I’m seeing a long medium slide of 4-8% in the median. That’ll in reality reflect a 10% or so drop in like for like that trickle down year after year. Median will move down slowly, because as prices slide, they’ll by better for more, but less than the junk they could’ve bought at peak.
The primary problem I see is buyers will sit tight that have equity and must sell owners will quickly become can’t sell owners because they can’t bring the money to the table and can’t get a short-sale.
That “must sell” home first sits as a wishing price, then as late mortgage, then NOD, then NOT, then eviction, then vacant REO and eventually rehits the market a year later. Just to turn another must sell owner into a can’t sell owner.
I see a very illiquid market ahead if we get the spring fizzle to turn into a fall flop. Prices are holding, inventory is dropping, but sales volume is still dropping. That means sellers are giving up selling and trying to hunker down.
The prices will then set by a owner that bought in 2000, with a fixed loan they can afford, that wants to move and looks out at a world of REOs.
Unlike the 90s, streamlined refis to save an FB will be difficult. When rates are going from 10% to 8%, taking a loan at 10% with 27 years left and turning it into a new 30 year at 8.5% is easy to do to prevent a default. Doing the same when the homeowner had a 3% teaser with rates at 5.5% when rates are going from 6.5 to possible 7-8% range, doesn’t give the owner payment relief.
Other than our Congress, who will be willing to take below Treasury yield returns with more risk? Possibly the Chinese, if they can keep the bubble inflated, they can keep us buying junk, which is the bulk their economy. That’s a long shot though.
