They just do not get
it, do they? A massive inventory of bad mortgages
continues to choke the market. That
inventory is simply too large to absorb in the normal course of business and no
one wants to accept that reality. As I have
posed, it is necessary to reset the process and cause that entire inventory to
sell out once and for all. This would
immediately relaunch the building industry and put millions back to work.
The market may fall as
suggested here, but I think that continues to be unlikely because the hit on
bank capital is too large. I think that the
reverse will happen. The banks already
know what they are stuck with and it is
better to sell into a rising market.
After all if I have all
available stock in my inventory and all buyers must come to me, it costs little
to tape the prices higher.
Thus I am predicting
the exact opposite. The banks know today
what their losses are and the only way out is to move prices upward. Downward merely puts them under, while upward
frees up huge amounts of new capital.
Yes, buy bank stocks. Note that Citibank is on a clear uptrend out of the cellar.
Zillow: Home Values to Plunge by $1.7
Trillion This Year
Thursday,
09 Dec 2010 10:48 AM
This year’s estimated
decline, more than the $1.05 trillion drop in 2009, brings the loss since the
June 2006 home-price peak to $9 trillion, the Seattle-based company said today
in a statement.
The drop in home
values pushed more buyers underwater, meaning they owe more on their mortgages
than their homes are worth, Zillow said. The percentage of homeowners with
so-called negative equity reached 23.2 percent in the third quarter, up from
21.8 percent at the end of 2009.
“With foreclosures
near an all-time high in late 2010 and high rates of negative equity
persisting, it does not appear that the first part of 2011 will bring much
relief,” Stan Humphries, Zillow’s chief economist, said in the statement.
“Government incentives can only temporarily hold back the tide.”
Housing demand has
slumped since the start of the year as the government tax credit expired and
unemployment hovers near 10 percent. Sales of existing homes in October fell to
an annual pace of 4.43 million, compared with 5.98 million a year earlier and
an annual average of 5.81 million over the past decade, the National
Association of Realtors said Nov. 23. The median price was $170,500, down from
$172,000 a year earlier.
More than $1 trillion
of this year’s decline in home values occurred in the second half, Zillow said.
Federal tax credits of as much as $8,000 for qualified first-time homebuyers
and $6,500 for repeat buyers required a sales contract by April 30.
Only 31 metropolitan
areas, or fewer than one-fourth of the 129 tracked by Zillow, had gains in home
values this year. They include Boston and San Diego
Zillow’s report is
similar to other forecasts for prolonged weakness in the U.S.
Prices will be as much
as 36 percent below their 2006 peak before finding a bottom, Morgan Stanley
analysts led by Oliver Chang wrote. Sales will stay “depressed” through next
year amid tightened lending standards, they said.
As many as 8 million
homes are in default or foreclosure and may be offered for sale, known as
shadow inventory, according to Morgan Stanley. The looming supply will combine
with tight credit and questions about housing-finance regulation to reduce
prices 6 percent to 11 percent from current levels, the analysts said.
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