Sunday, July 30, 2006

More bad news from the US

U.S. Home Prices in Peril

House prices are set to drop in the US for the first time on record, US investment bank Goldman Sachs warned this weekend. Prices in several segments of the market have already started to fall, and the overall market will move into the red even in nominal terms next year, fuelling fears that this will trigger a downturn in consumer spending and hit an already slowing US economy.

Posted by little professor @ 11:32 AM (663 views)
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7 thoughts on “More bad news from the US

  • little professor says:

    More from the US here: http://www.projo.com/business/content/projo_20060724_dimart24.154c333.html Apparently the rate of repos in the US is increasing sharply.

    “Even the usually gregarious National Association of Home Builders chief economist, David Seiders, could not muster the levity to mention a “soft landing” in Tuesday’s news release. Instead, he spoke of “growing builder uncertainty on the heels of reduced sales and increased cancellations” and builders’ concerns of “more monetary tightening by the Federal Reserve that could drive interest rates, and thereby homeownership costs, even higher.”

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  • Also from the Article

    “Unlikely though it seems, the latest data … mean that falling house prices can no longer be ruled out. And if they do fall, then any thought of an orderly slowdown in the housing market must go out of the window. To be joined by hopes of consumer spending holding up in coming quarters.”

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  • Are we seeing the UK phonemena of the media and VIs squealing before the IR setters meet?!

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  • bidin'matime says:

    What a heart-warming report. SirG has already picked my favourite quote, but try this too:-
    “The slowdown in house price inflation has been extraordinarily rapid,” Gabrielle Stein, chief international economist at Lombard Street Research said in a report this week.
    Or this:-
    “Every boom, mania and bubble follows the same path,” Mr. Rosenberg said.
    “What has undone everyone of these back to the tulips in the 17th century is a massive accumulation of unsold inventory once you’re past the peak of the cycle, and that’s exactly where you are with the U.S. real estate industry.”
    With every spare bit of building land here being turned over to apartments, it’s only a matter of time before we too find ourselves in that position. Cities up and down the land will be full of huge white elephants, put over the social housing, to become the slums of the future.

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  • Bidin I like the quote that harks back to the Tulip Boom. Supply and demand do drive booms as well as speculation on capital growth (for no effort). With global rising IRs (reduced demand) and rising stocks of apartments this could indeed be a tipping point. Now that the Stock market has cleaned up its act somewhat, perhaps the short term speculative money will also return back to shares and bonds – where it belongs.

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  • Those who watch the US housing market know that this has been a growing problem from the beginning of the year, with many areas not just slowing but also now falling. The Fed is desperate to hold off from raising rates further – question is whether inflation and the money markets will let them.

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  • Associates, relatives, friends in the USA who sold homes in Florida during the past year reported significant profits — even doubled their investment within two years — one buying a small place on a lake for $80.000 dollars, reselling two years on for $175,000 . Homes in the same area six/eight months later aren’t selling at all, even for much-reduced figures. Streets, for example, in Fort Pierce and Port Lucie, very popular tourist and retirements venues, display “FOR SALE” signs by the dozens and, even now in the season, no properties moving.

    A relative in the less inflated MidAtlantic market reports that many neighbors who need to move on for the coming school year, or new work position, aren’t bothering to place homes with an agent, but going straight to auction with a reserve. This relative bought a home there in 1999 and has no hope of recouping her original investment. Surely these trends are going to have significant consequences for future property investments. Its not only a case of hemorrhaging equity, but losing faith in property as a safe investment at all.

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