PMI: US Home Prices Likely Lower In 2 Years
Falling home prices any be moderating, but they are not likely to be heading higher anytime soon. That’s according to mortgage insurer PMI Group ((PMI).
One of the the largest mortgage insurers in the US, PMI is forecasting that home prices will be lower in 2011 than they are today, including 30 of the 50 largest metro areas. The decline is likely to spread to “all regions of the nation” from California, Florida, Nevada and Arizona, the states most affected by the housing slump.
This line really grabbed me: “The 15 areas with the highest probability of lower prices in 2011 each have a 99 percent chance.”
Newswire:
“The report said as many as 85% of the country’s 381 metropolitan areas are facing an increased risk of lower home prices in 2011, with Florida, California and Nevada continuing to be at the highest risk.
Among the country’s 50 most populated metro areas, the PMI study showed 28 to be in the highest risk category, signaling the greatest probability for lower house prices by the first quarter of 2011.
The credit crisis was set off after the housing bubble deflated and popped – and that crisis only reinforced an extremely difficult dynamic in the housing market.”
The charts below are not at all encouraging:
US Home Prices, 1890-2009
click for larger charts
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Real Home Prices, 1890-2009
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Year-Over-Year Change Home Prices, 2001-2009
All charts courtesy of Bianco Research
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Sources:
U.S. Home Prices to Fall Through 2011’s First Quarter
Dan Levy
Bloomberg, July 7 2009
http://www.bloomberg.com/apps/news?pid=20601103&sid=aEwbzPfaEGw8
PMI Risk Index Shows US Home Prices Likely Lower In 2 Years
Kerry Grace Benn,
Dow Jones Newswires, JULY 7, 2009
http://online.wsj.com/article/BT-CO-20090707-708983.html
July 8th, 2009 at 10:51 am
This could hardly be so…
After all, Jim Cramer called the BOTTOM of the housing market just a few weeks ago!
July 8th, 2009 at 11:05 am
What is utterly amazing is that prices continue to fall in the face of an on-going massive cash infusion by the fed ($1.25 Trillion directly into MBS, another $300 billion into gse bonds). Imagine how things are going to look when they run out of money.
July 8th, 2009 at 11:05 am
BR, no blogging today on the coming reverse split in FAS/FAZ? I’m reading commentary on Marketwatch and TheStreet.com the fine folks at Direxion are doing it to save traders fees with their brokers. hehehe
July 8th, 2009 at 11:07 am
Nothing would please me more than further decline in housing prices, but how reliable are these forecasts?
OT: The S&P500 chart from this morning looks very interesting… someone tried to defend the 882 line real hard. Any word on who they might be?
July 8th, 2009 at 11:16 am
a home is a place to live and raise a family and if there long enough you have the luxury of having it paid off as you head into your golden years- but-
housing as an investment?- everyone looking at appreciation and rising prices as a positive- regardless that when you sold and went on to buy the next house – that the values had increased on that home as well- were you really better off?
I can not get enough amusement from the lemmings that went head first into the housing bonanza with the hope of getting a big pay day only to find that a house is a very illiquid investment- a far cry from stocks which are easily sold with minimal transaction costs- tough to find a realtor who will work for a 7.99 flat fee.
July 8th, 2009 at 11:30 am
ahab
And we’ll know when we’ve bottomed when people are no longer talking about it as an investment and renting has become fashionable because owning is a big suckers game and a losing proposition. Right now there are people out there salivating over the “great deals” and can’t wait to make their fortune, just as in the stock market.
They’re expecting a big bounce out of the fall, just as eventually happened out of the early ’90s housing bust (i.e. bear market). But they are missing the bigger picture, of course. They don’t understand the huge debt deflation dynamics at play. And they regret it.
July 8th, 2009 at 11:32 am
http://www.nasdaq.com/asp/EconodayFrame.asp
Highlights
“Redbook continues to report extremely weak retail conditions with its same-store sales tally down 4.2 percent in the July 4 week vs. the year-ago week. Redbook pegs June-to-May sales at minus 4.3 percent, a result that would send chills through the global markets. In its commentary, Redbook says consumers are more focused than ever on basic consumables. Chain-store sales will post their monthly results on Thursday, in announcements that will confirm just how weak June really was. ”
Redbook has indicated for weeks that consumers are just not getting the message….
July 8th, 2009 at 11:39 am
“They don’t understand the huge debt deflation dynamics”
Not only do they not understand the dynamics, most housing specs can’t spell words of more than one syllable.
July 8th, 2009 at 11:40 am
[...] July 8, 2009 by marketinganalytixx From The Big Picture (here): [...]
July 8th, 2009 at 11:40 am
“I can not get enough amusement from the lemmings that went head first into the housing bonanza”
Speaking of amusement, chief among the lemmings: Adolf!
http://www.youtube.com/watch?v=bNmcf4Y3lGM
July 8th, 2009 at 11:50 am
Pete-
dude- funny clip- everyone looks pretty nervous when he asks about his 401K and then says he will just have to sell his Lehman and AIG stock
July 8th, 2009 at 11:51 am
Pete
That video was HILARIOUS! It was really very well done.
Thanks for the point out.
July 8th, 2009 at 12:06 pm
What happened to the X-axis scales on the 1890-2009 charts? tick-marks every 6 years up until the last 2, which were 4 and 1 year intervals apart, respectively. Kinda wrecks the picture of the severity of the downturn.
July 8th, 2009 at 12:16 pm
I don’t know about broader US home prices, Ritzy, but the home values of about 100 communities will most assuredly turn into a bad case of diarrhea if John Engler and the Republicans have their way and we build 100 new nuclear plants. Republicans want to replace billions of dollars in subsidies for wind and solar with trillions of dollars in subsidies for nuclear plants. Ya never know if they will force-build one of these highly radioactive fuckers right in your backyard, so if you want to protect your home value, always vote for the Democrat.
Don’t say The Great CNBC Sucks didn’t warn you.
July 8th, 2009 at 12:22 pm
[...] that housing recovery Jump to Comments Kudlow and Cramer close their eyes and ears: The report said as many as 85% of the country’s 381 metropolitan areas are facing an increased [...]
July 8th, 2009 at 12:45 pm
Just to play the contrarian here … (that would be a contrarian to the whole notion of a global economic downturn)
http://reservedplace.blogspot.com/2009/07/is-this-really-great-global-recession.html
I can think of at least 5 reasons why this atmospheric CO2 data might appear as it does, and still have the developed/western world going down the tubes, but it’s an interesting thing to contemplate. The correlation to economic activity and global downturns is the point here … if there is a correlation at this point in time.
July 8th, 2009 at 1:08 pm
How can CA home prices bottom, when there is no “fix” in sight for their budget woes? Ditto for many other states but none is in the sorry state that CA is in. Cramer is a contrary indicator and is only good for giving Kass’ calls more noise level.
July 8th, 2009 at 1:08 pm
Nice post Pete! poor poor Adolf
July 8th, 2009 at 1:20 pm
In a market where factors other than the seasons have become more important in affecting house prices, such as the availability of mortgage finance and the level of mortgage rates, it becomes increasingly difficult to work out what typical price movement could be expected purely because of the time of year and hence what the seasonal adjustment should be.
Prices would further plunge since
* No improve in the Job market
* Lack of Demand
* Since May, Mortgage Rates Have Gone Up
* Too Much Supply
* Option ARM – The Next Wave of Default
* Market Psychology
Read more http://www.housingnewslive.com/blog.php
Is the Market reviving
July 8th, 2009 at 1:42 pm
I’m having trouble figuring out whether this is a posting of concern or just a positive guidepost along the way of home prices heading down to where they should be. You’re going to have to be more clear on these postings, Barry. You might be giving these Crameresq-like bottom-callers false signals. lol
July 8th, 2009 at 2:16 pm
larst – there is indeed a ‘fix” for the mess here in CA, there’s just no political will to accomplish it.
July 8th, 2009 at 2:23 pm
Thor, only the Feds had jurisdiction (via interstate trade) over the actions of Wall St. in CA (I’m talking about the mortgage securitization market which went haywire.) I think therefore CA suffers from a “lack of political will” because they believe it’s the Feds problem, and are thereby waiting for a Fed solution (i.e. a bailout.)
July 8th, 2009 at 2:35 pm
“What is utterly amazing is that prices continue to fall in the face of an on-going massive cash infusion by the fed ($1.25 Trillion directly into MBS, another $300 billion into gse bonds). Imagine how things are going to look when they run out of money.”
According to Barry’s 7 AM posting we have lost 4 trillion in house values (that is 4 trillion in destroyed money). If you add in all the other destroyed money (derivatives etc.) we are probably north of 10 trillion. We have another 9 trillion sitting on the siteline in cash scared to death of being anything but mattress stuffing. Why would anybody be surprised that a puny little trillion dollar stimulus and a few other trillions of cash infusions from the fed, cannot get us out of this deflationary spiral. If you are pouring a gallon per minute into the bucket and it is loosing 2 gallons per minute, you don’t have to worry that it will spill over (you actually have to pour even more into it regardless of the screems from all the chicken littles).
July 8th, 2009 at 3:05 pm
Chief – I’m not sure I agree with that – our Governor has said recently that he will not accept any bailout money from the fed, both our Senators as well as the vast majority of our House members are also against any bailout. In any case, there is no possible way the congressmen from the rest of the country would ever pass that kind of bailout and it would be political suicide for Obama.
July 8th, 2009 at 4:28 pm
But Dedude, the Fed’s cash infusion represents about 1/12 of the total value of residential real estate, and almost double what is expected this year in new mortgage originations. It is a massive amount of money focused on a particular sector of the economy. Whether it is inflationary or not in the broader economy is another question. It is undoubtedly having an impact on prices in residential real estate.
July 8th, 2009 at 5:05 pm
The Fed is simply purchasing those MBS and GSE’s that the 9 trillion in cash on the sideline refuse to purchase without a risk premium that is completely out of line with the actual risk. So they are ensuring that the interest on a loan (for those who can qualify) is not rising. Although I am sure they would love to have this stabilize the prises of homes, it probably only has a limited effect. The main determinant on whether you can/or will purchase a home in the current market is not the $100/month that a lower interest rate saves you.
July 8th, 2009 at 5:21 pm
But I think they should let all the old MBS and gse bonds float to whatever price the markets sets, and just purchase every new issue that comes along from Fannie and Freddie at a price that keeps the interest locked at current level. That would probably be cheaper in the long run, and there is no reason to bail out the chicken little investors that are bailing out of those bonds.
July 8th, 2009 at 6:30 pm
Thor, I think aid for CA would be packaged with a similar band aid for all the states. Maybe a $100 billion this go ’round. Those in better shape because they had “rainy day” funds or just budgeted more reponsibly can choose how to use their share. But the pattern internationally seems to be full fiscal stimuli ahead. I’m not saying I agree with it, but that’s the pattern I see.