Home Sales at a 7-year low

“The National Association of Realtors Pending Home Sales Index, based on contracts signed in November, dropped 4.0 percent to 82.3, the lowest level since the series started in 2001. That was worse than economists’ expectations for a 0.1 percent drop.” Read the full article here.

“”Mounting job losses and very weak consumer confidence deterred home buyers from signing contracts in November,” said Lawrence Yun, NAR chief economist.”

So when will the housing market bounce back?

Dr. Housing Bubble says:

When the employment situation improves.
When wages start increasing again.
When there is a lack of inventory on the market.

I agree.

Will Home Prices Bottom Out In Late 2009?

Source: NYT

According to the New York Times, they are reporting falling home prices through late 2009. “The No. 1 thing that drives housing values is incomes.” States Todd Sinai, professor of real estate at the Wharton School at the University of Pennsylvania.

First, here in California we will be lucky if it’s 2009 when we see the bottom. I think we are looking 2010 or 2011, until we hit bottom. This is supported by the last California housing boom and bust of the 1990’s.

“In a previous boom, home prices peaked in the Los Angeles area in 1990 but did not hit bottom until 1996. Prices remained near that low for more than a year before starting to climb again.”
Second, the fact that home values are now based on incomes is shocking. By not using income as the measure if a person can afford a home, is what caused the housing bubble and collapse.

Former Bush Advisor – 5.25% year Mortgage for ALL?

Found this great blog entry by Peter Viles of the L.A. times.

“It’s true, housing prices in much of America are too high relative to income, which means they should continue to decline. But further declines in housing prices will cause more economic pain for many homeowners, and the government seems hellbent on bailing out current homeowners at the expense of future home buyers.”
–Peter Viles
I could not agree more with Mr. Viles conclusion.

Eighth Straight Month of Decline

Is Lawrence Yun, chief economist for the Realtors serious? Read this quote.

Yun said he believed the drop in sales, which left activity in October 20.7 percent below the level of a year ago, was nearing its end. He said a greater willingness of lenders to start offering jumbo loans again and the use of Federal Housing Administration-insured loans in place of subprime mortgages will help generate a rebound. Read the full story here.
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Home Prices Drop In Third Quarter

This is a clear sign the housing decline has not reached the bottom. There is another wave of adjustable rate mortgages set to reset in Q4 of 2007 and Q1 of 2008.

Los Angeles home prices declined 7 percent year over year.

Read the full story here.

Los Angeles 40% Price Decline

CNN/Fortune is predicting Los Angeles will face a 40% decline in home pricing in the next 5 years. They are using historical relationships between home prices and rent to make this prediction.

I agree with this prediction. If you do the math, there is no way for the average Joe to afford homes at their current pricing. Tighter loan underwriting, and expanding inventory will force prices down.

Renting is not a bad option for the next couple of years. Save your money for a down payment and wait for the market to bottom out.

Falling Housing Prices

Falling home prices are making buying a home more affordable these days. This is great news for the U.S. economy because so far the slumping housing market has been a drag on the economy.

Many people are stretching to make their mortgage payments due to the recent boom years of the real estate market. In July mortgage payments represented 25% of people’s household income. Currently it represents 23%. Industry experts say anything above 22% of the household income is high.

The west coast of the country is getting hit the worst, with the average mortgage representing 35% of people’s income. Only time will tell how this will effect the foreclosure market.

Deflating Home prices.

Is the bubble about to burst? Or is it just a minor correction?

Cites to watch, Las Vegas. “33% increase in appreciation between 2003 and 2004, and then a 14% increase by the third quarter of 2005, evidence that prices have begun to cool”
Sacramento California is going to take a beating. “Local Home Value Ratings rates the market as 59% overvalued and Burns Housing Cycle Barometer also lists it as overpriced.” There is just too much inventory in the pipeline, which is pushing pricing way down.

Los Angeles, “Fortune predicts a drop-off of nearly 8% in housing prices in the next two years, putting it in 95th out of 100 markets for growth.”

Check out more major locations here.