Losing It on the Home Front

Posted by: Dan Beucke on November 9, 2011 at 2:15 PM

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The housing crisis just keeps grinding on. Home prices fell in three-quarters of U.S. cities in the third quarter, by double digits in some places, according to the latest data from the National Association of Realtors. The median U.S. house price, $164,500, is now 28 percent below its 2006 peak and about where prices stood in Feb. 2003. Fewer people plan to buy a home over the next six months, according to the Conference Board. And another survey of homeowners finds that nearly as many think of owning a home as a “nightmare” as consider it an “American Dream.”

It’s hard to put a happy face on that — but boy, do the Realtors try. NAR President Ron Phipps, who runs his own brokerage in Warwick, R.I., says: “Existing-home sales are little changed from the second quarter but are notably higher than a year ago.” The Realtors’ Housing Affordability Index, he says, is near its record high. “For people with secure jobs, good credit and long-term plans, today’s conditions will be remembered as a golden opportunity to enter the housing market.”

That well-qualified statement pretty well answers itself. Even if you have a job, chances are you don’t consider it too “secure.” Long-term plans? See previous. The NAR’s affordability index seems designed to make every day a buying day, as financial blogger Barry Ritholtz has explained: “from 1989 - 2009, the NAR showed housing as ‘unaffordable’ for just one month.”

This eagerness to call a housing bottom is nothing new. My colleague Mark Gimein, writing for Slate’s The Big Money in April, 2010, noted that the Realtors were trumpeting “stabilizing” and “steadying” prices at a time when the percentage of people who couldn’t pay their mortgages was climbing in the worst-hit markets. At the time, fewer than half of U.S. cities were reporting a price increase. NAR Chief Economist Lawrence Yun said back in February, 2010, that the “price recovery process appears durable;” in fact, the following spring prices rose in less than a third of cities.

The Realtors aside, many people are into the process of resetting their psychology about wealth and real estate. For a reminder of the magical thinking that pumped up the housing bubble, read this piece in today’s New York Times about one homebuyer’s road to ruin. It’s all there: the “what we can afford” price climbing with no relationship to income; pressure to buy before prices go up further; banks willing to lend over the purchase price; refinancing to support a bloated lifestyle. It’s hard to believe it ever happened, unless you’re still trying to climb out of the hole.

(Photographer: Derick E. Hingle/Bloomberg)

Reader Comments

Pilau

November 9, 2011 3:51 PM

For some it's a golden opportunity but not for all. There is no urgency to buy now or next year. Globalization have set new rules and new ones are to come. No one knows where it will lead us and for someone to say they know be skeptical

John

November 9, 2011 5:41 PM

With interest rates at all time lows, those of use with the ability to refinance are having a blast. I've cut my term in half and lowered my monthy payment at the same time. Life is good.

Conrad Mogambo

November 9, 2011 6:55 PM

If your existing mortgage amount (money you owe the bank) is greater than an average of at least 2 recent home appraisal, you should seriously consider stop all payments and refuse to vacate the property. This will force the bank to either foreclose the property (very unlikely) or refinance the mortgage with a new, lower mortgage amount. You do not have to be a victim of fraud.

Trish

November 9, 2011 7:04 PM

We are in the process of trying to buy a house. The house originally sold in 2006 for $250,000. We offered $150,000. The owner accepted our bid.

Since this will be a short sale, we are waiting to hear if the bank will accept our offer.

MarkJ

November 9, 2011 7:30 PM

I have to disagree. "Average home price" is a subjective term and doesnt always tell you the real story under the hood.

Here is what is happening in California. All homes priced in the $75k-$300k range and listed near comparable sales are selling like hot cakes. We are seeing the bottom prices move up while top prices move down to match. I purchased a condo in early '09 for $90k and last month I got an offer for $115k. Homes in good areas around the $300k range cannot be kept in stock either. Same for condos in nicer cities. So as you can see, the bottom has actually risen significantly.

That is just half the picture. At the upper end, sales are pathetic. As prices climb above $400 sales slow down significantly and this is why you are seeing a reduction in "average" price. Its because the high end is not moving which is not surprising given the state of our economy.

So yes, average home prices are down OVERALL, but the price for middle income homes is up at least here in Cali.

upwinger

November 9, 2011 8:10 PM

Since house prices are still in free fall, buying one is obviously a very dubious investment.

Realtors always say it's a good time to buy. That's why nobody believes anything they say.

Robert Laughing

November 9, 2011 10:47 PM

Hasn't that useless parasitic species,'Real-a-tor' disappeared yet? 6% is an obscene cost, feeding 4 real-a-tors' at every sale...must be unionized, to get away with that.

ken

November 9, 2011 10:47 PM

Yeah, I agree with the realtor MarkJ. I watched all the inventory evaporate out of eastvale california. It used to be dots everywhere from 250 and up, not it is only dots over 350. The nicer home areas with moderate prices are definitely moving. Once inventory runs out, they either will stabilize or move up. but definitely we need better jobs to solidify the upward trend.

Robert Laughing

November 9, 2011 10:47 PM

Hasn't that useless parasitic species,'Real-a-tor' disappeared yet? 6% is an obscene cost, feeding 4 real-a-tors' at every sale...must be unionized, to get away with that.

Curt

November 10, 2011 1:36 PM

all factors that affect home prices are very clearly strongly negative, meaning home prices will fall a lot further. these factors are:
1) interest rates will rise for many years to come, they've fallen (adjusted for inflation) since 1980--we're at the nadir on this;
2) taxes will rise;
3) foreclosures to come will add huge supply;
4) 25% down is now required;
5) negative sentiment;
6) would be buyers saddled with enormous educational debt like never before;
7) job instability permanent; and
8) demographic shift to a fluid work force that often changes jobs and moves to new locations.

NAR is full of it!!

Curt

November 10, 2011 1:39 PM

all factors that affect home prices are very clearly strongly negative, meaning home prices will fall a lot further. these factors are:
1) interest rates will rise for many years to come, they've fallen (adjusted for inflation) since 1980--we're at the nadir on this;
2) taxes will rise;
3) foreclosures to come will add huge supply;
4) 25% down is now required;
5) negative sentiment;
6) would be buyers saddled with enormous educational debt like never before;
7) job instability permanent; and
8) demographic shift to a fluid work force that often changes jobs and moves to new locations.

NAR is full of it!!

Deeknow

November 10, 2011 4:51 PM

Jewelers will never tell you its a bad time to buy gold and diamonds. It's their job, for god's sake!

The last people you want to ask about the housing market is realtors...

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"The Wealth Debate" is a running discussion of wealth, poverty, the economy and income inequality in the U.S. and the world. It was started shortly after the Occupy Wall Street movement sparked a global protest about the fallout from the financial crisis and money in politics. You can reach the editors, Dan Beucke and Mark Gimein, by email, or follow BloombergNow on Twitter to keep up with posts.

Analyses or commentary in this blog are the views of the author and or commentators, and do not necessarily reflect the views of Bloomberg News.

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