Housing— The Worst Is Yet To Come

Housing— The Worst Is Yet To Come

By Mike Shedlock / Mish | 30 October 2007

The housing industry plunged deeper into recession as existing home sales plunge 8 percent.

There is no rational basis for anyone to suggest the worst is right here right now. But that does not stop anyone from trying (and they have been trying for months on end).

Once again the NAR is putting lipstick on a pig with their report Mortgage Availability Improving But Hampered September Existing-Home Sales.

Temporary problems in the mortgage market are easing and are expected to free some pent-up demand, but disrupted existing-home sales and distorted prices on sales closed in September, according to the National Association of Realtors®. Even so, prices rose in the Northeast and Midwest.

My Comment: Pent up demand? The only thing there is pent up demand for is selling. People are so far under water they are praying to sell at a higher price to avoid foreclosure.

The third quarter finished better than expected, with a 5.42 million annual rate of existing-home sales versus the 5.38 million forecast by NAR.

My comment: If you set the bar low enough, eventually you can stumble over it.

Lawrence Yun, NAR senior economist, said the decline is understandable. "Mortgage problems were peaking back in August when many of the September closings were being negotiated, and that slowed sales notably in higher priced areas that rely more on jumbo loans," he said.

My comment: Once again there is no rational measure or reason for suggesting that mortgage problems peaked in August.

"It appears raw inventories are stabilizing, but the housing supply is a bit inflated now because the sales pace does not reflect underlying market conditions— sales were dampened by the mortgage cancellations," Yun explained.

My comment: The inventory supply is now 10.5 months up from 9.6 months in August. Is this stabilization? One of the reasons raw numbers appear to be holding is people are pulling listings off the market praying for better prices. Many people who want to sell cannot sell because they are too far under water. These people represent pent up selling demand not pent up buying demand.

“Once the pent-up demand begins to move, we’ll see housing supplies begin to ease and then prices will edge up.”

My comment: What year is that? We have upcoming issues with mortgage resets as the following chart shows [[as far as the eye can see, or at least until past 2012...: normxxx]]

Subprime resets peak this year but Alt-A problems which are just as big do not peak until 2011. In addition, the overall economy is slowing dramatically. There is going to be a consumer led recession to deal with [[so there go the As and some of the AAs: normxxx]]. Unemployment has bottomed this cycle and is bound to rise dramatically. That will further pressure housing prices in a very significant way. The worst (by a long shot) is yet to come. Remind me to start looking for a true bottom in 2011-2112. Perhaps we get a bounce somewhere along the way.

Normxxx    
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