Just speaking anecdotally, I think that this year will see a very large number of homes for sale. You’ve got existing home sellers who were not able to sell their home last year and gave up, waiting to try again; you’ve got homeowners no longer able to hang on as the bad economy outlasted their savings; and you’ve got millions of foreclosed houses must have to come to market soon.
Obama’s “Summer of Recovery” 2010 was supposed to have created new home buyers as job creation picked up. But the recovery didn’t happen. Sure, there’s been a recovery for those in the stock market, but that’s not Main Street these days. There simply are not enough people with money who are willing to spend it.
And then there is home lending. Or more accurately, the lack thereof. Banks are NOT lending. I laugh when I watch the isolated CNBC hosts and guests saying that the banks are lending, and sadly there are no borrowers. Bullshit. I’m watching three community banks in my area go under. Why? Because the FDIC is making it impossible for community banks to lend money (favoring the big banks), or even simply survive. Even on the high end, I know people that have millions, even tens of millions, in assets, but the banks will not give them a home loan because they have “no income” (they are retired from active work, and took losses to zero out their recent years cap gains).
Everyone has pinned their hope on 2011 as the turn around year in real estate. But it just ain’t gonna be. Take a look at the sales downturn and sale price decline in February, as reported by Yahoo:
Fewer Americans bought previously occupied homes in February and those who did purchased them at steep discounts. The weak sales and rise in foreclosures pushed home prices down to their lowest level in nearly 9 years.
The National Association of Realtors said Monday that sales of previously occupied homes fell last month to a seasonally adjusted annual rate of 4.88 million. That’s down 9.6 percent from 5.4 million in January. The pace is far below the 6 million homes a year that economists say represents a healthy market.
Nearly 40 percent of the sales last month were either foreclosures or short sales, when the seller accepts less than they owe on the mortgage.
One-third of all sales were purchased in cash — twice the rate from a year ago. In troubled housing markets such as Las Vegas and Miami, cash deals represent about half of sales.
The median sales price fell 5.2 percent to $156,100, the lowest level since April 2002.
Oopsie. Low interest rates and wasteful stimulus cannot overcome unemployment and underemployment. If you have to sell your home this year, you better get moving on it before the summer, and you had better get real about the price.
{ 5 comments… read them below or add one }
What happens to home mortgages if the economy collapses? If we still have a mortgage would we be able to stay in our homes? and if so, for how long? or would the banks call the loans and foreclose? I think these are questions a lot of middle class folks would like to have answers for. Anyone have comments?, suggestions?
I have been asking that same question for about two years. As best I can tell is that if the economy collapsed it would be the end of the banking system as we know it. Real Estate is an investment for banks, if those investments suddenly went bad because no one could pay their mortgages (look how the ’08 housing market screwed them up, and that was just a hiccup compared to a true economic collapse) The present value of the properties would not be worth the debt (mortgage) so as far as Assets minus liabilities they would all be so far in the red they would be insolvent. Under the name of “an emergency” just like in ’08 the government would most likely take over the banks and thus the ownership of the properties “renting” them back to people at the new, reduced “fair” market values. You would no longer be able to own your home but you would have a roof over your head as long as you could afford to pay the rent.
Again, no expert, just my conclusions based on some logic, past behaviors and research
“the government would most likely take over the banks and thus the ownership of the properties “renting” them back to people at the new, reduced “fair” market values”
really doubt this will happen. new waves of foreclosures will happen till prices bottom. all we have had since 2008 is a delay to the price recognition that has yet to allow to happen.
look at Japan for guidance. since their crashed (followed by aging population) home prices have gone down 70%. most people keep on paying their mortgages if they can and try to live the house to their kids free and clear. housing obviously becomes the biggest money pit ever instead of a great investment for the old, but lives goes on.
juana,
What we saw in 2008, although bad, was not a collapse, it was “a bump in the road” in comparison to what a true economic collapse will look like. IF the dollar fails, no one wants to buy the debt (t-bills)caused by our “over spending” government. The government has to print (excuse me Mr. Bernanke, digitize) the difference(we are already seeing this QE1, QE2….QE3?). This, combined with other global market forces(release of reserve capital) leads to hyper-inflation and instability in all markets. Instability, bad…. businesses will not spend because they can no longer determine the price of doing business, cannot calculate earnings vs.expenses vs.future growth. Many just close thier doors. This puts many and most people out of work. Because the USD is the reserve currency for much of the world (although China and Russia are now quickly divesting), this will not be strictly a US phenomenon. The good news is that if you still have a job, hyper inflation (3 digit + annual inflation) will make your mortgage smaller, but at some point, your annual property taxes out do your mortgage balance. This is what happened to many people in the great depression, they lost the farm not because of being unable to meet their mortgage, but because of skyrocketing property taxes. For those probably about 40%-60% (my estimate) or more of the population, they will be unable to meet their mortgage obligations and will lose their homes. Those who keep thier jobs long term will be people in services that are” essential workers”. Oil workers, doctors, police, fire, EMT’s, power companies, truckers. All paid not by thier private, but by the US gov (who in an attempt to keep control of the infrastructure and “fix” the economy by getting things back to “normal”, “buy” these companies in the name of the common good) in continually devalued dollars. When I talk of an “Economic collapse” it is not your 2008 version, that wasn’t a collapse it was a small shift in the foundation.
I know I’m a little late to this discussion, but I think that the economic collapse scenario has changed somewhat in recent weeks. It appears that Europe will go first, followed by the United States who has gambled and lost on a TARP style European bailout.
The real question for me is “What comes next?”
I think that it is unlikely that each country will go back to the currency drawing board and begin printing new money. Let’s face it, we don’t trust the Federal Reserve or any other bank to guarantee the value of some new fiat currency.
Unfortunately for the world, I think that the Illuminati/Bilderberg types will seize this opportunity to “fix” the system and establish a new economic order based upon a single currency that is tightly controlled by a small group of powerful people. Real economic power will then reside with the countries that were A) screwed royally in the sovereign debt crisis; and B) have natural resources, energy and land.
The two countries that come to mind are China and Russia (and their surrogates including the middle east).
Yeah, I know, this is wild speculation… but think about it. China owns American and European debt and will expect us to pay up big time. Russia is becoming the military hegemon in the middle east and will control the gas and oil. They are not going to accept a new phony baloney version of our inflated dollars to pay debts and trade for oil. They will be controlling the purse strings and we will pay heavily to stay in our Chinese owned homes.