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U.s. Housing Crisis Not Over

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http://www.winnipegfreepress.com/local/us-housing-crisis-not-over-yet-122490588.html

WASHINGTON -- At the ripe old age of five years, America's housing bust is still very much alive and kicking. House prices dropped 3.3 per cent in the year to February according to the S&P/Case-Shiller index, the fastest decline since November 2009. The Federal Reserve's preferred measure, the CoreLogic house-price index, showed an even worse one-year decline of 7.5 per cent in March. And Zillow, an online real estate database, recently said that prices fell 8.2 per cent in the year to March. Zillow has reported falling prices for 57 consecutive months.

The latest housing hiccup has Americans worried that a new phase of the crash is under way. Two years ago, housing appeared to hit bottom. Prices and sales leveled off thanks to low interest rates and a generous housing tax credit. But that respite ended last summer. The tax credit expired just as a broader economic chill descended, and price declines resumed. Some forecasters expect another five per cent to 10 per cent fall in prices before the market rights itself. Robert Shiller, of Case-Shiller index and irrational exuberance fame, thinks a further 25 per cent decline is not out of the question.

That would mean big trouble for the economy. Reductions in construction jobs limit growth, further depressing housing markets. As prices fall, existing mortgages look less affordable and defaults rise. Banks and the two government-sponsored mortgage giants, Fannie Mae and Freddie Mac, are already laboring under the strain of huge portfolios of foreclosed homes. Bulk selling by Fannie and Freddie helps explain the faster decline in prices this year. With default rates high, banks are demanding better credit ratings and larger down payments than first-time buyers can manage.

But there are signs this may be the darkest hour just before the dawn. House ownership is beginning to look more affordable by many measures. Adjusted for inflation, prices are close to their long-term trend after the bubble years of the 1990s and the first years of the 2000s. And the ratio of house prices to rents has returned to its pre-bubble level.

Other numbers are looking a lot better. Vacancies for apartments tumbled in the first quarter of the year and are now at a three-year low. Rents have been rising, and analysts expect them to increase by over four per cent this year and next. Rent rises typically support house prices by making home ownership more attractive.

The credit markets are healing. Mortgage borrowing actually rose in the first quarter, according to the Federal Reserve Bank of New York. New foreclosures were 17.7 per cent lower in the first quarter than they had been at the end of 2010, and household delinquency improved for a fifth consecutive quarter. Mortgage rates have fallen back to historic lows, tracking declines in yields on American government bonds.

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I guess a rise in borrowing should help to stabilise it. Seems the US has had most of the pain in the housing market, while we're still at the bit where Wylie Coyote is looking at the camera having realised there's nowt beneath his feet but the valley floor, miles below.

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This is fairly old news, the February C-S indices were published on April 26.

The march figure is due out shortly, let's see if prices plunge below the April 2009 bottom :)

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I guess a rise in borrowing should help to stabilise it. Seems the US has had most of the pain in the housing market, while we're still at the bit where Wylie Coyote is looking at the camera having realised there's nowt beneath his feet but the valley floor, miles below.

My only concern is that Merv is doing his best to make the valley floor come up to meet Mr Coyote.

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My only concern is that Merv is doing his best to make the valley floor come up to meet Mr Coyote.

Indeed, but I think there are forces at work which are greater than Merv. Some sellers can't wait a decade for Merv's plans to play out, and it's they who set the prices for the rest. Banks are instrumental, we know they have ben taking a softly-softly approach. Well that has to end. It's taking an age compared to the US, which is ultimately to our detriment, but I feel that we are well on the way- the press is becoming almost universally bearish to boot.

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How has it not happened here yet, just can't understand it

whilst it has in currency terms the main reason it hasnt nominally is because whilst everyone likes to berate Merv for being clueless, he was about the only central banker to see what was coming and as such took out a huge amount of long term uk debt in early 2008 before the crisis really hit which has bought the UK time above most other countries with a similar debt profile paying higher rates. If he was really clueless UK borrowing rates would be much higher than currently

Edited by georgia o'keeffe

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The article is lfited/syndicated from The Economist. I know, I'd just read the article in paper version on the way home.

Case-shiller comments indicate that - roughtly - US housinh is where it should be. It's not cheap. Its not expensive.

Shiller mentions that they could see another 25% fall. I guess he's expecting an overshoot on the way down. Buy a house now and you'll pay the rought historical price. Wait a but and you may get a bargain.

As far as the UKs long dated gilts + genius Merv. Well, we've been lucky, that's all. If Merv was a genius we would not have a financial mess like we have. In fact the long dated hilts are due to the private pension industry not the BoE cleverness.

The long dated gilts just give us some time - 5ish years. Bond refinancing was a 'don't care topic; countries never go bust issue'. Its not now.

I was reading a lot of PIIGS have pretty short maturities. Oh fun fun fun.

The big story is the UK deficit. The figures were never going to great but todays were terrible.

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whilst it has in currency terms the main reason it hasnt nominally is because whilst everyone likes to berate Merv for being clueless, he was about the only central banker to see what was coming and as such took out a huge amount of long term uk debt in early 2008 before the crisis really hit which has bought the UK time above most other countries with a similar debt profile paying higher rates. If he was really clueless UK borrowing rates would be much higher than currently

I think you actually confirmed he is clueless. Delaying a bad event is not a good thing. Better to let it all come out in the wash in one big hit, nice and quick. Like removing a thorn. You don't wiggle it around, look at it, wiggle it some more, then slowly draw it out whilst twisting it. Or perhaps if you are the UK you do.

The debt is still there, even if he secured a good deal, and that has to be proven, the debt has just been rolled over and then when the world sees we're sitting on a mountain of pig sh1t they will charge a much higher rate. Just look at whats happening with the UK banks today. The government deferred the costs of reckless lending, and now as interest rates are beginning to rise, the banks are being downgraded so it's going to cost them even more, it's a double whammy and Merv has set the UK up for the same.

The rest of the world could be emerging as we begin sinking.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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