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... and the existing inventory gets back to a 6 month level or so, it's premature to think about.
That's the key, IMO. Even without a lot of foreclosures, there's lots of inventory because people are freaked, and looking to unload property. Some people have had a hit on their 401k, for example. My realtor says there is a lot of stuff coming on in outlying areas, as well, because of the price of gas. And if people who are out of the market see the inventory and DOM going down, they'll put their house in, which raises inventory.
So we probably are looking at at least 1-2 years for recovery, in my area. I've completely written off 2009.
Builders are like real estate agents in that there needed to be a culling as there were too many of them for what the market would bear. So while 1/4 have gone belly up, there are more than enough to handle future demand. I don't see this as causing a shortage in housing in the near future. We still have a 17-23 month inventory of new construction homes in my area. Out here, they just cost too dang much for the average homebuyer.
The other issue I see is that the historical average for homeownership was 64%. In the boom it was up to 69%, and I think we are down around 67.5-68% right now. What this means is that we are still several percentage above normal. So the people that could "afford" (I use that term loosely here) homes already own one, or will go into foreclosure soon and not be able to buy one soon anyway. Builder's aren't going to built $300,000 spec homes in order to rent them out for $1200 a month.
Scone, I agree with what you are saying, but one of the problems with the manufacturing sector and jobs is that when oil was cheaper it was just cheaper to outsource to Asia. When oil went up and talk of it heading to $7 a gallon or so, it would be cheaper to manufacture in the US than outsource, but our manufacturing infrastructure has disappeared. Even if they wanted to bring the jobs back here, there is little infrastructure to do so. It's a complicated mess.
Scone, I agree with what you are saying, but one of the problems with the manufacturing sector and jobs is that when oil was cheaper it was just cheaper to outsource to Asia. When oil went up and talk of it heading to $7 a gallon or so, it would be cheaper to manufacture in the US than outsource, but our manufacturing infrastructure has disappeared. Even if they wanted to bring the jobs back here, there is little infrastructure to do so. It's a complicated mess.
Yes, I think that's true for a lot of the 'old iron' industries, but I believe all is not yet lost. High tech is doing better than many other industries. Cars are still made here. Solar just got a tax boost today, and will get more when the Dems win the election. My washer and dryer were designed in New Zealand and made in Ohio. And the importers are going belly-up fast, which creates it's own opportunities. And my builder, who was into the high-end market, now wants to get back to building starter homes! So the ones who survive, will retool and adapt to the changes in the market. I think there is hope-- especially since a lot of people have been turned off about exotic financial instruments, such as derivatives. People have to put their money somewhere.
Yes, I think that's true for a lot of the 'old iron' industries, but I believe all is not yet lost. High tech is doing better than many other industries. Cars are still made here. Solar just got a tax boost today, and will get more when the Dems win the election. My washer and dryer were designed in New Zealand and made in Ohio. And the importers are going belly-up fast, which creates it's own opportunities. And my builder, who was into the high-end market, now wants to get back to building starter homes! So the ones who survive, will retool and adapt to the changes in the market. I think there is hope-- especially since a lot of people have been turned off about exotic financial instruments, such as derivatives. People have to put their money somewhere.
I don't think all is lost at all. My hubby is in high tech, and there are some amazing things being developed here. Infrastructure and skilled labor is an issue. As our manufacturing base moved overseas we failed to train a new generation of skilled laborers. I think welders and some of the other trades are having a hard time getting people into those industries.
Who knows maybe some of the builders, carpenters, plumbers, etc can move into the manufacturing world.
As our manufacturing base moved overseas we failed to train a new generation of skilled laborers. I think welders and some of the other trades are having a hard time getting people into those industries.
Who knows maybe some of the builders, carpenters, plumbers, etc can move into the manufacturing world.
True, CNC and other machinists can name their price. Nurses are in high demand. But it's not all that hard to gain these skills-- in WWII we ramped up our industries almost overnight, and housewives became Rosie the Riveters in just a few months. My mother got through a crash nursing program in 18 months. My MIL became a crane operator in 2 weeks.
One of the great things about America is the way our economy can turn on a dime, much faster than, say, France or Germany. We just have to get the credit markets on a sound footing, and eventually the market will right itself.
And we may see some neo-WPA projects going on in the coming years, so some of those building tradespeople will still have stuff to do. At least it's a portable trade.
Yet, if the economy survives the next couple of months and recovers, don't be surprised to find that your home values start increasing next summer, particularly for homes in the $150-$300K range that remain very affordable for the average middle-class couple--particularly if interest rates remain in their current range. It's an interesting blip in the data that really bears watching.
It might be my wishful thinking as I bought a house a little over 6 months ago, but I don't think you smoke crack exactly. In my local market the inventory in some zip codes had gone down to about 6 months last month. Now it's up a little bit again, but that's a normal seasonal change. Building has come almost to a screeching halt, at least by our standards. Absolutely no new developments have been started for at least a year, probably close to two years. The most hurting neighborhoods are obviously those with a lot of foreclosures and those where the builder is not done (read moi...) It makes me sick hearing their ads on the radio, but that's the way it is. I guess I did catch a falling knife... However, as you say, unless the country goes totally down the tubes, I still believe my decision won't be too bad long-term. Should I need to sell the house for some reason any time soon, though, I'd be in a pickle.
At this time most of the decent neighborhoods in Tucson have about 7 to 8 months of inventory.
The other issue I see is that the historical average for homeownership was 64%. In the boom it was up to 69%, and I think we are down around 67.5-68% right now. What this means is that we are still several percentage above normal. So the people that could "afford" (I use that term loosely here) homes already own one, or will go into foreclosure soon and not be able to buy one soon anyway.
This is a really good point. It may look like just a few percent, but with 100 million households in the country, each percentage change in this stat means 1 million more or less houses needed. And there's no reason to assume we'll just drop to the average - it's an average because we have periods below that value as well as above it. So this might be hinting at an additional 5-7 million unneeded houses in addition to the ones for sale now.
This is a really good point. It may look like just a few percent, but with 100 million households in the country, each percentage change in this stat means 1 million more or less houses needed. And there's no reason to assume we'll just drop to the average - it's an average because we have periods below that value as well as above it. So this might be hinting at an additional 5-7 million unneeded houses in addition to the ones for sale now.
Good points.
To follow up what KC said, it looks deceiving but a "few percentage points" is an extremely huge # of homeowners....
Also, there's the possibility of "overshooting the bottom" here and not recovering in a typical "V" pattern.
Also, there's the possibility of "overshooting the bottom" here and not recovering in a typical "V" pattern.
Another good reason to bring the credit markets back from 'tilt.' I've been up since 4 a.m., looking for news on the bailout. It's 'hail Mary pass' time.
Sales of new one-family houses in August 2008 were at a seasonally adjusted annual rate of 460,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.5 percent (±11.7%)* below the revised July rate of 520,000 and is 34.5 percent (±7.3%) below the August 2007 estimate of 702,000.
Inventory is dropping, it's only barely keeping up with the drop in demand. This lines up with my previous link, which says that new homes are going to be the least needed type of inventory until the existing inventory is cleaned up. With over 10 months of existing inventory sitting around assuming no new houses come on the market, that's going to take a while.
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) It makes me sick hearing their ads on the radio, but that's the way it is. I guess I did catch a falling knife...
However, as you say, unless the country goes totally down the tubes, I still believe my decision won't be too bad long-term. Should I need to sell the house for some reason any time soon, though, I'd be in a pickle.
