An excellent list. It made me pull up some recent articles for clarification:
1. Prices up 150% in major markets.
According to OFHEO, CA is up 117% over the last 5 years. Florida 107%. The entire US is up 58%.
2. Incomes relatively flat.
Real median incomes are flat, but nominal incomes have increased 15% over the last 5 years. Earnings for high income earners have increased substantially.
3. Interest rates relatively flat.
Yes.
4. 35% of purchase activity has been speculators and 2nd home buyers.
Yes.
5. 60%+ have relied upon toxic arm mortgages with either no money down or minimal down.
This seems high - but there is no question a large number of people have little or no equity: "Twenty-nine percent of borrowers who took out mortgages last year have no equity in their homes or owe more than their house in worth, according to a study completed this year by Christopher L. Cagan, director of research and analytics for First American Real Estate Solutions, a unit of First American Corp. That compares with 10.6 percent of those who took out loans in 2004."
post-gazette.com
6. Inventories have tripled over the past year in major markets while sales activity has fallen roughly 20%.
This varies by market. In OC, inventories are up substantially, but I don't think they have tripled and are back to more normal levels. Activity has fallen substantially in many major markets, but the MBA Purchase Index (nationwide) is only off about 12% compared to last May.
7. Continued near record home starts.
Yes. Builders will get in trouble! Starts are now falling.
8. Massive condo projects still in pipeline.
Yes.
9. 50% of new jobs over past 5 years are housing related.
When I came up with this number early last year - it was correct. Asha Bangalore (Northern Trust) also did a write-up on this. But since early '05 the economy has added over 2 million jobs - and a far lower percentage were housing related. Here is an excerpt from a NY Times article 11/20/2005:
nytimes.com
"Asha Bangalore, an economist at Northern Trust in Chicago, tallied figures from the Bureau of Labor Statistics for sectors like construction, building material and garden supply stores. She found that from November 2001 to October 2005, housing and real estate accounted for a whopping 36 percent of private-sector payroll job growth. "In four years, 2.3 million private-sector jobs were created in the U.S., and 836,000 were related to the housing sector," she said."
I'd put the percentage at just over 30% right now.
10. 3 million factory jobs have been lost.
Yes. That is over 6 years.
11. $1.5 trillion of arm resets about to hit which will likely double payments at minimum.
From NY Times (June 2005): The Trillion-Dollar Bet
nytimes.com
"This year, only about $80 billion, or 1 percent, of mortgage debt will switch to an adjustable rate based largely on prevailing interest rates, according to an analysis by Deutsche Bank in New York. Next year, some $300 billion of mortgage debt will be similarly adjusted.
But in 2007, the portion will soar, with $1 trillion of the nation's mortgage debt - or about 12 percent of it - switching to adjustable payments, according to the analysis."
12. Economy about to enter recession with associated job loss.
If the economy slides into recession - no question, housing will get killed. |
