3 replies to this topic

[Rogerdodger]

NYTimes.com August 26, 2007
Drop Foreseen in Median Price of U.S. Homes
By DAVID LEONHARDT and VIKAS BAJAJ The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950.

Economists say the decline, which could be foreshadowed in a widely followed government price index to be released this week, will probably be modest — from 1 percent to 2 percent — but could continue in 2008 and 2009. Rather than being limited to the once-booming Northeast and California, price declines are also occurring in cities like Chicago, Minneapolis and Houston, where the increases of the last decade were modest by comparison.

The reversal is particularly striking because many government officials and housing-industry executives had said that a nationwide decline would never happen, even though prices had fallen in some coastal areas as recently as the early 1990s.

While the housing slump has already rattled financial markets, it has so far had only a modest effect on consumer spending and economic growth. But forecasters now believe that its impact will lead to a slowdown over the next year or two.

“For most people, this is not a disaster,” said Nigel Gault, an economist with Global Insight, a research firm in Waltham, Mass. “But it’s enough to cause them to pull back.”

[cgnx]

IMO the amount of jobs in the building trades is and will drop off dramatically. These lost paychecks will bring about a whole new inability to pay mortgages. The large number of off the books workers in this category I bet is staggering. Not to mention the huge number of illegals collecting paychecks and contributing to family mortgages. The only thing that can stop this domino effect is another stock market run higher or some other asset class creating wealth out of thin air. My bet is on the gold market. Wealth creation caused by the inflation of stock values filtered into real estate. Since that has peaked, the decrease wealth effect is occuring. Since the stock market is not overpriced, folks think it may have a nice run left. Stocks are not cheap on the whole. They can get alot better. Check valuations in 1974. Middle single digit p/e's were avg. for most all stocks. Kid in a candy store. Only problem was no one had cash or could buy. I think we goin there again. Folks are house rich and cash poor. The big trade down effect is coming. This coming mostly from aging baby boomers who need a McMansion like a whole in the head.

[humble1]

exactly right, especially on your last point. and many of the aging baby boomers are getting too FAT to waddle down malls and to sit on planes to take vacations. the obesity epidemic will have a huge economic impact. so many people are so fat now that it is not accepted to really talk about them. that is one reason don imus was run off. he always ridiculed fat people. fat is a danger to our nation !

Edited by humble1, 27 August 2007 - 12:00 AM.

[pdx5]

The ARM's reset peaks in March 2008, which will keep house prices in a general decline for another 9 months or so.