Tuesday, February 24, 2009

Housing tumbles again but the markets are holding up...

Some of the retailers weren't as bad as expected (I don't know how, but Home Depot cut it's sales forecast by $2 billion !!! and it was viewed as a positive??) so the markets have been holding up. The gamblers --- I mean traders --- will be whipping the markets around on any little bit of news or rumor. Bernake is talking about a recovery in 2010 but frankly he hasn't been right on one single issue since taking over at the Fed. As more of President Obama's speech leaks out expect the market to react swiftly to that news.

Housing sales and prices plummeted across the country in December according to the Case/Shiller S&P home index. Surprise, surprise. What I do find interesting is this notion that home prices are back where they were in 2003. Really, well, I sold my house in NJ in 2003 and I know that comparable homes listed in my neighborhood are still listed for 50-60% above the prices of 2003. I'd love to find some waterfront properties in Clayton under $200k (there were at least 10 properties like that in 2003).

My point is that while some markets have retreated quickly, in the Northeast we may still have further to fall.

I'll also make one of my famous 50 year predictions - The resurgence of the Rust Belt from Chicago to Syracuse might be driven by access to clean water. Yes, the weather is beautiful in California, Arizona and Nevada, but I suspect that they will face critical water shortages in that region in the coming decades. Yes, it's miserable in the Northeast and Midwest for 9 mths/year, but we have plentiful and relatively clean freshwater. If I'm still around in 2059, let me know how that prediction worked out.

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On a related subject consider the status of housing in Chicago -"But given the states of the housing and credit markets, almost 99 percent of homes lost to foreclosure in 2008 went back to lenders—a total value of $1.9 billion in Chicago, according to data provided by the Woodstock Institute, a Chicago-based think tank.

Banks don't want to be landlords, so the properties usually sit vacant until they sell. And very few are selling. Census data show that from 2000 to 2007, the number of vacancies in Chicago jumped 82 percent to a record 165,679 housing units."

166,000 vacant units - that's a huge amount of excess supply.
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