Thursday, Aug 20, 2009
Economist - USA No green shoots, Stagnation, 60% of Nevada homes underwater
Economist: Americas housing Market - Where it all began
Excellent article spelling out the trouble still brewing across the pond.
"HE IS hardly your typical distressed seller. Hugh Hefner recently sold his personal residence in Holmby Hills, California, next door to the Playboy mansion, to a 25-year-old entrepreneur for $18m—some 36% below the asking price. It will come as little solace to the ageing Lothario that the discount looked about right: house prices have fallen by one-third from their peak nationwide, and by much more than that in the worst-hit states, such as California, Florida and Nevada".
Posted by mbga9pgf @ 08:19 PM (487 views) Add Comment
6 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. uncle tom said...
Although the US property market still has a little pain to endure, the end game to their housing crash is coming clearly into view.
American house prices did not overheat to the same extent that they did in the UK - On average, US houses are physically three times the size of British ones, and after allowing for economies of scale, that equates to them having a physical value that is roughly twice that in the UK.
The median age of the US population is 10% younger than in the UK, and the population growth rate is nearly four times faster, at close to 1% p.a. This points to a strong ongoing demand for housing, which will prevent prices from dipping much below construction cost in all save the most depressed areas.
Although much is made of the US mortgage holder's right to hand back the keys without direct recourse, middle class America is well aware of the difficulties people face when their credit score gets trashed. (And they still have to live somewhere..)
My guess is that the great bulk of deadbeat home owners have already thrown in the towel, and that while re-sets will cause a lot of grief over the next couple of years, the great majority of those having to endure them will do their best to weather the storm.
As it is not in the mortgage lenders' interest to provoke another wave of repos, I can also see them doing their best to help borrowers with Alt A or ARM re-set problems to find a way through.
For the Americans, the very fact that there will be some light on the horizon will make their outlook and attitude very different to that in the UK next year, and as the markets always favour nations that have solutions to those that have problems, I can see USD gaining against GBP over the current months.
2. flashman said...
uncle tom: I agree with much of your post but there is one structural problem with your reasoning. If the US property market bottoms out, there will be more confidence in the economic future. This will unwind some of the 'flight to safety' trade, which will cause the Dollar to fall. The recent equities boom has highlighted this effect (a booming equities market is a proxy for economic confidence). We are currently working on a ‘rule of thumb’ that for every 1% increase in the S&P 500, there will be a 0.5% decrease in the value of the Dollar (against a basket of currencies.)
Furthermore, a falling dollar, will to some extent, bring into play the theory that the Dollars’ pre-eminence is under threat. The Forex market is concerned about the Dollar on several fronts. There is a consensus that the Dollars as a % of foreign reserves will fall from around 75% to around 64% by 2015. There is also a consensus that US debt will end up at almost 60% of GDP. These factors are very Dollar negative.
Short term is king in the Forex market (which is why logic is so often defeated) and in the short term, the best thing for the Dollar would be a further dip in the US housing market and a collapse of the equities markets.
3. uncle tom said...
Flashman,
I take your point, but confidence in the USD is very low at the moment, and has been for some time. I see confidence in the greenback returning slightly, while the debasement of Sterling starts to look unending. The dollar will also get a boost if the eurozone's structural problems show no sign of easing.
4. flashman said...
uncle tom: I don’t necessarily disagree with your post but the permutations are endless and the Forex game has recently become a game of 'who's worst off' (it's very hard to determine who has the deepest structural problems). In a fair fight, I'd go for mild Dollar appreciation but the reserve currency conundrum has the ability to invert any situation. For the time being, it comes down to whether the world economy recovers or falters.
On a point philosophy...all available information is priced into the pound, so it's a bold call to tag Sterling as a currency, due for endless debasement. If we had reliable information that suggested that the pound was a good candidate for endless debasement, the price would adjust to this information in a nano second. The Pound looks terrible in isolation but so does every other currency
5. 51ck-6-51x said...
Where can we find data on repossession sales relative to total sales for the UK? A useful measure I think.
6. deeplyblue said...
Someone should quote the last paragraph, which is surely aimed at the UK market as well as the US one:
"Now that the myth of ever-rising house prices has been shattered, it may be time to embrace another inconvenient truth: that prices can take decades to recover, at least when adjusted for inflation."
Now that The Economist has said it, perhaps it will sink in.