"Boy, that was ugly," said Jared Bernstein, an Economic Policy Institute economist of the data.
"It's another reminder that anyone who thought we had hit bottom was wrong. This was a huge bubble, and when a bubble of this magnitude breaks, it creates a huge mess," he said." It could take a lot longer for the correction to work through the system."
Yep. 'swhat I thought, too.
Posts: 222 | Location: Arizona | Registered: Mar 14, 2007
The only time it's going to be a "great time to buy" is for the following to happen:
Wages increase Prices decrease
Since 2000, wages are up around 14% while housing is up around 50%. Some markets more, some less. The whole point is wages have to either go way up or prices way down so buyers can afford to actually....buy. I'm betting prices are going to continue to drop rather than wages shoot up.
Here's the actual numbers....I like to be accurate.
quote:
Look at some numbers from the National Association of Realtors. From 2000 to 2006, median family income rose almost 14 percent, to $57,612. Over the same period, the median-priced existing home increased about 50 percent, to $221,900. By other indicators, the increase was even greater.
But home prices could not rise faster than incomes forever. Inevitably, the bust arrived. Credit standards have been tightened, and the (false) hope of perpetually rising home prices -- along with the possibility of always selling at a profit -- has evaporated. For many potential buyers, prices have to drop for housing to become affordable.
How much? No one really knows. There is no national housing market. Prices and family incomes vary by state, city and neighborhood. Prices rose faster in some areas (Los Angeles, Miami, Phoenix) than in others (Dallas, Detroit, Minneapolis). Some economists now expect an average national decline of about 20 percent. The Federal Reserve estimates that owner-occupied real estate is worth almost $21 trillion. A 20 percent reduction implies losses of about $4 trillion.
The largest part would be paper losses for homeowners: Values that rose spectacularly will now fall less spectacularly -- back to roughly 2004 levels; that's still 30 percent or so higher than in 2000. But hundreds of billions of dollars of other losses are already being suffered by builders (from the lower value of land and home inventories), mortgage lenders (from defaulting loans), speculators and homeowners (from lost homes). Mark Zandi of Moody's Economy.com estimates that mortgage defaults this year will exceed 2 million, up from 893,000 in 2006.
I like the guy's "apple economics":
quote:
It's elementary economics. Pretend that houses are apples. We have 1,000 apples, priced at $1 each. They don't sell. We can either keep the price at $1 and watch the apples rot or cut the price until people buy. Housing is no different
