BluefoxToday blog : The Housing Market Has Fallen And Won’t Get Up

The Housing Market Has Fallen And Won’t Get Up

man on floorAn article in the Wall Street Journal, Housing Market Stumbles, describes how home sales seem to be deteriorating, but it isn’t just a stumble; the housing market has fallen and won’t get up. The WSJ piece projects the dreaded “double-dip” in housing, a prediction that has grown more popular in recent weeks.

 

What most seem to overlook, however, is that the fundamentals of housing are being rearranged. The overall market was never truly in recovery; the brief periods of upward momentum were, in general, a response to an artificial stimulus applied by government—a stimulus which was neither permanent nor productive.

 

With the numbers of new home starts falling, with housing inventory rising, and with the potential for several million additional foreclosures, the housing market is entering a new phase where the old rules no longer apply. Past statistics regarding recovery from recession are meaningless, for the current recession has little in common with those of the past. And those who have homes to sell, those who wish to purchase a home, and those in real estate related businesses must adjust to the fundamentals of this market.

 

While some areas of the country have seen improvement—markets in the northeast and parts of California—other areas, especially those with the potential for additional foreclosures, are still experiencing weak demand and falling prices. Those needing to sell their home will have to market and price more aggressively; prepare for a longer period on the market; and will have to be flexible to micro-changes in their market.

 

An anemic job market, expected to continue well into the decade, has changed housing for the foreseeable future. And those areas with double-digit unemployment can expect additional price declines. Nationwide, prices should remain well below the levels of recent years; and, with few exceptions, appreciation will be minimal.

 

What we’re experiencing is not a double-dip in housing, not a “stumbling,” but a market experiencing a fundamental adjustment downward. With the current and projected absorption rates, we’re likely to have high levels of inventory for several years; and if we add in the indeterminate number of future foreclosures, structural and fundamental changes seem unavoidable. The potential inventory of homes must decline to levels appropriate for the current and anticipated absorption rate—an event unlikely in the short term—in order to begin a recovery; and until that occurs, the housing market has fallen and won’t get up.

 

The Housing Guru: The expert source for all your housing questions

 

 

Comment balloon 89 commentsJohn Mulkey • July 21 2010 11:03PM

Comments

Scary stuff. Glad to hear other parts of the country are seeing improvement though.

Posted by Ellen Dittman, #1 Stop for NE FLA-JAX/OP 904.535.1199 (TEXT OK) r (Watson Realty Corp.) about 8 years ago

WELL, JUST WHAT DO THEY EXPECT?

 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) about 8 years ago

Hi, John. GREAT title and GREAT graphic! Too bad the content is not so great...once again, I think you're right!

Posted by Leslie Helm, Real Estate For Trail Riders (Tennessee Recreational Properties) about 8 years ago

Ellen - It's not bad everywhere, just most places.

Lenn - Who really knows?

Leslie - Thanks!  Time will tell.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

I estimate 3 to 5 years before there is any appreciation and in areas with heavy foreclosures it will take 5 to 8 years unless they do like Detroit and raze 10,000 abandoned or uninhabitable properties.

Posted by Wallace S. Gibson, CPM, LandlordWhisperer (Gibson Management Group, Ltd.) about 8 years ago

Wallace - And once we see appreciation, it will seem pitiful when compared to the past few years.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

I believe financial reform will have a negative effect on housing in NYC, because of the financial institutions potential job loses and the lack of confidence in this countries stocks.

Posted by David Okada, Service-Beyond Your Expectations (Douglas Elliman Real Estate) about 8 years ago

Well, we got change.

Posted by Pamela Seley, Residential Real Estate Agent serving SW RivCo CA (West Coast Realty Division) about 8 years ago

And the anemic job market would be worse had it not been artificially bolstered by hiring more government workers to perform the census. I remember in the early 60s when volunteers conducted the census because one of them was Mom.

Posted by Kate Kate about 8 years ago

David - You just may be right.

Pamela - Somehow I don't think it's what most had in mind.

Kate - Your mom should demand her back pay!

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

John,

Fundamentally, it all comes down to supply and demand. Then, we are back to basics.

Brian

Posted by Brian Madigan, LL.B., Broker (RE/MAX West Realty Inc., Brokerage (Toronto)) about 8 years ago

Brian - You're right and that's as basic as it comes.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

If you look at history, we go through these bad, bad, cycles about every fifteen years or so. This just happens to be particularly bad when it comes to housing.

 

Posted by Scott Hayes, Realty Austin, Broker Associate ((512) 786-8300) about 8 years ago

Always wanting to remain positive, I have truly come to the realization that this market is not changing anytime soon. It's like a sinking ship at this point.

Posted by Keisha Hosea- KASIHomes.com, Real Estate Solutions For Real People (KASI Homes ) about 8 years ago

It is all relative. My market has experienced an up tick. Just waiting to see if it is sustainable.

Posted by David Spencer, Show Me real estate in Kansas City (Keller Williams Northland) about 8 years ago

It is hard to evaluate the long range growth of a local market but if it is tourism based as mine is...I don't see a great deal of improvement.  Glad you shared; I missed that article.

Posted by Linda Hinson (S & L Properties) about 8 years ago

John: I think many resellers have not really woken up to the facts of this market. Not wanting to "buy" a listing, being the messenger is not a popular position.

Posted by Matt Grohe, Serving the metro since 2003 (RE/MAX Concepts) about 8 years ago

@ John,

"What most seem to overlook, however, is that the fundamentals of housing are being rearranged. The overall market was never truly in recovery; the brief periods of upward momentum were, in general, a response to an artificial stimulus applied by government—a stimulus which was neither permanent nor productive."

Well stated Jon... All the stimulus and tax credits have done is delay the inevitable... and delay a true recovery.

It's amazing how many people don't understand that the market was originally whacked when they were giving anybody a loan... Throwing good money to prop up artificial values will indeed end up being a huge mistake.

Posted by Paul Francis, Las Vegas Real Estate Agent - Summerlin Homes (Francis Group Real Estate) about 8 years ago

John, I think you are right and I think one of the things (very critical pieces) that needs to happen is that we, REALTORS and agents need to TELL THE TRUTH!  We (well, not me but way too many.) lie to the American public.  We want to be positive and upbeat so we tell them things are peachy keen.

NOT!

Posted by Marian Goetzinger, Crystal Coast Real Estate NC (Pine Knoll Shores Realty 252-422-9000) about 8 years ago

John:

When people ask me how the housing market is doing I tell them that it has improved from last year.  That is the truth (at least in my area.) But where does it go from here - that is the question.

 

Posted by Claudette Millette, Buyer, Broker - Metrowest Mass (The Buyers' Counsel) about 8 years ago

Not around the Washington DC Metro area. . and I feel very lucky to be here when I read this reports. 

Posted by Fernando Herboso - Broker for Maxus Realty Group, 301-246-0001 Serving Maryland, DC and Northern VA (Maxus Realty Group - Broker 301-246-0001) about 8 years ago

Well, I'm not afraid of thunderstorms.  It is time to let the market adjust itself and be prepared to weather the upcoming storms.

Posted by Kathryn Acciari, RSPS, SRS, REALTOR(R) Sturbridge-Shrewsbury MA (Cameron Real Estate Group) about 8 years ago

Sorry to sound this way, but don't they want the continued downward trend?  Didn't the "president" just tell Europe that America is done?

Posted by Jay Markanich, Home Inspector - servicing all Northern Virginia (Jay Markanich Real Estate Inspections, LLC) about 8 years ago

How's that "change" workin' for ya'?  

Really smart post.

In order for the housing market to stand on its own depends critically on private sector job creation, then we can hope to see sustainable homes sales.  Appreciation... well, let's just get the sales back up first.  

The market has changed and there's no denying that. Some say it's really bad.  As for me, it simply means this: each morning when I start my work day, I have another opportunity to help a lot of people out of difficult situations and that gives me great motivation.  

Posted by Donna Yates, Blue Ridge Mountains (BHGRE - Metro Brokers) about 8 years ago

Nice analysis. Improved from last year, as Claudette understands, does not mean that we're back (northeast)- it just means that for sellers willing to price at a much lower figure than has been found in recent years, there are buyers willing to move (a good thing). Lots more house for the money, but reports reflected from rose colored glasses are a detriment to both sellers and buyers (not to mention making real estate companies look foolish). "Puffing" should be illegal.

Posted by Laurie Mindnich about 8 years ago

John, it certainly is a real possibility for the double dip.  I'm not sure that it's a forgone conclusion that it will happen though.

Posted by Gabe Sanders, Stuart Florida Real Estate (Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales) about 8 years ago

Great Blog! And the "Clapper" is the short sale negotiations! "Clap on.... Clap off".....

Posted by Charlene Hammontree, Meeting the needs of Buyers and Sellers in MICH (616 Realty LLC) about 8 years ago

Our new job as Realtors is to realign expectations of buyers and sellers about the market.

Posted by Jean Hedren, CRS, SRES, RSPS, Your Northwest Wisconsin Realtor (Edina Realty, Inc.) about 8 years ago

This is not a good time for anybody in the profession.  We  should be aware of what's going on in our local markets and take it from there.  This economy is the worst I've experienced since the early nineties.  Brokers & Realtors practicing since the seventies are aware of this.  As far as predicting the market for the future, I do not venture to do so because there could be upcoming events that might possibly change everything.  I am an optimitst and look forward to a better day.

Ann 

Posted by Ann Gravel (Pat Bennett Realty) about 8 years ago

It's about JOBS($14-30 per hour ones), without these there will be no lasting Recovery !

Posted by Michael J. Perry, Lancaster, PA Relo Specialist (KW Elite ) about 8 years ago

Scott - It does qualify for the particularly bad category.

Keisha - It's the "new normal."

David - Yes, some areas are doing fine.

Linda - Thanks for your comments.

Matt - People will adjust as the doldrums continue.

Paul - I agree.

Marian - We all have to recognize the realities of the market and share that info with our clients.

Claudette - And where it is going is not where it's been.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

Fernando - As long as the government is located in DC, you'll have good business.

Kathryn - And that's what we must do. Let the market adjust, and then adjust to the changes.

Jay - You mean like "stick a fork in us?"

Donna - Great attitude!

Laurie - Those who adjust can still find/create success.

Gabe - Whether we call it a "double-dip" or not, the market still has some rough times ahead.

Charlene - Short sales, like foreclosures, will be with us for some time.

Jean - Exactly!

Ann - And while we're waiting for that "better day" we can use our creative talents to generate business.

Michael L. - Yes, and wishing won't make it so.

Michael P. - And little has been done to stimulate jobs growth.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

I'm afraid the government hurt the housing market rather than helped it with the tax credit.  Until we get leveled out, as you have described, we won't see any upward movement.

Posted by Bob Haywood, BobHaywood.com (McGraw Realtors) about 8 years ago

Home prices have increased over 7% in the DC area over the last year. Here's to hoping other parts of the nation can experience a similar revival.

Posted by Aaron Seekford, Ranked Top 1% Nationwide 703-836-6116 (Arlington Realty, Inc.) about 8 years ago

Bob - I agree. We must allow the market to find its bottom.

Aaron - DC is one of the strongest areas.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

John, Would really love to disagree with you..........if only I had any data to support a more optimistic view.  I think San Diego and surrounding areas are going to start rebounding, but I also think any appreciation is going to be slow and specific.  Great post.

Posted by Deborah "Dee Dee" Garvin, C2 Financial (C2 Financial) about 8 years ago

Deborah - I would like to have better news, but we must deal with the realities of this market. Hope things improve in your area.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

A lot of psychological air has been let out of any market enthusiasim. Considering the the market crash could have been worse than the 1929 one and central banks and governments worldwide threw the kitchen sink out it realizing the severity, is it any wonder that pulling out of this hole will take awhile. You have 5 job seekers for every available job in the US so your point about unemployment is well taken, and those who do have jobs are not as a rule taking risk.  

Posted by Joe Pryor, REALTOR® - Oklahoma Investment Properties (The Virtual Real Estate Team) about 8 years ago

I always appreciate your "realist" perspective, John.  While it's not popular, it is the truth.  Last weekend I caught a radio program featuring a HUD representative who works with foreclosures in GA.  She said, "Even though we have averaged 500-700 sales/month this year, our inventory has not been reduced."  (I think those figures are accurate, but please keep in mind I have no memory.)  Such is the GA real estate market.

Posted by Patsy Overton (Patsy Overton Interiors, Atlanta, Georgia) about 8 years ago

The WSJ has been publishing stories that are more sensationalist than real.  I spent time debunking a story the other day about "high-end foreclosures".  It was written to make the reader believe that NODs all result in foreclosures, which isn't true.  Their "facts" were misleading at best and absolutely wrong at worst.

Personally, the media are having way to much impact on consumer sentiment these days.  One week people are happy because housing starts are up and the next we're told sales are down.  It's all about selling papers and airtime.

Reporters should be writing 100% fact only with absolutely no projections whatsoever.  If they do that, we'll get back to happy home buyers soon enough.  As you say, there are markets making moves up.  However, we rarely hear about those.  Why?

Posted by Bryan Robertson, Broker, Author, Speaker (Intero Real Estate) about 8 years ago

John,

You said this so well. 

Time will tell but I think you're right.

Great read.

Posted by 1 ~Judi & Don Barrett & Chassy Eastep - Integrity, BS Ed, Integrity Real Estate Services -IDABEL OK (Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745) about 8 years ago

AMEN! The free market is a self-correcting system, but when the government fundamentally changes the rules with massive regulations no one even reads the market gets nervous. Nervous people do not buy houses, unemployed people do not buy houses and so on...

I would really like to see a period of the government going on vacation and doing nothing and letting the market fix itself or at least find its balance point.

thanks for a great post...

Posted by Brent & Deb Wells, Prosper TX (LivingWell Properties) about 8 years ago

Of course you are right, you are always right.  The bottom of the socio-economic ladder has been obliterated and the pain is moving on up.  Rising million dollar foreclosures, every house for sale in my market is a short sale on it's way to becoming a foreclosure, double tight residential lending guidelines, the commercial bubble is leaking like a sieve despite the pretend and extend theory, commercial rents continue to decline...

We have a long way to do and it's gonna be a bumpy ride.

Posted by Jenna Dixon, Empowers You With a Better Real Estate Experience (DRA Homes | Cobb County Real Estate ) about 8 years ago

Great post and one that requires us to actually think, rather than act on emotion.  Ultimately, those that want to succeed will, and to worry about what is going to happen simply causes a road of distraction.  I'm certainly not suggesting ignoring what is going on, but there is plenty of opportunity in every market, we simply have to find the need and service that segment. Thanks for the post!

Posted by Jake Luehrs (Keller Williams Integrity - Team Leader) about 8 years ago

I wish we had higher inventory here. Maybe wouldn't have to compete with 10 other offers on every house.

Posted by Brian Bean, Homeowner Advocate, Dream Big Real Estate, S.Calif (The Dream Big Team at Realty ONE Group Champions) about 8 years ago

John, another example of the media exploiting a down market. I agree with you that it is a correction and adjustment. Thanks.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA about 8 years ago

I think you hit some valid points. I really think everything is LOCAL and if you are at the lower end in a desirable area , price it fairly, show it well- IT WILL SELL.

I think alot of people in the $500K and up range are in for a LONG SLOOOOOW recovery. The pool of buyers for these homes is NIL- hmm might need $ 100K down, stable full doc verifiable income, 740 + ficos, and be WILLING to pay the $ 3000 plus mortgage payments each and every month.

It will be tough sledding in the higher costs markets and higher end subdivisions in the more reasonable market.

Posted by Mark Smith (Cherry Creek Properties, LLC) about 8 years ago

Hi John ~ I was actually heartened by the WSJ article. Housing starts slowing to a crawl is what gets the market going again. You need to eat up inventory and that's what happens when you stop adding new units. Chip Case does a great presentation about this and that's all I could think of when I read the article.

As always, real estate markets are local of course.  We're still ginning along in my neck of the woods - sellers have to be realistic about price but the market is pretty active.  I know that in many parts of the country things aren't as rosy.

Liz

Posted by Elizabeth Bolton, Cambridge MA Realtor (RE/MAX Destiny Real Estate Cambridge, MA) about 8 years ago

John - With regards to the Phoenix Metro area market you'll get no arguments from me.  While one can never predict the future with certainty, I've seen nothing that leads me to believe that prices here have stabilized.

Posted by Tony and Suzanne Marriott, Associate Brokers, Serving Scottsdale, Phoenix and Maricopa County AZ (BVO Luxury Group @ Keller Williams Arizona Realty) about 8 years ago

My part of Southern California is very comparable to 2009 statistics.  Certainly better than 2008 but still a very cautious market.

Posted by Norma Toering Broker for Palos Verdes and Beach Cities, Palos Verdes Luxury Homes in L.A. (Charlemagne International Properties) about 8 years ago

John, didn't you know that a turnaround is just around the corner? 

We just have to find the right corner. 

Prosperity is just around the corner

Posted by J. Philip Faranda, Broker-Owner (J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY) about 8 years ago

Great post, thanks!  Love the image :-)

Of course, I think the markets are very local and different areas are experiencing variations in the way they are struggling, but the fact that remains important here is that the 'fundamentals' need to improve rather than any us counting on 'artificial' remedies for the market to change its course.  

I also think that some markets were way over-inflated, so the hopes that a boom like that will happen again soon seem very unrealistic.

Posted by Manuel Monserrate about 8 years ago

As people come out of shock they now realize that their home is upside down and will be for a long long time. Their retirement is not enuf to retire. The debt of this country is higher than ever. 15 million out of work. More Gov't growth means higher taxes.

We need to vote for change again.

While many Builders continue trying to sell their big beautiful homes we are selling 1st & 2nd time home buyers affordable homes on the golfcourse starting in the $150's

rochesternewlistings.com

 

 

 

Posted by Anonymous about 8 years ago

I absolutely agree, John. The housing bubble was artificially created by providing credit to people who really couldn't afford it and didn't know how to manage it. And when all that money pumped into the housing market, prices inflated... artificially. Had that credit never been provided, I suspect we'd be in a much different economic situation. When asked about when I think home prices will get back to their peaks of a few years ago... in my mind, my answer is, "I don't know... because those prices never should have happened at that point in time."

Posted by Bill Burchard, Broker, Realtor, Representing Buyers and Sellers (3B Realty: 951-347-3818, CA) about 8 years ago

Joe - And the uncertainty in the economy is keeping companies from investing and creating jobs.

Patsy - And just today we learned that GA unemployment has spiked upward--again.

Brian - While I agree that newspapers and pundits often look for the most sensational stories, this market will not recover as it has from past recessions.  We have lots of foreclosures yet to come and a jobless rate that will stay unusually high for years.

Judi - Thanks!

Brent - Thanks for stopping by.

Jenna - But even with all the negativity, there will be many who "create" success.

Jake - My sentiments exactly!

Brian - I'm sure some areas would be willing to share their glut of inventory.

Michael - And we all have to adjust to the new reality.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

The market will have to reset itself. It's a sad reality. Many doctoral thesis will be written on the root causes of this crisis and we may find out one day.

Posted by Dave Halpern, Louisville Short Sale Expert (Keller Williams Realty Louisville East (502) 664-7827) about 8 years ago

Well, Positive thoughts bring positive results so hoping to the best for all of us :)

Posted by Pelin Guzel (Dallas Homes For Sale - Plano Real Estate) about 8 years ago

Mark - Yes, but some areas are seeing little activity even in the lower price ranges--I live in such an area.

Liz - You're in one of the better areas, and I agree that the decline in housing starts is a good thing for the industry.  However, construction is a significant engine for creating jobs, and that's not likely to see much improvement for some time.

Tony & Suzanne - There are lots of "fits and starts" yet to come.

Norma - Much of CA will see a recovery before the remainder of the country.

J. Phillip - I'm still trying to find your corner : )

Manuel - I agree.

Rochester - There is a new level of affordability in most areas.

Bill - Exactly!

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

Dave - I may not be around long enough to see all the explanations unfold.

Pelin - Yes, positive thoughts combined with creative actions will allow many to continue in success.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

This looks like the "future hole in the market" that I talked about last year. 

At that time I made the argument that the stimulus would bring buyers to the table prematurely sooner and would create a "hole in the market" later as buyers who would have otherwise waited to buy would bring their purchases forward.  

Those buyers are gone now and absent those buyers, the market will need to adjust once again.

Posted by Dan Quinn, Dan Quinn (Berkshire Hathaway HomeServices PenFed Realty) about 8 years ago

Good post, and equally good comments.  Can we say "short sales" boys and girls?  Sucks to be an investor in a bankster organization.

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) about 8 years ago

Dan - And enticing buyers to enter the market prematurely does nothing to create a sustainable stimulus.

Carla - This market is creating new businesses and new opportunities for those who are not idly waiting for the rebound.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

Great post, John and it is unfortunate that the real estate market does not seem to be going in the right direction. While the tax credit greatly helped our business, it wasn't the answer and could end up doing more harm than good.

Posted by Dan and Amy Schuman, Luxury Home Specialists (Howard Hanna Real Estate Services) about 8 years ago

Looks like years of flat pricing...lots of inventory...tough times.  Great post.

Posted by Lauren Stark, Luxury Real Estate Agent - Las Vegas-Henderson NV (THE STARK TEAM-Las Vegas Luxury Homes & Condos) about 8 years ago

Interesting Blog, things are not bad all over (as you state in your blog).  This month my office is having one of its best months of the year so far!  All sides of the market seem to be hitting, we are seeing condo buyers, low end and high end buyers coming in at a steady pace.  I think the word has gotten out in certain markets that if you are planning to buy you should buy now, it won't get much better (pricing and interest rate combination).

In fact I stopped by the Post Office a little while ago and while sending out a heavy package to a freind in Florida I struck up a conversation with the local Post Master (long story short) he will be buying soon and I have a pre approval to work up for him. 

I an not overly optimistic, but I do think you have to keep your legs moving in this market, let others hide, I plan on flying my banner even higher these days!  Happy Selling!

Ed

Posted by Edward Cooper, all the best, all the time. (Retired Mortgage Banker - Lender Consultant) about 8 years ago

John, as usual you are being brutally realistic. It is what it is, and we need to plan accordingly.

Posted by Jon Budish (Resident Realty) about 8 years ago

John....I find this post (and its comments) refreshing as it addresses the elephant in the room.......which shouldn't be there to begin with. The rush to go out and buy a home.....or get a steal or deal is fading. Instead, what I see is that if and when you purchase..... whether today or in years to come, you will get what you pay for. Then, I would expect Real Estate to return to what it does best, which is a long term valuable hold. At the end of 20-30 years, you have a reliable piggy bank on your hands. People have to live somewhere. Even if your plans change and you have to shift to another location, you can most likely rent out your home instead of selling it as payments are equaling rent amounts in many instances. Of course rental dynamics come into play and professionals can guide you here. The way of Real Estate is changing......it is people who are interfering with the process.....

Highest regards.......thank you John

Posted by Richie Alan Naggar, agent & author (people first...then business Ran Right Realty ) about 8 years ago

Great post John.  I think EVERYONE needs to be educated about the big picture. Sellers need to understand that they no longer have the upper hand. RE and Mortgage professionals need to know that they have to add a lot more value to their offering than they've ever done before. 

Posted by Speed Equity® Mortgage Acceleration System, We help your clients Own Their Homes Years Sooner (Speed Equity®) about 8 years ago

Dan & Amy - What we need are jobs--people with jobs buy homes.

Lauren - We're entering a period unlike that of recent decades.

Edward - I agree that: "you have to keep your legs moving in this market"  And while hard work and a good attitude can bring success, in this market it's the difference between success and failure.

Jon - The facts are what they are, and we choose how to address them.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

John, Around Florida, the market has gone from bad to worse to unsustainable. If prices keeping weakening like this, no one will have any equity to fall back on.

Posted by Judy Chapman (Referral Network of Illinois LLC) about 8 years ago

Oh, I knew I shouldn't have come over here to read this doom and gloom post.

We seem to be doing quite well here in San Diego, which might just prove yet again that all real estate is local. Sales have been up for something like 24 consecutive months, and prices have been up or flat for something like 17 consecutive months.

Unemployment is down, the economy is up, confidence is improving, major appliance purchases are improving, stocks are up, foreclosures have fallen to a three-year low, notices of defaults have also fallen to a thee-year low.

An article in today's paper, coincidentally, says that the same trend is showing up throughout California. John Walsh, President of DataQuick, says the reasons for the decline in defaults and foreclosures is because of "motivated sellers and accommodating lenders."

Gary London, who heads London Group Realty Advisors in San Diego, said that the number agree with "the trends he is seeing in the market."

Out of San Diego County's 85 zip codes, only two had an increase in the number of notices, and both of those have a median home price of $800,000. That's not surprising because here in San Diego the high end market lags by 12-24 months behind the general market.

We know that what starts in California often leads the way, eventually spreading to the rest of the United States, so here's hoping that the rest of the United States starts following California's lead in real estate recovery.

Posted by Jim Frimmer, Realtor & CDPE, Mission Valley specialist (HomeSmart Realty West) about 8 years ago

John, if supply and demand are the most basic forces, how can we expect demand to increase without putting people back to work.

Underemployment may be a bigger problem than unemployment. Millions of people are making significantly less than they did just a few years ago. It's not limited to our industry either.

Posted by Greg Cook about 8 years ago

Judy - I have friends in FL and hear their accounts of how bad conditions are.  Hopefully, we'll begin to put people back to work and start the road to recovery.

Jim - While the overall news may be negative, the potential for recovery is there.  We just have to "build" upon the "foundation" that will lead us out of recession; and the first step is to begin creating jobs.  The good news for CA is that it's CA; lots of folks still want to live there :  )

Greg - I addressed the "structural" changes we're seeing in employment in a post a couple of months ago.  Like the housing market, the employment picture has made permanent adjustments.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

What many in our industry fail to understand is that our previous economic recoveries were based on an industrial base that no longer exists in this country. Over the past 15 years, more than 3 million jobs have been shipped overseas.  Entire industries eliminated in this country (e.g. textiles) with others hanging on by a thread (e.g. steel).  Once dominant industries such as Aerospace (Boeing) have received withering competition from foreign companies (e.g. Airbus). 

Those lost industries are just that: lost.  The income and multiplier effects of those jobs are also eliminated.  We have become a service providing country and not a product providing one.  Without a significant change in that dynamic, our current standard of living (as a country) is unsustainable long term.  Don't believe me, are we not a debtor nation now (both government and as a population)? 

For those who think the "free market" is going to fix this issue, what have you been smoking?  The free market helped to facilitate the current conditions.  It is the mission of every business to maximize it's profitability either by gross revenue increases or by expense reduction (or a combination of both).  The outsourcing of higher cost labor to lower cost providers is a natural outgrowth of that concept.  What we are experiencing now is no different than what has occured to empires throughout history.  The slow and methodical erosion of a standard of living as that standard of living shifts to other society/nation/region.  Look at what outsourcing has done for the standards of living in places like India, Bolivia, Indonesia.

John is absolutely right.  This is a long term, fundamental shift in our economy.  A shift that will in the end be quite disruptive.  There may be local pockets that withstand the shift longer than others but ultimately, there is a new equilibrium being created globally and frankly, we're at the high end settling lower.

 

Posted by Craig Frazer, Real Estate, RE/MAX Metro, Davis & Salt Lake County about 8 years ago

Craig - Good analysis of some of the problems we must address.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

John, 

LOVE this post!  The housing paradigm has shifted and all parties,sellers, buyers, tenants, brokers & real estate agents need to shift as well, or they will not have the desired outcome.  The market will never be the same again!  

A major component is can the buyers actually logically afford what they WANT!  The market scrambled upward and an artificial demand was created on anticipated appreciation.  I'll take a slow and steady appreciation with less highs, but less lows any day!

Cute title, too!

All the best, Michelle

Posted by Michelle Francis, Realtor, Buckhead Atlanta Homes for Sale & Lease (Tim Francis Realty LLC) about 8 years ago

While housing was showing signs of leveling off in my area with some better numbers in sales - the new governor sent everyone running for the bomb shelters afraid they will no longer have a job. The idiot has undone all the positive effects the federal spending had produced and has now decided automobile inspections are unnecessary to the safety of people sharing the road in one of the most congested states of the country. Now he is focused on Atlantic City because the casinos that are the mainstay of revenue have gone out and built other casinos in neighboring states which they now claim is the reason their revenue is down in Atlantic City.

Who would have guessed that the price of housing was tied into the income level of the residents?

Who would have guessed that if you build a revenue center in a neighboring state that was providing the revenue to the old revenue center, that that revenue would disappear almost on a dollar for dollar exchange?

Who would have guessed if you relax rules, regulations, and oversight corporations would begin to treat workers like they did before there were rules, regulations, and oversight?

Who would have guessed that if you allow manufacturing to be sold off, dismantled, and moved to a foreign country we would not have those jobs here and would be forced to buy the products from the other country?

I don't know anything about a double dip in housing. Sounds like some ice cream parlor talk to me. But, you can rest assured we are going to experience a further decline of the America that you once knew. It ain't rocket science. And, those doom and gloom, shock and awe buzz words only serve to rally the masses.

But, HEY. It's only an opinion and you know what they say about opinions. Everyone's got one.

Posted by Gregory Bain, For Homes on the Jersey Shore (Mezzina Real Estate & Insurance) about 8 years ago

Michelle - Those who can't adjust to the changing market will find the future much more difficult that they expect.

Gregory - It's only an opinion and you know what they say about opinions. Everyone's got one.  And I appreciate yours.

 

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

The markets are so localized that I am fortunate to have been relatively unaffected.  In my area, there are very few short sales and foreclosures and we have a very low unemployment rate.  But I agree that the areas that are struggling are the ones that have the fewest options to recover.  As others have stated, the jobs have to come first and then the home sales will follow.  You cannot have one without the other in the areas that are falling the hardest and cannot go up. 

Posted by Karen Feltman, Relocation Specialist in Cedar Rapids, Iowa (Cedar Rapids/Iowa City, IA KW Legacy Group) about 8 years ago

I'm lucky to be in a market area that people are retiring to, because there is no job growth.  Without jobs, people can't purchase homes.  The credit contraction only makes matters worse, because FICO scores are going lower as lenders reduce lines of credit and yet mortgage qualifications are higher.  It's a bad combination.  Even thought my market area is hot in terms of sales, prices are still declining.  I've been doing CMA's for three consecutive years for some clients, who keep waiting for the next year to get better. 

Posted by Gail Robinson, CRS, GRI, e-PRO Fairfield County, CT (William Raveis Real Estate) about 8 years ago

Good post John. The question is ...now what?    You are right about the artificial stimulous. I suppose it generated a little tmporary business for us all, bit I felt alll along it was a bandaid that would soon fall off.

Posted by Trey Thurmond, College Station , Texas Homes (BCR Realtors) about 8 years ago

I am one of those who believes that prices in many markets have not yet stabilized, and that once they do they will likely stay pretty flat for a generation.  Not a great thing to perceive as the future of real estate, but something which I do believe is inevitable in most markets.  I try not to discuss such gloomy stuff on my active rain lethbridge houses for sale blog, but do have that chat with clients.

Robert May

Posted by Robert May, Real estate consulting (Robert W May - Lethbridge Real Estate) about 8 years ago

Karen - And a big problem with the jobs picture is that some jobs will never return.

Gail - And the wait may be long indeed.

Trey - While politicians have searched for one, there is no "quick fix."  We have millions out of work, millions of homeowners underwater, and a debt load (public and private) that is unsustainable.  We need some structural and painful changes, something few politicians are willing to pursue.

Robert - It's the reality of this economy, especially the housing market.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

John,

Fundamental adjustments are being worked into the housing market, for the long-term good of it. For instance, prices in Las Vegas are now getting close to where the median annual income will be able to afford them again.

Posted by Esko Kiuru about 8 years ago

Esko - We have to return to pre-bubble pricing in order to stabilize the market.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

John, the double dip has been talked about for a long time. I think anyone who reads and thinks knows it's inevitable with the amount of inventory and with the end of short sales and foreclosures nowhere in sight. If there were more jobs, then the market would stablilize. We are at pre-bubble prices in many areas.

Posted by Sharon Alters, Realtor - Homes for Sale Fleming Island FL (Coldwell Banker Vanguard Realty - 904-673-2308) about 8 years ago

Frank & Sharon - More jobs would certainly be nice, but we don't appear to be headed in that direction.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

John,

I'm following my own advice and holding buying for a while. I predict 3 million more foreclosures soon; then I'm buying.

Posted by Terry Chenier (Homelife Glenayre Realty) about 8 years ago

Terry - In most areas there's no rush to buy. We'll have "bargains" for some time.

Posted by John Mulkey, Housing Guru (TheHousingGuru.com) about 8 years ago

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