Housing Prices Fall to New Lows Without Buyers

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“EMOTIONAL SCARS ON THE AMERICAN PSYCHE”

“Housing is locked in a downward spiral”

EDITORIAL COMMENT: Why would anyone buy when they are uncertain as to virtually all market conditions including the fact that they might be getting “title” from someone who doesn’t have it? Anyone who buys now is taking the risk that the flood of homes NOT on the market yet will drive prices still lower. Anyone financing such homes is taking the same risk.

When Golda Meier was asked when there will be peace in the Middle East, she replied “When we care more about our grandchildren than our Grandparents”. This economic crisis is driven by the housing crisis which in turn is driven by the fake mortgages that were sold to homeowners and investors alike. It will improve and we will prosper again when we care more about what is right for our society than we do about scoring political points. It will end when we hope and look forward more than we fear and look back.

Eventually we will come to some sort of equilibrium. It doesn’t need to be as painful as this. It just takes common sense and the rule of law. The Banks want us to abandon common sense and to avoid the rule of law.

They have had their way with us because they have convinced many in our midst that if they fall, so goes the country. Not true. As housing falls, as consumers fall, as workers fall, there goes the country. We’ve heard their scare rhetoric before, in the now ironic form of “What’s good for General Motors is good for the Country.” It obviously wasn’t true then and just as obviously it isn’t true now for the Banks.

Housing Index Is Expected to Show a New Low in Prices

By

SAN FRANCISCO — The desire to own your own home, long a bedrock of the American Dream, is fast becoming a casualty of the worst housing downturn since the Great Depression.

Even as the economy began to fitfully recover in the last year, the percentage of homeowners dropped sharply, to 66.4 percent, from a peak of 69.2 percent in 2004. The ownership rate is now back to the level of 1998, and some housing experts say it could decline to the level of the 1980s or even earlier.

Disenchantment with real estate is bound to swell further on Tuesday when the most widely watched housing index is all but guaranteed to show that prices of existing homes sank in March below the lows reached two years ago — until now the bottom of the housing crash. In February, the Standard & Poor’s/Case-Shiller index of 20 large cities slumped for the seventh month in a row.

Housing is locked in a downward spiral, industry analysts say, not only because so many people are blocked from the market — being unemployed, in foreclosure or trapped in homes that are worth less than the mortgage — but because even those who are solvent are opting out.

“The emotional scars left by the collapse are changing the American psyche,” said Pete Flint, chief executive of the housing Web site Trulia. “There was a time when owning a home was a symbol you had made it. Now it’s O.K. not to own.”

Trulia, a real estate search engine for buyers and renters that is based here, is a hive of renters, including Mr. Flint. “I’m in no rush at all to buy,” he said. He expects homeownership to decline further to about 63 percent, a level the country first achieved in the mid-1960s.

Tim Hebb, a Los Angeles systems engineer, expertly called the real estate bubble. He sold his bungalow in August 2006, then leased it back for a year. Since then, the 61-year-old single father has rented a succession of apartments.

“I have flirted with buying again many times over the past few years,” said Mr. Hebb. “Let’s face it, people are not rational creatures.”

But he always resists, figuring housing is still overpriced and even when it stops declining it will stumble along the bottom for years and years. He says there is plenty of time to get back in if he should ever want to.

The market signaled further trouble on Friday when the April index of pending deals was released by the National Association of Realtors. Analysts had predicted the index, which anticipates sales that will be completed in the next two months, would be down 1 percent from March. Instead, it plunged 11.6 percent.

Many of those in the business of building and selling houses believe the current disaffection with real estate will pass. After every giddy boom comes the hangover, they acknowledge, but that deep-rooted desire for a castle of one’s own quickly reasserts itself.

“There’s no question that people are reticent to own,” said Douglas C. Yearley Jr., chief executive of Toll Brothers, the builder of high-end homes. “They’re renting and they’re happy renting because they’re scared.”

Yet those fears will fade, he predicted.

“Most people still want the big house with the big lot in the desirable school district in the suburbs. No one ever renovated the kitchen or redid a room for the kids in a rental,” Mr. Yearley said. “I think — I hope — we’ll be O.K.”

The market’s persistent weakness, however, runs the risk of feeding on itself. Buyers are staying away despite the lowest interest rates and the highest affordability levels in many years, which in turn prompts others to hesitate.

Trulia and another real estate site, RealtyTrac, commissioned Harris Interactive to take a poll last November about when people thought the market would recover. A third of the respondents chose 2014 or later. But in a new poll, released this month, the percentage giving that answer rose to 54 percent.

The sharp decline in prices since 2006 has meant a lost decade for many owners. But what may prove even more discouraging to potential buyers is academic research showing that the financial rewards of ownership were uncertain even before the crash.

In a recent paper, a senior economist at the Federal Reserve Bank of Kansas City found that the notion that homeownership builds more wealth than investing was true only about half the time.

“For many households in many years, renting and investing the saved cash flow has built more wealth than homeownership,” the economist, Jordan Rappaport, concluded.

Economics affects potential owners in other ways. A house is a long-term commitment that many are loath to make in uncertain times like these.

“What I’m hearing from people is that they don’t want to be tied to a particular geography, which inclines them to renting,” said Mr. Flint of Trulia.

San Francisco is one of the country’s most expensive cities, so renting has a natural appeal here. But the Associated Estates Realty Corporation, which owns 13,000 apartments in Georgia, Indiana, Michigan and other Midwest and Southeast states, also is seeing more people deciding to rent.

“We have more of what we call ‘renters by choice’ than I’ve seen in the 40 years I’ve been in the apartment business,” said Jeffrey I. Friedman, chief executive of Associated Estates.

For decades, the company has asked former tenants why they were moving out. During the housing boom, as many as a quarter of those moving on said they were buying a house. In 2009, the percentage of new owners fell in the first quarter to 13.7 percent, the lowest ever.

Last year, as the economy improved, the number rebounded. This year, it fell back again, to 14 percent.

Builders clearly believe that the future includes many more renters. So far this year, construction of multiunit buildings is up 21 percent compared with 2010, while single family-homes are down 22 percent. Sales of new single-family homes are lower than at any time since the data was first kept in 1963.

Susan Lindsey, a San Diego software programmer, was once eagerly waiting for the housing market to crash. She said she would have no guilt about swooping in on some foreclosed owner who had bought a place he could not afford.

With prices now down by a third, however, she is content to stay in her $2,500-a-month rented house. She prefers to invest in gold, which she has been buying since 2003.

“I could afford a median-priced house, no problem,” said Ms. Lindsey, 48, as she headed off for a holiday weekend in Las Vegas. “But I would be paying more to live in a place I like less.”

6 Responses

  1. i don’t think they should build new construction of multiunit buildings.For what so they could stay empty .they charge high rents just to rent and peopee are not going to be able to aford the rent’s and thery will stay empty just like the homes more touble.Fix the real issue.

  2. Absolutely, they wanted this, let them have it. Will they pay those property taxes…I wonder. The fact is they can change the purpose of the property preservation companies and have them just respond to all the renter’s complaints…lol. I love this idea. Most of the ‘new’ rental class will be previous homeowners so the risk is little to none and the new renter certainly knows what to expect in regards to maintenance. The only downside I see is the write off on loan interest as regards the IRS but congress seems intent to do away with that anyway so what the heck.

  3. Alice my point exaxtly I couldn’t agree with you more.More abject stupidity at its finest.My whole thought process is place them in a corner and watch them squirm like the spineless worms that they are.Lets see how well they become landlords.The great part is there are more laws protecting tenants than home owners.They on’t effect a repair that you have sent notification of via certified or registered mail you effect the repair send them the receipt and whats left if any of thier rent.I see this as a win situation also a way to exact a small amount of retribution for all of us.Let them eat cake!!

  4. Pamela, we are on the same page..typing at the same time..lol. I am sure there are those that would argue that the price on renting would go up but I would argue that their will be a glut of properties to rent because the banks can’t unload all of their illegally foreclosed on properties.

  5. It used to be the American dream to own a home ,that was a fallacy that was passed down generation to generation.It sucks to be a home owner,when something breaks you are the responsible party to make sure the repair is made ,you are the party that pays for it,you are the party that has to pay the property tax and home owners insurance and everything else.You are the person that takes the loss on everthing as well.Explain to me how this is a win win situation for the property owner cause I for one am not getting the warm fuzzy glow I’m supposed to feel here.Seems to me that all this benefits the LENDER and nobody else.

  6. Perhaps it is time we become a ‘renter’ society and the banks can become landlords on their REO. Let the banks pay all of the out of control property taxes the homeowners pay as a result of no income because of the MERS ponzi scheme. Renter insurance polices are a lot cheaper than homeowner issurance policies. Owning a home is expensive with all the costs of upkeep. The banks can come in and fix the leaky pipes and broken furnance. The banks wanted this and maybe it’s time we gave it to them and all the headaches as well. IMHO the renters are the smart ones today…they are free.

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