From the back cover:Dent identifies opportunities, explores trends, and makes concrete predictions. Among them are: A Dow that will reach at least 21,500 and possibly 35,000 by the year 2008.Far from being a "roaring" decade, the 2000s had the slowest rate of job growth since the Great Depression.
Dean Baker, the earliest economist to publicly warn about a housing bubble, argues that the recession was directly caused by the decline of the housing bubble, not by the financial crisis:Politicians and the media continue to refer to the economic downturn as being the result of a financial crisis. This is wrong. We have 15 million people out of work because the housing bubble that drove the economy since the last recession finally burst. The financial crisis may have been good entertainment for those who like to see huge banks collapse, but it was a sidebar. The real story was the rise and demise of the housing bubble.So, while apparently 71% of Bubble Meter readers blame banks for the U.S. housing bubble (see polls in the sidebar), Dean Baker seems to argue that Spain disproves them.
Those who claim that the real problem was the financial system and its faulty regulation can be disproved with a single word: Spain.
Spain is noteworthy because it now has an unemployment rate of more than 19%, the highest rate in any of the wealthy countries. Spain did not have a financial crisis. In fact, its well-regulated financial system is often held up as model for the United States.
Spain did have a horrific housing bubble. ... When the housing wealth created by the bubble disappeared people naturally cut back their consumption. ...
This is why Spain's economy is in a severe slump right now. Note that just about all analysts agree, Spain's financial system was well regulated and it had none of the loony loans and outright corruption that pervades Wall Street and the US financial system. Yet, it is suffering from this economic downturn even more than the United States.
The moral of this story is that the problem is not first and foremost a financial crisis. ... The economy's real problem is simply the loss of demand created by collapse of the bubble. ...
We do need financial reform. We have an incredibly wasteful and reckless financial industry. But bad financial regulation by itself did not give us 10% unemployment, nor would good regulation have been sufficient to prevent it. Just ask the workers in Spain.
Question, does anyone know if we officially went into a recession in this area "2 negative quarters of GRP"?? My suspicion is no, in which case, its inaccurate to say we are "emerging" from the recession when we never entered one in the first place.First of all, NBER, the official arbiter of recessions, only makes its judgments for the country as a whole. Therefore, if "we" are in the United States of America then "we" are/were in a recession.
District of Columbia unemployment rate:
State of Maryland unemployment rate:
Commonwealth of Virginia unemployment rate:
So, were "we" in the DC area in a recession? Yep, any way you look at it.
Real estate billionaire Mort Zuckerman describes the state of the housing market:America’s housing crisis has not gone away. If anything, it is getting more severe. Today, median single family house prices nationwide are down by slightly more than 30 per cent from their early 2006 peak. Fusion IQ, the research group, estimates that excess inventories will push prices down by a further 10 per cent. This is a critical issue because home equity was for years the largest asset on the balance sheet of the average American family.I believe Mr. Zuckerman gets some exaggerated statistics by using month-over-month numbers rather than year-over-year. Natural short-term volatility can easily make month-over-month numbers look far better or worse than the actual longer-term trend.
The sheer number of empty homes overhanging the residential property market points to lower prices. There are an estimated 7m homes empty today, and an estimated 7.7m houses and condominiums behind on their mortgage payments. This is tantamount to a shadow inventory. More than 4m of those are now delinquent and going through some form of foreclosure or related procedures that will put them on the market in the next year or two. Fannie Mae’s 90-day delinquency rate is now roughly 5.5 per cent, double that of a year ago.
Home sales are depressed, too, by competition from some 6m rental vacancies, or 11 per cent of total rental supply. Median asking rents have been declining by an estimated 3.5 per cent over the past year – and that is accelerating.
There is no cheer in the new residential numbers either. January’s new home sales plunged by more than 11 per cent month-on-month to an annual rate of 309,000 units, the weakest on record. It now takes a record 14.2 months to sell a finished house. In the boom years, it took about three.
Even worse, the median price for new homes sold was $203,500, almost a seven-year low, and that for existing single-family homes fell 3.5 per cent month over month to $163,600, a new eight-year low. Inventories rose to a 9.1 month supply, which on top of the shadow inventory of unsold houses and those in the foreclosure pipeline does not bode well for homebuilders or housing. Neither does the sharp decline in mortgage applications to the lowest levels since May 2007 and the rise on the 30-year mortgage rates to more than 5 per cent.
Roughly one in four mortgages today exceeds the house’s value – approximately 10.7m homes. American Corelogic, the research provider, estimates an average deficiency per home of $70,700 or an aggregate of about $800bn. An additional 2.3m homes had less than 5 per cent equity. The remaining equity for many other homeowners is at historic lows. With declining prices beginning to hit the middle to higher ends of the housing market, we are looking at another foreclosure wave.
Premier Wen Jiabao pledged further measures to curb speculation in China's housing market Friday, signaling that lending to the sector would be tightened as well as the imposition of targeted taxes and stricter enforcement of real estate laws.If the decline of America's housing bubble brought down the world economy, what might a decline of China's housing bubble do?
"We will rein in speculative housing purchases by intensifying the implementation of differentiated credit and tax policies," Wen said in his report to the annual National People's Congress in Beijing.
The government would work to improve management of land to prevent "prices from rising too fast" along with making "greater efforts" to tackle illegal land hoarding and property-price manipulation, he said.
The speech marked a step-up in Wen's rhetoric since he warned of rising property prices in December. ...
Indeed, many economists believe China's property market is inflating at a dangerously fast pace.
Prices of new homes in the urban Beijing and Shanghai areas gained by 68% and 66%, respectively, in November from a year earlier, while research by Standard Chartered in January said land prices nationwide more than doubled during 2009.
This year, real-estate investment trusts, or REITs, are expected to start close to $1 billion in new multifamily projects, according to real-estate research firm Green Street Advisors. While that still is less than average, it is a significant increase over the $100 million of development starts in 2009.
Analysts caution that the increase in construction doesn't mean there has been an improvement in the business. Apartment vacancy is at a record and unemployment, essential to the sector's health, remains elevated.
But operators are betting that limited new supply, combined with an improving economy, will lead to ideal market conditions nationwide starting in 2011 or 2012. From then until 2015, "apartment REITs may generate the best property net operating income growth that they've seen in a very long time, maybe ever," said Haendel St. Juste, a REIT analyst with Keefe, Bruyette & Woods Inc.
To be sure, there are risks. Given the multiyear construction window, companies have to start now to be ready in time. If the economy weakens further and recovery is delayed, landlords may be forced to keep rents low or offer free rent to get leases signed.
"There's an element of risk," said Andrew McCulloch, an analyst with Green Street. "But if you were to go back a year, the outlook is much more clear today. Their confidence level in that eventual recovery is much higher."
Owners said the rent declines appear to have bottomed out in some areas and concessions are moderating.
In 2009, [housing] starts were 554,000, by far the lowest number in the 50 years for which we have data. Paradoxically, this is good news.
People thought it was good news a few years back when housing starts – the supply side of the picture – were running about two million annually. But household formations – the demand side – only amounted to about 1.2 million. After a few years of such imbalances, the country unsurprisingly ended up with far too many houses.
There were three ways to cure this overhang: (1) blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the “cash-for-clunkers” program; (2) speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers or; (3) reduce new housing starts to a number far below the rate of household formations.
Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious. Prices will remain far below “bubble” levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means because the bubble burst.
Friday night, note the timing, Fannie Mae said they will need another $15 billion in cash from the government (that's you and me, the taxpayers). That brings the Fannie and Freddie total to $126.9 billion thus far, but with more to come, according to both companies.Will Fannie Mae and Freddie Mac be shut down, as they should be? No, because politicians want to use other people's money (i.e. yours) to prop up the housing market.
The Congressional Budget Office estimates Fannie & Freddie cost us a total of $389 billion by 2019. That includes all the subsidies they are providing in an effort to keep mortgage rates low, and support the housing market.
And people are mad about Citi and Bank of America getting $45 billion (which they have paid back by the way)?
But Fannie and Freddie money is just going to money heaven.
Despite signs that the real estate market might be lurching forward, prices are expected to fall further this year and next.Most predictions fall wide of the mark, so I don't place much faith in them. However, it's still interesting to hear what independent analysts expect.
The average home price in the United States will fall by about 6% by September 2011, according to a joint report between Fiserv and Moody's Economy.com. And that's after plunging more than 27% in the past three years.
Most of the projected home price decline will occur during the usually slow summer months of 2010. After that, prices should begin to stabilize, according to Fiserv, and stay almost flat through fall of 2011.
The main reason for continued decline, according to Mark Zandi, economist and co-founder of Economy.com, is foreclosures — the same thing that's plagued markets for the past three years.
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