Housing Forecast, 2008 Expected to be Slow
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Housing prices are going to have a hard time recovering according to a study out of the Harvard Joint Center for Housing Studies. While this is not a surprise for many of us, the study cites the removal of subprime loans and higher interest rates will keep many out of the housing market.
We all sit and worry about this, but when you have a bubble like we did in many parts of the country a stagnant period always follows. However, a huge decline in housing prices is not accompanying this slowdown as many predicted. The New York Times had an interesting article over the weekend discussing a foreclosure sale in California that had 1,200 people attend searching for cheap homes. The problem was that there were not many deals out there, the homes that sold were for near market prices when the auctioneers commission was included.
That is why the Harvard study is interesting. Yes, foreclosures are going to increase and there will be individual suffering as the marketplace resets. But the overall market will not fall out of bed.
“At a minimum it will slow any recovery,” said Nicolas P. Retsinas, director of Harvard’s Joint Center for Housing Studies, which issued the report. “Add to that the overbuilding and the inventory correction and you can see why it appears, particularly for the new-home market, that this slump will last well into 2008.”
Housing-industry analysts say the riskiest subprime adjustable-rate loans were made in 2005 and 2006. As they reset at higher interest rates through 2008, they are likely to fuel the current surge in foreclosures.
As lenders move to tighten loose credit standards and prevent defaults, it will become harder and harder for subprime borrowers to refinance into more affordable loans, Retsinas said. via SignOnSanDiego.com
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Comment by Thomas M. Mitchell on 12 June 2007:
I would certainly agree that the market is not falling apart. It just takes a greater commitment to work smarter. It can be a great opportunity for agents that specialize in working with Sellers to provide “true” value added services to those Sellers facing some difficult decisions.
Comment by havensofmanhattan on 12 June 2007:
I also agree that it’s not falling apart. Coming from a construction family I can say that it has greatly hurt and even destroyed many builders. Staying alive is the name of the game right now for many small builders.
Comment by Tom on 12 June 2007:
Havens
Good point, people forget that being a businessperson takes the skill of learning to hold on till bad times pass.
It rarely is all gravy.
Tom
Comment by anon on 15 June 2007:
I think that maybe things haven’t really started yet. Inventory is rising and there are very few buyers. Interest rates are higher than they were, and fewer people can qualify for a loan due to tighter load requirements. There were several condos that sold in Florida (by the builder) for $145,000. The people who recently bought at $300,000 were not happy. They said that the builder promised not to sell the condos for less than a fair market price. The builder said that the hundreds of potential buyers that attended the auction had determined the fair market price. We may just be getting started.
Comment by Scott on 30 September 2007:
I see noting good on the economic horizon. Inflation is up. Interest rates are up. The dollar is down. The federal deficit is a mess. The foreign trade deficit is terrible and will get even worse. Long term problems like Social Security and Medicare threaten to cripple the economy, yet we continue to spend on Defense like we are in a war against the rest of the world. Then there is the fiasco in Iraq. We have a moron for a President, a homicidal maniac for Vice President and a congress that is sure to screw up every thing the two idiots in the Executive branch miss. And the worst thing we have going are the fifty plus million brain dead haps that elected Bush, not once, but TWICE!
Let’s face it, we are screwed.
Comment by Susan White on 18 December 2007:
Good article. Check out http://www.housingrisk.com and see what is going on in Florida