the bank's home inventories, and the lenders have one thing to do to avoid depreciating asset value sitting on their balance sheet - cut prices. The standard practice is cutting prices every 20 days.
- So banks are tight for cash in the end. They lent money and ended up with bunch of assets that is depreciating. Therefore, two events occur.
a. Tighter lending policy
b. Rising mortgage rates
3. Falling housing price affects labour mobility.
- One of the golden points of AlephBlog's post - I believe. This is one of those hidden effects.
4. Housing starts are very low. Builders are working off excess inventories.
as of Tuesday, June 17th, new housing starts dropped 32% YoY to 17 year low
5. Losses have started in Alt-A and Prime loans, much, much bigger part then subprime loans.
- Until now, the problem has been in the subprime range. However, first signs of consumers with regular and alt-a loans not paying mortgage has shown up.
Looking at chart via NYTimes, this now isn't just a budding phenomenon. Yes this number probably is VERY skewed by the fact that it's in percentages instead of just absolute numbers, but the fact that delinquincies
So all in all..... I think I agree with most saying that we've still got a while, while, while more to go in terms of housing crisis.
The thing works like an Earthquake - it hits, then we have to wait for the aftershocks as we try to rescue and rebuild. If the aftershocks are hit off-shore though, we have a chance of tsunami hitting us.
Source: Aleph Blog
http://alephblog.com/2008/06/18/ten-notes-on-residential-housing/
No comments:
Post a Comment