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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Think4Yourself who wrote (46310)	12/29/2005 7:02:30 PM
From: Crimson Ghost	Respond to of 306849

Pardon my premature call on housing Danielle DiMartino: 08:24 AM CST on Thursday, December 29, 2005 Two graphs hang in front of my computer. One is old, the other new. Both provide constant inspiration. The old one – titled "Credit Crazy?" – shows total U.S. debt as a percentage of gross domestic product. The most recent update has debt pushing 310 percent of GDP, burying the record 287 percent set during the Depression. The new one, "Reset Risk in the Mortgage Universe," depicts the number of adjustable-rate mortgages that will reset through 2015. The number peaks next fall. Good old "Credit Crazy?" explains why I've been wrong about housing for so long. I thought the bubble would start to pop long before it did. I called it too early. Never in my wildest visions of the future did I think households would sacrifice their primary asset – their home – to put themselves so deeply into hock, for so long. I blame my naive, misplaced notions about taking pride in homeownership. Lest we forget, 2005 will go down as the year the savings rate turned negative. Investors in housing have been handsomely rewarded in the last year. Shares in homebuilding stocks tacked on 37 percent through July 20. Since then, about half the gain has evaporated. Happy homeowners Homeowners have also fared well: The average price of a U.S. home is up 12 percent through the year ended Sept. 30. Though price gains have slowed from 15 percent this year, the return still beats nearly every other asset class. I never thought sales would set records in the face of swelling inventories. The price dynamic has turned the law of supply and demand on its head. Having risen for 11 months straight, new-home inventories are up 20 percent on the year and are at an all-time record. As a result, despite record sales, price appreciation skidded to a flat line. As for existing-home sales, which outnumber new-home sales 6-to-1, today's report for November is poised to come in below the 7 million-a-year mark for the first time in eight months. Pressure on prices With inventories up 15 percent in the last year to a 17-year high, it won't take much more of a sales decline to push supply over the psychologically critical six-month level. It hasn't taken much to push inventories from January's 3.8 months to October's 4.9 months. Oversupply's pressure on prices is already evident: Low rates and all, purchase applications are down 11 percent on the year, and refinancings are sitting at a 3 1/2 -year low. No doubt, I'd rather have called the bubble minutes before it popped. Better early than late. Mark this: Care of the Federal Reserve, starting now and peaking when the leaves change, millions upon millions of adjustable-rate mortgages will reset at much higher interest rates. Housing's apologists have had little trouble whistling past bulging inventories. I doubt the same will occur with the coming spike in delinquencies and foreclosures. E-mail ddimartino@dallasnews.com

To: Think4Yourself who wrote (46310)	12/29/2005 8:45:42 PM
From: Jim McMannis	Read Replies (3) \| Respond to of 306849

RE:"The feds were in the process of tightening in between his post and then. They were forced to reverse course drastically after 9/11, giving money away for years to prop up the economy. That's why the market didn't go down then. All of that free money turned it into the largest housing bubble in history. The fed started removing that free money last year and is continuing to do so." It's apparent Greenspan had little faith in the economy after 9/11. Why he let the easy money flow so long is a mystery for the ages.