Thursday, April 15, 2010

Leading indicators point to another housing downturn

Robert Shiller makes the case for another downturn in housing, including the fact that leading indicators are negative:
Today, we need to worry about strong headwinds, as the government begins to withdraw its support of a still-troubled lending industry and as foreclosures are dumping millions of homes onto the market.

Consider some leading indicators. The National Association of Home Builders index of traffic of prospective home buyers measures the number of people who are just starting to think about buying. In the past, it has predicted market turning points: the index peaked in June 2005, 10 months before the 2006 peak in home prices, and bottomed in November 2008, six months before the 2009 bottom in prices.

The index’s current signals are negative. After peaking again in September 2009, it has been falling steadily, suggesting that home prices may have reached another downward turning point.
It seems, perhaps, that the people inclined to be seduced by the first-time home buyer tax credit (yeah, I'm talking about you David) took advantage of it early, causing a temporary blip in a longer downtrend.


  1. Here Pussy

    Foreclosure activity jumped 19 percent to a monthly record in March, driving first-quarter actions up 7 percent from the prior quarter and 16 percent from a year ago to a record of more than 932,000 properties.

    One in every 138 U.S. households got a foreclosure filing in the quarter such as a notice of default, auction or bank repossession.

  2. So what are the potential pitfalls and drawbacks to "walking away" from an underwater mortgage? I have two acquaintances that are thinking of doing that... they want to know. Thanks.

  3. "Here Pussy

    Foreclosure activity jumped 19 percent to a monthly record in March, driving first-quarter actions up 7 percent from the prior quarter and 16 percent from a year ago to a record of more than 932,000 properties."

    I see that. Thank you for siting the NATIONAL statistics. As it so happens, I calculated the LOCAL stats. Foreclosures in the first quarter:

    Arlington -24.6% YOY
    Alexandria -11.1% YOY
    Fairfax -27.6% YOY
    Loudoun -19.2% YOY
    Prince William -56.6% YOY

    Once again, it looks like its different here. SUCK IT!!!

  4. "So what are the potential pitfalls and drawbacks to "walking away" from an underwater mortgage? I have two acquaintances that are thinking of doing that... they want to know. Thanks."

    Well, there are several drawbacks to walking away from a loan, also called a "strategic default."

    The major one is that they will take a hit to their credit. I've seen some people who have lost anywhere from 100 to 125 points on their rating due to a strategic default. The foreclosure will stay on their credit for seven years, and while its impact may depreciate as the foreclosure gets older, it could still hurt when it comes to getting another loan.

    It may also make it more difficult to get a new mortgage from a government agency, like an FHA or FNMA loan. On a similar note, foreclosures can, ironically, make it harder to find a rental property if the owners run credit checks.

    Keep in mind that there are also things like "mortgage repair" loans that can help boost a credit score, but as with any other industry that springs up to fill a niche, be careful of scams.

    In general, I don't think strategic default is the way to go. I am not a lender, nor a credit adviser, so I highly suggest your friends speak with one of them before doing anything, but their first step should be to work with their lender to see what can be done to keep them in their homes.

  5. "siting the NATIONAL statistics"

    So Pussy you are the author of the "marshall law"!!!! It's not "siting" it's "citing" you moron.


  6. It's not "siting" it's "citing" you moron.

    So noted. As to the local stats themselves, do you have anything to cey?

    Or better yet, you want to go back and diskuss what its going to be like when the government fails?

  7. Fair enough. I guess I should have checked the local statistics before I posted that national stat.

    And yes, I guess its possible that the USA would fall into anarchy so perhaps wanting the "government to fail" was a tad harsh.


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  9. I seriously doubt that is your response - looks like you got sockpuppeted.

    In case it is you horseshitter, next time think before you post. I may not be as merciful next time.

  10. Pussy, you are a a-hole! You have nothing of substance to offer on this blog...and I am watching you!


  11. So noted Lemmy.

    Back to the questions, any comment as to the local vs national stats?

    And please, now that you have time, explain it to us what its gonna be like when the US fails?

  12. You just wait Pussy. You are going to get yours.


  13. The other problem with strategic defaults is that you need to know whether you have a "recourse" mortgage (as opposed to a "no-recourse" mortgage).

    Anyone contemplating a strategic default needs to know which category they are in.

  14. I cant believe how depressingly low those foreclosure numbers are in Northern Virginia. I thought by now we would be awash with inventory and have our pick of the litter. Instead, we (buyers) are being squeezed and having to fight each other for the scraps that fall from the table.

    This whole thing is killing me. I saved for years and this is what I get? It wasnt supposed to be this way.

  15. Well, there were foreclosures - out in Manassas, Ashburn or Woodbridge. In closer, not so much.

    I think to a degree it was all predictable - the new housing that was built and sold during the bubble was mainly out there. The land closer in had largely been built out before the bubble.

    So the stuff closer in more likely had traditional mortgages - 30 yr fixed, for example. Yeah, some properties close in were bought during the bubble years with exotic mortgages, but nowhere as many as you would find way out in the new subdivisions.

  16. But one thing you have to remember, there is no equity left for people to move up and cause rapid price increases. Back to the doldrums of modest price appreciation. So take a seat because if your are hoping to double your money in a few years, you might see Elvis too!

  17. You two dudes fighting here about local vs. national -- did it ever dawn on you that some of the people reading this and posting here don't give a crap that you guys live on the East Coast?

    The Internet is international, remember. Post something here, and anyone can read it from anywhere.

    Besides, you're both off the mark with your logic, which is fed by the mainstream media which is Fantasyland, if you like that sort of thing. Follow the status quo these days and you are an automatic moron.

    The central bankers have no intention of letting anyone own property in the future. You have read the UN's Agenda 21 plan in detail, haven't you? Right? Only the most important document in world history.

  18. Washington DC housing bust - again

  19. Anon said...You two dudes fighting here about local vs. national -- did it ever dawn on you that some of the people reading this and posting here don't give a crap that you guys live on the East Coast?

    Yes. Did it ever occur to you to read the title of this blog, especially where it said "National housing bubble coverage, with special attention to the Washington, DC area housing bubble"?

  20. Here pussy, pussy, pussy....

    Let me just first give a little background for those of you who don't know Ivy Zelman. She's the former Credit Suisse analyst who called the housing crash, even before the boom had peaked.

    She's famous for a simple excel chart that showed the timing of subprime mortgage resets, and while she got plenty of criticism for being a big bad bear, she was right.

    Zelman did a simple exercise of adding shadow inventory to the seemingly improving inventory numbers. In DC for example, she cites a 5.1 month supply of homes for sale, well below the nation's 8 month supply. But add the shadow inventory of foreclosures, and you get a 13.2 month supply. She claims builders "underwriting ground are unaware of these headwinds."

  21. Anon - thank you once again for pointing out how Zelman thinks about the NATIONAL picture.

    You can thus understand why it gives me great pleasure, bordering on unadulterated glee, to point out what she says about the LOCAL picture:

    "Zelman is bullish on the development-friendly Virginia side of the Washington, D.C. market, less so on the Maryland side. She recently released a report on D.C. saying its “fundamentals are among the best in the country. It is well positioned for sustainable recovery given incremental job growth and land constraints.”

  22. You know, 'it's different here' is a cry I haven't heard since the bubble days. Many people believed that there was indeed a bubble back in 2005-2006, but they felt, no, they KNEW that prices were not inflated in THEIR area. It's different HERE.

    And they all sank together. A loss is a loss, and a loss on a house is worse because of the loans involved.

    Before taking a hit to a credit score, remember that employers look at credit ratings before hiring, at least the smart ones do. And insurance companies, and doctors before accepting patients, and of course lenders.

    Please, go ahead and buy with abandon -- it is different here, it is different this time -- it just IS.

  23. I didn't know DC was the nation. Keep wishing upon a star. And tell us pussy about the old home smell you overpaid for.

  24. The Pussy, sorry, im just frustrated I dont have a home yet. I had no idea Ivy Zelman was bullish on the N. VA area, and yes it does make me think twice about my bearish stance.

    Maybe it really is different this time.

  25. hahaha pussy posting as anonymous giving an apology to himself, completely unbelievable to the point of being humorous. Classic.

    Anyway, Im new to this thread...but I can say that regardless of all the arguments, prices even in DC have gone down....and they will continue. This blog probably has another 10 years of life in it with you morons arguing over a decline thats going to last and last and last....and last.....etc.

  26. Pussy, tell us about that tiny space in your home you call a kitchen.

  27. Why don't you dicks go get a life

  28. Who the hell are you?

  29. Pussy, I consult to many of those companies. You don't know how wrong you are. You will be in Pittsburg, Kansas when this is all over.

  30. Oh and fuck Zelman. She clearly doesnt know what she is talking about.

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  32. I guess Del Ray Alexandria is not the hot ticket others have claimed on this blog. The brand new Del Ray Central apartment complex is offering 2 months free if you sign a 12-month lease. One note, you could only fit a bed and a coat rack in each bedroom. So if Japanese style living is for you, march on down there and get yourself a closet!

  33. Well, I dont know about all that. Last I checked, Del Ray was up 7.2% YOY. Not bad considering how slight the declines...

    Still I agree with you on the size of those places. You couldnt pay me enough to live there!!!