My Sunday Washington Post Business Section column is out. This morning, we look at the annual premature housing recovery.

The print version had the full headline The eternal optimism of spring — except in housing; the online version had the longer Spring brings signs of hope and renewal — except in the housing market).

Here’s an excerpt from the column:

“Ahhh, winter is finally over. Each year about this time, flowers push up through the soil, trees begin to bud — and the stories about a real estate recovery appear.

Am I skeptic? But of course. To understand why, let’s consider a few questions . . .

Which of course, we do, looking at shadow inventory, affordability, and valuation.

I like the way the Post put heavy emphasis on the Ned Davis Charts in the print edition:
click for ginormous version of print edition


Spring brings signs of hope and renewal — except in the housing market
Barry Ritholtz
Washington Post, April 8 2012

Washington Post Sunday, April 8 2012 page G6 (PDF)

Category: Apprenticed Investor, Credit, Data Analysis, Real Estate, Valuation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

5 Responses to “Spring’s Eternal Optimism – except in Housing”

  1. Inquiring Minds says:

    Barry, you have completely forgotten to mention the next wave of foreclosure tsunami on the horizon.

    Americans brace for next foreclosure wave


    BR: See the Monday discussion about Shadow Inventory turning into supply (here) or the Thursday conversation titled Foreclosures: A Decade Long Overhang

  2. murrayv says:

    the Case Schiller Index is at 140. Loking at the long history of the index back to 1890, one can make a go0od case that the bottom of the overshoot band is near 112. National average price potentially has a lot more than 10% to fall. 20% would not shock me. Of course if you are taking the downside potential drop as a % of the 2006 peak, then something near another 10% would be right. I would guess 12%, going from 33% down now to 45% down at the bottom. Much of Florida is down >50%.

  3. emaij says:

    Let also not forget that FHA is pushing loans out with 3.5% down – and that buyers have a number of options in terms of how to come up with that 3.5% down. So we immediately went back to doling out loans to people with little or no skin in the game. What does it mean when people (us) do not learn from their mistakes? Why are taxpayers not revolting? Why are taxpayers not revolted?

    The government has spent the last 5 years teaching entrepreneurs that honesty is not going to be rewarded. If you want to “thrive” in this economy, capture your regulator and get your profits written into law.

  4. Jim67545 says:

    Three small bones to pick:
    1. There is no such thing as delinquent but not in default. If the payment is due on the 1st of the month and it is paid on the 2nd, it is both delinquent AND in default (of the terms of the note.) The issue is whether it is so seriously in default/delinquent that the remedy is just a late charge or if the note holder decides to demand payment in full (leading to foreclosure if not paid.)

    2. The reason mortgage rates are low is the Fed AND the GSEs adding USA’s guarantee to the mortgage – which gives the homeowner a rate similar to that which the USA would get. Take away the guarantee and kiss cheap mortgage rates goodbye, regardless of whatever the Fed does.

    3. Affordability. Yes, one needs a downpayment and to meet certain income and credit criteria. One flaw in the system is that it does not take into consideration, or even require the borrower to consider, whether the FAMILY can afford the loan. So, perhaps to avoid discriminatory issues, a family with 1 child is treated the same with respect to the percentage of income it presumeably can pay for its mortgage, as one with 6 children. A family with 2 children, one with a chronic serious medical condition (say autism) is treated the same as one with two healthy children. A family that tithes 10% of income to church is treated the same as one that does not. A family that supports two elderly parents is treated the same as one that does not. And on and on.

    When I did mortgage prequalifications, after doing the standard calculations (which took none of this into consideration) I always asked the prospective homeowner if they thought they could afford the $XXX.XX a month payment, plus taxes and insurance (PITI). Forced to think about it specifically, practically every one said they could not, and would prefer a smaller payment and to borrow less (and therefore search for a less expensive home.) If I had not asked the question in most cases they would buy the home they really want, though could not afford.

  5. murrayv says:

    And from here http://www.bloomberg.com/news/2012-04-09/will-u-s-avoid-recession-in-2012-part-1-.html I just noticed this from Gary Shilling:

    “And consumer spending will no doubt have a big slide if my forecast of another 20 percent drop in house prices pans out. ”

    I’m no0t the only one. Murray