Posts tagged falling house prices
Housing Price Dip Turns British Pound Trend Down
Aug 10th
A softer U.K. housing report is overshadowing this afternoon’s U.S. Federal Open Market Committee announcement as falling house prices increased jitters in an already fragile economy.
Early in the trading session, a report from the Royal Institution of Chartered Surveyors said July house prices turned negative for the first time since July 2009. This report resonates other reports that showed a rising supply of houses for sale and decreased buyer interest. The return of a buyers market indicates the strong possibility of a softer housing market through at least the end of the year, leading to speculation of a double-dip recession.
Technically, after failing to follow-through to the upside following the penetration of a major Fibonacci retracement level at 1.5967 in two out of the last three trading session, the British Pound took out a main swing bottom at 1.5819. This move turned the main trend down on the daily chart. The chart pattern suggests that 1.5633 is the next likely downside target, followed by an uptrending Gann angle at 1.5400.
The 20 US Cities Where Incomes Are Falling The Fastest
Aug 9th
Right now, deflation is the primary concern of markets and Americans concerned about falling house prices and the threat of further impact from that fall.
Wages are a key indicator of what direction the economy is going, and new data just released by the Bureau of Economic Analysis points to significant per capita income deflation in metropolitan areas across the U.S.
Click here to see the cities >
British Think Tank Warns Of A Five-Year Stealth Decline For UK Property
Jul 28th
Britain’s National Institute of Economic and Social Research (NIESR) believes that British housing prices will fall over the next five years, in real terms (adjusted for inflation), out to 2015.
This equates to an 8% decline per year.
NIESR’s figures show that although average house prices are expected to rise from £194,235 last year to £213,091 in 2015, they would need reach £231,000 to keep pace with inflation. As a result, average households will be £28,000 out of pocket.
Simon Kirby, a NIESR research fellow, said: “While we have assumed the housing market remains stable, house prices could decline at a more rapid pace.”
Families have already been hit by falling house prices. They crashed 19.3 per cent during the recession, according to Nationwide and have yet to recover to pre-crisis levels despite a 10 per cent bounce. Mr Kirby said that weak bank lending would restrain house price growth.
NIESR’s housing outlook came as it warned that a double-dip recession is more likely following the coalition’s emergency Budget. The probability of a full year of negative economic growth has risen from 14 per cent to 19 per cent as a result of the extra £40bn of spending cuts and tax rises unveiled by the Chancellor last month, it said.
This is a particularly interesting view given that it incorporates the potential for high U.K. inflation. Basically, housing prices may appear relatively stable, but if inflation is rising rapidly, then real prices will decline. They’re warning of a stealth-devaluation, if you will.
When Will Falling Home Prices Hit Bottom
Apr 21st
When will the falling house prices finally plateau? This question is on the lips of a number of real estate market analysts and investors on the lookout for the promised turnaround in the housing sector that will continue to disappoint. Although regulations are increasingly stringent saw in the credit market and the real estate sector has some overall positive trends, the major factors of foreclosures and a reticent attitude of buyers continue to make propertyprices fall.
Negative Equity
Apr 5th
Negative equity is the term for a situation where a person mortgage exceeding the value of their house to describe. It usually occurs over a period of falling house prices and last peaked in the UK during 1990/93, with an estimated 1,680,000 homeowners were affected.
"The Long-Term Impact of the Mortgage Crisis"
Mar 28th
Richard Green is concerned about the old people of the future. Are they
saving enough today?:
The long-term impact of the mortgage crisis–and why it keeps me awake, by
Richard Green: My parent's generation behaved differently than mine in all
sorts of ways.
A paper of mine with Hendershott shows that they spent less, controlling for
education, etc., throughout their life cycle than any other generation. One of
the reasons for this is that they paid off their mortgages. According to the
American Housing Survey, 70 percent of households headed by someone over the age
of 65 have no mortgage at all. Loan amortization became a mechanism for forced
saving, and as a a result, those born during the depression are in pretty decent
shape financially. …My generation is different. Even under the most benign circumstances, we
refinance in a manner that slows amortization. I refinanced … twice to take
advantage of lower interest rates–this was, of course, the right thing to do
financially. But each time, the amortization schedule reset, and so it extended
the period at which the mortgage would pay off. Now yes, one can take the money
one doesn't put into home equity and put it in other savings vehicles, but it is
not clear that everyone does that. Forced saving is slowed.But this is not the worst of how people have handled their mortgages. A
substantial fraction of borrowers pulled equity out of their houses, putting
themselves on a lower savings path even in the absence of falling house prices.I am going to run some American housing survey data on this, but it is hard for
me to imagine that 70 percent of my generation will have no mortgage debt when
we are elders. My parents' generation has used housing wealth to, among other
things, finance long-term care. I hope I am missing something here, but the lack
of housing wealth in the future could become yet another challenge as we seek to
fund the needs of the elderly.
Property Affordability At Seven-Year High
Mar 10th
A combination of falling house prices and low interest rates means twat UK housing is now more affordable than it has been at any time since 2003.
Fed’s Duke on Economic Outlook
Jan 6th
From Fed Governor Elizabeth Duke: The Economic Outlook
In my view, the outlook for economic activity depends importantly on our ability to build on the progress to date in improving the operation of financial markets and restoring the flow of credit to households and businesses.Although household wealth has received a boost from the gains in the stock market over the last nine months and from the stabilization in house prices, household balance sheets remain weak. In 2009, household income received some temporary support from the tax cuts and transfer payments enacted with the fiscal stimulus package and from the extensions of unemployment insurance. Over the coming year, households should begin to see gains in income associated with an improvement in the labor market, and the drag on spending from past declines in real net worth should ease. As their income and balance sheets improve, consumers should have better access to credit. Favorable trends in income and employment should also bolster consumer confidence, although one risk I see to the outlook for household spending is the possibility of a rise in the personal saving rate as consumers choose to shore up their balance sheets rather than spend. While good in the long run, increased saving means consumers are providing less of a short-run boost to the economy.
The outlook for homebuilding will depend critically on the continuation of the uptrend in the demand for housing that began in early 2009. I anticipate that low mortgage rates and house prices that are still very low compared with the recent past will continue to provide important support for demand. And a shift in expectations from falling house prices to modest appreciation should encourage buyers to invest in houses. That said, the headwinds in housing and mortgage markets remain relatively strong and are likely to restrain the pace at which the residential construction sector recovers. Many of the existing homeowners who face payment problems are having trouble restructuring their loans, and the large backlog of foreclosed properties will likely take several years to resolve. Tighter standards for government-backed loans and still-restrictive credit conditions in private loan markets are also likely to slow the housing recovery. Nevertheless, with the inventory of new homes having been worked down to a relatively low level, even a gradual strengthening of demand should lead to an upturn in homebuilding.
Prospects for a recovery in business investment are getting better as we move into 2010. Typically, business confidence builds as firms see a sustained increase in sales and output. Various indicators of business sentiment rebounded over the second half of 2009 as economic activity accelerated, and the latest surveys of capital spending plans have been more positive. That said, the amount of unused capacity in the business sector is substantial, which implies that the recovery in spending on equipment and software will likely be more gradual than typically occurs during a cyclical recovery.
…
Unfortunately, the outlook for commercial real estate is much less favorable. Hit hard by the loss of businesses and employment, a good deal of retail, office, and industrial space is standing vacant. In addition, many businesses have cut expenses by renegotiating existing leases. The combination of reduced cash flows and higher rates of return required by investors leads to lower valuations, and many existing buildings are selling at a loss. As a result, credit conditions in this market are particularly strained. Commercial mortgage delinquency rates have soared. …In this environment, a turnaround in CRE is likely to lag the improvement in overall economic activity. However, compared with the situation in the early 1990s, the problems in this sector now appear to be due largely to poor business fundamentals rather than widespread overbuilding, suggesting that the performance of the CRE sector will gradually begin to improve as the economy continues to strengthen.
An important element of a sustained economic recovery will be an improvement in labor market conditions. Employment gains typically lag the recovery in sales and production in the early months of an economic upturn. In many cycles, the lag occurs because businesses need to restore productivity and are reluctant to hire until they are more confident that any pickup in sales will be maintained. In this cycle, the reductions in jobs and hours of work have been so deep, and the pressure to cut costs has been so strong, that businesses in the aggregate have already realized solid gains in productivity. As a result, I expect that businesses will begin to add jobs this year, but I anticipate that they will do so cautiously in order to hang on to their cost savings and efficiency gains.
Even as the unemployment rate begins to decline later this year, it likely will remain high by historical standards. Based on the experience of the last two economic recoveries, net gains of roughly 100,000 payroll jobs each month are needed to reduce the jobless rate by 0.1 percentage point. …
emphasis added
I think Ms. Duke is somewhat too optimistic on housing and employment. It might take more payroll jobs to lower the unemployment rate this time because the Labor Force Participation Rate has declined so sharply; the BLS reported the participation rate as 65.0% in November (the percentage of the working age population in the labor force). This is the lowest level since the mid-80s, and I expect a number of people will rejoin the labor force at the first sign of an employment recovery, putting upward pressure on the unemployment rate.
