Lehman Housing Analyst Bruce Harting on the housing crisis: Its a Buyer’s Market.

Category: Real Estate, Video

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13 Responses to “Lehman: Its a Buyer’s Market for Houses”

  1. JustinTheSkeptic says:

    Only if you don’t know any better. I’ll have to go back and look at when housing troughed back in the 30′s, and add five years! lol

  2. VennData says:

    Buyer’s market? Seller’s Market? Given you can’t predict the future, how does anyone know this, ever, about anything?

  3. Jim D says:

    Is it really a buyer’s market if you can just about bank on another 10% price reduction? How about 20%? I suspect that the definition of “buyers market” may be a little misleading for the layman, you know?

    But he’s still way too conservative – he looks at existing inventory, and says it won’t clear until 2009. Based on what? How long things will take to sell if they all start to sell now?

    Most housing busts take 6-8 years to clear from the market. This one was bigger, so it’s likely to take longer.

    2012, if we’re lucky – and after that, demographic forces take over, so maybe not even then.

    And, to the guy that says you can’t predict the future – if *you* can’t predict the direction of a market with an easily computed intrinsic value, and a recent history of failed financial mania, then yea, *you* can’t predict anything.

  4. edhopper says:

    Okay let’s say it together AFFORDABILITY. It will be a buyers’ market when home prices are affordable to the buyers. That means in line with income.
    We are no where near there.

  5. Fred says:

    Jim – great point. affordablity is of course very subjective and moreover particular to the submarket. i think a good litmus test is to revert back to the old yield comparison. if we assume treasuries will be back up another 300bps within two years, we can talk about the real cost of capital and what one could at least in theory get in other asset classes. the crunch right now is that homes from an investment perspective are money losers, temporarily masked by cheap debt. i agree with you that another 20% may be light but it’s not as far off the mark if it takes a couple of years to flush out. time value of the assets doesn’t really get reflected in the sales price today because someone sitting on a home for two years doesn’t factor in their discounted cost basis for failing to lower their price. buyers on the other hand, intuitively understand that while prices may not pullback more than 20%, there is not need at this point in time to rush into anything. i still think the overall housing market is not ready to turn around until NYC prices come down to the 800 psf range. i’d hate to own a pre-war rental bldg right now. opex is through the roof. a 2,500 SF coop on CPW will cost you almost 5k per month just in opex. that’s 90k pretax just to sit in your apartment and before any extraordinary items like rats in the kitchen or deadbeats on the roof…..days of freewheeling spending are over and homes values must absorb that ultimately. it’s also unclear to me if the homebuilders have really turned any significant corners, unless they are going to change their business models and focus on REO resales and low income/subsidized.

  6. Flic says:

    There is just no urgency to buy a house now…..period. It’s not like housing is going to start shooting higher at some point. Renting is still cheaper than owning in many parts of the country so as long as prices are falling…or even stagnant…it makes no sense in the near term. My rent barely covers the owner’s tax & insurance…..’nuff said. If the owner walks away, I have plenty of other choices, especially here in FL. Also, as we head into a downward spiraling economy it’s sure nice to know we’re mobile and can get up and leave at any point. In the meantime, we’re stashing a good amount of money each month that would otherwise go towards PITI if we owned. Renting is the new black…..

  7. RW says:

    A falling knife is a falling knife and, if it’s as slow to fall as housing declines generally are, the cut will only be deeper and more agonizing if you buy back in too early. OTOH if you’re a fan of arterial spurt and exposed marrow by all means.

    Waiting until a clear upward bias is established would appear to be the better move even if opportunity cost is not factored in.

    And echoing the affordability point above, when median home prices are six times median annual income or more and rents are significantly lower than mortgage payments to say nothing of the total carry cost of a home then what economic animal with his or her wits about them will do anything other than rent and save the difference.

  8. RW says:

    I should add, unless you want to make a business of distressed properties. I do know a couple folks who do that but they are very smart, very careful, have a long time horizon and tend not to touch anything unless the discount is very large.

  9. Pool Shark says:

    Re-entry Point?

    2013 Baby!

  10. Pool Shark says:

    btw,

    Maybe foolish calls like this one are why Lehman is close to bankruptcy

  11. McCain: U.S. Shouldn’t Bail Out Banks

    John McCain said that government isn’t in the business of saving and rewarding banks or small borrow

  12. Lord says:

    It is a buyers market on reos if you can get a good discount and the funding. Otherwise it is just a dead market.

  13. brooke b. says:

    the homes in our neighborhood are priced at tens of thousands of dollars less than they were when i was looking into buying a house here 2 years ago. when i couldn’t find a decent house for less than $150K, now the same homes are running around $100K or less. noticing this, i told my husband i considered that a buyer’s market — we could get a good house for really cheap. he however said he believes otherwise, and after thinking about it, i agree — not only is the housing industry bad because homes aren’t selling (and no one can afford them), but the economy itself is bad and either of us could lose our jobs any time without notice. that negates the “buyer’s market” argument, because if it was really a buyer’s market, not only would the houses be inexpensive, but job security would be higher. i’d rather keep renting and be able to get out of our lease should something happen than to buy a home right now and be faced with foreclosure.