Real Estate Recovery Debate Forum
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Real Estate Recovery Debate
Wall Street Greek, Barron's and other popular media have had a lot to say lately in the real estate recovery debate. Recent interest was of course spawned by the weak existing and new home sales reports published for the month of August, and the coinciding stock market dip. Opinions have varied widely though... Barron's Alan Abelson noted a report by Amherst Securities Group in his article "Shadow Over Housing," published for the week of September 28. Abelson noted Amhersts forecast of an approximate 7 million "delinquency pipeline" that threatens to undermine recovery. Our own Michael Douville also discussed this "Phantom Inventory" in his article "Housing Challenges for 2009," but still views now an opportune time for the purchase of a home. The Greek was neither silent on the subject, when he analyzed the August reports in his article, "Existing Home Sales Puts Skids to Market."
This column, however, is for you to share your wise and valued opinion on the subject. So please let us know what you think about the timing and fervor of real estate recovery, if you see it at all. Do you agree with Mr. Douville, or do you fall in Amherst's camp, and why. Please tell us, and let's open the debate!
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posted by The Greek | 3:21 PM
4 Comments:
100% Confidence in Amhert's and Abelson's opinions. Let's try and keep this as simple as possible. Appreciation aside, people buy homes when it is less expensive then renting. In the old days, there was some thought to the appreciation of equity in the home, but I don't think that will add much to current debate about whether or not we've reached bottom.
Right now, especially in the northeast, which has not experienced the 40-50% correction that FL, CA, NV, AZ, etc have experienced. NY/NJ/CT have another 20% to go based on "affordability", especially given future expectation of higher property taxes and income tax hikes in the near future. Continuing uncertainty about a prospective home buyers job will keep them renting into the forseeable future, and extremely mobile if the need to relocate for work arises.
I won't speak to Shadow inventory, as that has been addressed, but I do believe that Banks are "managing" their home inventory.
Existing Homeowners job losses will continue to add to foreclosure rates and distressed sales of properties in advance of actual foreclosure.
Pay Option ARM Resets, and all those other lovely exotic mortgages that are responsible for bidding up home prices to unrealistic levels are now coming due. ObamO may have been able to stem the more responsible owners who still have jobs from losing homes by refinancing them into 30 year mortgages, but the ones who could never afford more than the INTEREST ONLY OPTION are just out of luck. The gamble on house prices only going up didn't work.
The dollar does matter. China will voice their opinion more on the issue, and may drive up borrowing costs via interest rates which will further throw a wet blanket on any subtle housing recovery that idiot on CNBC rants about.
I think the next leg down in the economy is coming in the next 3-6 months, and housing is no where near the bottom. Oh, and the $15,000 housing credit...we can't just keep handing out free money to prop up a market that clearly wants to find a bottom if Government would just get out of the way.
Oh, and I don't know if I concluded or not in my previous post....it is still less expensive to rent a 4 bedroom, 2 1/2 bath Colonial with a good school system that it is to buy one, when you factor in property taxes (not to mention maintenance costs). So the basic rent vs. buy principle says the logical choice is to rent until home prices deflate to something that costs less than the rental equivalent. Simple is better. But all those other factors also need to be considred.
I heard a rumor recently that studio values have actually risen in New York City. Apparently, a phenomenon intrinsic to the NYC marketplace has this occurring.
The story goes that the economic situation has new buyers seeking a cheaper flat to buy than what they might seek if their future were more certain.
Also, some say owners of one bedroom apartments and larger are trading down to smaller digs.
The New York City marketplace is always in demand, and while the financial district has cut some fat, its cyclical sensitivity would have hiring again soon enough. And New York is more than just Wall Street, as far jobs go. We have an extensive advertising and marketing sector and technology, tourism and other businesses that support back office jobs as well.
What do you think? Is this possible. Do we have any NYC real estate experts that might verify or kill this rumor.
Thanks
Whether its families or singles,people who need to cut monthly expenses yet desire to remain in prime locations in manhattan seek out smaller cheaper residences .That being said I can understand how prices can remain stagnet or even uptick with the little supply in the best locations.
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