About 12 million U.S. homeowners owe more than their homes are worth, compared with 6.6 million at the end of last year and slightly more than 3 million at the close of 2006, said Mark Zandi, chief economist at Moody's Economy.com.
Will this end anytime soon? Not likely. The following charts are from Calculated Risk. Click on the image for a larger image.
Inventories are still sky in in absolute numbers:
And in months of available supply:
As a result, prices are dropping like a stone:
Now ask yourself this question: are people going to buy more or fewer homes right now? The job market has been tanking all year (and has been dropping year over year for far longer):
And unemployment has been rising:
Oh yeah -- the credit markets are in complete turmoil making it really hard to get a loan right now.
4 comments:
I noticed on the Case Shiller Index that the rate of decline in prices is falling over the past 3 months. While it is too early to mark this as a trend, if it continues then a point of inflection will mark the beginning of the end of price declines. If the curve proves to be symmetrical then it would appear that the rate of declines will top out in the December 2008 to February 2009 period at about 18% and would go to zero at the beginning of 2011. The total decline on average would appear to be about 36% over 4 years. This is of course subject to an end of the "moderate" recession in 2009.
If the 36% drop over 4 years is in order, then prices will bottom around late 2003 levels. Any opinion on the $700 billion bailout in regards to pricing? Also, what about interest rates given the Fed signaled more rates drops.
I am trying to figure out why the Euro is getting decimated.
The 36% is an overall average of all locations. Some will not drop or go up and some will be hammered down 70%. The 700 billion will only help the billionaire bond barons of Wall Street and other locals. The trickle down will be in the form of more mortgage money going forward. Prices will still be determined by supply, demand, ability to pay and ability to borrow conservatively. This is how it should have been done all along and we wouldn’t be in this melt down! If I could predict interest rates with certainty I would be blogging from a beach in Tahiti. My feeling is that short rates will remain low as the Fed prints money and people look for safety. Longer rates will be subject to the Treasury’s incessant demand for deficit spending and the appetite of foreign money to buy our worthless debt. Our REAL deficit last year was one trillion dollars, this year it will be two trillion dollars. Plan accordingly.
Foreign exchange traders are not rational individuals. Like children, they always run to one side of the tetter totter or the other. There is no method to their madness. Anyone giving quantitative explanations of currency trading is making it up as they go.
Hey Bonddad, I thought you were "bullish" at the moment? This is the same trend you've been rightfully spouting, but nothing here shows a bear market forming... what gives?
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