In Howard Gold’s Fighting The Tape column Is It Crunch Time for Housing? [Barron’s], he suggests that this spring determines how the residential housing market, which is one of the key contributors to the economic recovery, will behave over the next several years.

The points he makes are:

Inventory is up [WSJ]
Toll Brothers reports a 29% drop in orders

Mark Zandi of Economy.com writes: I don’t think nationwide you’ll see a bust,” says Mark Zandi, chief economist of Moody’s Economy.com. But we might in certain markets, he adds — the usual suspects like Miami, Las Vegas and Phoenix.

(and we can’t omit moi)

This is a watershed moment,” says Jonathan Miller, president and chief executive officer of Miller Samuel, a large New York real-estate appraisal firm. “If we’re going to see trouble, it’s going to be over the next 12 to 18 months.

What I mean by this is the following: Bernanke indicated today that the economy is very strong and so is housing. It has been speculated that he has at least two more rate increases in store for us until he takes a breather. That will further weaken the housing market as things continue to get more expensive for the ARM mortgage customers who largely financed the housing boom.

It’s a three- to five-year cycle on the downside,” says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. Rosen calls himself a real-estate bear who endorses the doom-and-gloom scenario of Yale University professor Robert Shiller.

We’ve already passed stage one, characterized by “a falloff in new sales and orders,” says Rosen, and are just entering stage two, in which unsold inventories build up.

Inventory and mortgage rates are the key concerns.

In Nicholas Yulico’s article Housing Starts Explode [TheStreet.com], January new housing starts increased 12.8% above December. Initial reactions from optomists said that this was evidence that the housing market was back. Actually, the surge was due to unusually warm weather for December which enabled builders to build. This will compound inventory problems since inventory was already rising without help from new construction.

(In the Barron’s piece, I close out with moi)

“The boom is over,” declares Jonathan Miller. That perception no doubt has begun to trickle down to prospective buyers and sellers

Its a bit dramatic but its taken about 6 months for many in the real estate market to come to terms with this.


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