Normally I would just add this article to Joe's excellent post, but this point is so important that it deserves its own section.
Three out of four U.S. homeowners think the worst is over in the housing market.
And half of the homeowners in Southern states – including Texas – say home prices will stabilize in their areas in the next six months, according to a new survey by Zillow.com.
Almost a quarter of homeowners in the South said they think their properties will increase in value during the next six months.
"While homeowners are now more realistic when looking backward, they are still pretty starry-eyed when looking forward, with three out of four homeowners believing that their own homes' prices will increase or be flat over the next six months," Dr. Stan Humphries, Zillow's vice president of data and analytics, said in the report. "Unfortunately, there are few markets we expect to perform this well."
Thousands of potential sellers are waiting on the sidelines, Zillow said.
More than 30 percent of homeowners said they would be likely to put their houses up for sale at the first sign of a market rebound. That's bad news for prices.
"With almost a third of homeowners poised to jump into the market at the first sign of stabilization, this could create a steady stream of new inventory adding to already record-high inventory levels, thus keeping downward pressure on home prices," Humphries said.
Millions upon millions of homes are ready to be put onto the market the moment that housing prices begin to rebound. When you wrap your mind around that idea you have to realize that home prices will not return to 2006 highs in your lifetime.
On top of that, you have to account for at least 600,000 bank owned houses that aren't for sale, aka "shadow inventory".
“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”
Whether this is because banks don't want to mark the losses on their books because it would make them insolvent, or if they are also waiting for a rebound in the housing market, the amount of supply waiting to hit the market will overwhelm all rebounds of any kind.
Of course this doesn't stop the spin masters from trying to engineer a rebound. For instance, I turned on the news the other night and saw this.
42 offers for one property sounds impressive. But someone else had done their research.
The sale of CBS5’s infamous "42 offer" home at 555 Edinburgh closed escrow on 4/22/09 with a reported contract price of $570,000. That’s $111,000 (24%) over asking!
On a price per square foot basis ($456), however, that’s 0.2% over the 2009 neighborhood median to date ($455), 6.9% under the median last year ($490), 21.3% under the median in 2006 ($580), and about equal to the median in 2004 ($450).
Once again, the 42 offers were a result of pricing rather than a "real estate rebound."
It's also a fair guess that the other 41 offers were quite a bit lower than that.
state of denial
These are just random thoughts. There is right now the behavioral economics craze and I was thinking....has anyone examined research into propaganda (sales, marketing, press releases) correlating to massive bubbles? As I mull this it seems a host of propaganda has influenced economic decisions repeatedly and it's on steroids in the last 20 years....does this actually create these tsunami wave bubbles? How much effect does it all really have?
Anyone old enough to remember when advertisers were getting sued for false advertising? When we had a consumer movement in the 70's? They were all over everything from soap to subliminal advertising to false advertising? Seems like anything goes in advertising these days.
I saw the most disgusting ad from Charter cable. They try to associate finding a job with buying their digital cable. Now is that just sinister or what?
A sign of recovery in RE will be when
someone can sell their home (without losing their shirt) and be able to buy another. This is not happening. I think Calculated Risk called it the "one off" phenomenon - there are very few to no upgrade buyers right now.
RebelCapitalist.com - Financial Information for the Rest of Us.
Nailed it RC!
The all important "move-up buyer" is AWOL.
Even if somehow the Washington club could engineer a bottom in housing the law of unintended consequences would take over.
Housing prices, still, are too high compared to salaries. Putting in an elevated false bottom creates a gap where there will be no new first time buyers to purchase existing homes, thus move up buyers will not be able to sell their existing residence for what they owe.
move up buyer
I don't think we will see anything but move down because wages, job stability, income is continuing to decline. Until we have wage levels that can support these home prices, unless it's an asset bubble or foreigners buy up all of the houses, I don't see how it could happen.
Just found out that Aon is outsourcing their actuarial work. So even the jobs of the "protected class" of high income, upper class professionals are sailing away. And it's not just actuaries. The only thing standing between radiologists and pathologists and the unemployment lines (or primary care practice; hard to say which is worse) is the complexity of medical tort law. Once the outsourcing groups get a handle on this issue, those jobs will be gone as well (anyone can read digitalized images of films and slides from any location). If the outsourcing continues without let up, then as you pointed out yesterday in your "Labor Shock" post, there will be no recovery. It'll be much more like a lazy L.