Tuesday, March 09, 2010

Housing...

I haven't touched on housing lately mainly because the markets have been so uneventful. There's a little activity in low-end markets - like NNY - because the tax credit can be meaningful on an entry-level home, but the rest of the US has just flattened out.

There does not seem to be much movement in many markets because the "have to sell" people have sold and now most sellers are still clinging to dream-like 2007 pricing, while most buyers are trying to knock 30% off the lowest comp.

The quote of the day refers to the latest government efforts to prop up the housing market ---

"I stole that shell game idea from housing consultant Howard Glaser: “We’re spending tens of billions of dollars on a tax credit to get people to purchase homes, we’re spending federal money to keep them in their homes through the modification program, and now we’re going to pay them to move out of their homes. This is not a sustainable system for the housing market. It’s a shell game. Bernie Madoff could have created this system,” Glaser told me today.

If you haven't heard about the latest program you can get a rundown here. I appear to be the only one concerned that bank assets remain wildly overvalued and that our banking system remains on the edge. If you look at the most recent bank failures they tend to have a common theme - the banks were saying they had assets of $100 and liabilities of $101, but they failed to note that their assets were really worth $65. This has been a fairly consistent ratio around the US. If the BIG Banks have balance sheets that look anything like the banks that have been failing this year it means that there are billions -- maybe trillions -- of unrealized losses hiding in the banks right now. The hope is that the housing market will rebound quickly enough so that these losses never have to see the light of day. We'll see....

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Speaking of housing -- Anyone want to buy a dated house outside of Philly in NJ with 4 bdrm, 3.5 baths, 5000 sq ft, 3 acres, 3 car garage and an indoor pool for $300k? Check it out here. Sounds like a pretty good deal actually, except for the whole living in South Jersey thing...

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Fact of the day: "The most stunning number in the report is that 27% of American workers have less that $1,000 in savings." Wow.

Cheers!

2 comments:

Anonymous said...

I don't understand why people keep saying "if the housing market rebounds...."

What does anybody think? That at some point in the next 10 years somebody is going to again pay $250,000 for a house that only cost $150,000- to build.

The misnomer that the housing market will "recover" assumes that people will overpay for homes yet again.

It's like saying that you are going to pay $50,000 for a car that really only cost $30,000- based on the fact that in 3 years you can sell it for $70,000- Rediculous! People are going to pay reasonable prices going forward now that "Flip This House" is off the air. The banks used to lend on that basis, but they never will again.

It is not coming back, ever! Houses whether new or used, or not even built yet are going to start selling for their construciton price, plus a 5% profit plus the price of the land. Period. Not double or triple that.

Subsequently the banking system is going to get bitch slapped here unless they come up with some new kind of govt "gimmie" to cover the current problem. Meanwhile the entire economy is going to go flat or worse for 10 years now that there is no "home equity" money floating in the system to buy retail crap made in China.

Pretty soon it is going to get really, really bad out there.

SMTF

The Artful Blogger said...

I agree for the most part. I don't understand the obsession we have with resurrecting the housing market. I suspect it comes from the high dependence certain large population centers had on housing - CA, FL, AZ, NV.

Since housing is the only industry in town the thinking goes that we have to save it.

A house should be viewed as shelter not some type of physical 401k, IMO.

Thanks for the comment.