“It’s going to be a long time before we see it bottom out and recover”

[cr]

House prices expected to fall until 2009
The continuing spike in foreclosures and a glut of unsold homes will suppress housing prices at least through the end of next year, say officials with the biggest mortgage financiers.

U.S. housing prices will continue to decline at least through the end of next year and may not begin creeping upward again until 2010, executives from the nation’s biggest mortgage financiers said Monday.

Officials with government-sponsored mortgage companies Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs) and CEOs from two major mortgage banks told the Mortgage Bankers Association’s annual convention that the continuing spike in foreclosures and a glut of unsold homes will prevent any quick price rebound.

“It’s going to be a long time before we see it bottom out and recover,” said David Lowman, chief executive of JPMorgan Chase’s Global Mortgage unit. “There’s too much inventory already in the marketplace.”

Lowman and the three other participants in a round-table session before most of the convention’s 4,000 participants differed slightly on the size of price declines still upcoming, but they agreed no price recovery is likely until at least 2009.

“I think this year we will see a 2% decline in national home prices, and we’re projecting about a 4% decline next year,” said Thomas Lund, an executive vice president at Fannie Mae.

Prices likely will flatten in 2009, Lund said, before gradually rising.

Lowman said it might be 2010 before the price decline ends.

In certain coastal markets where speculative investing drove up prices rapidly early this decade, the price correction “could be quite severe,” said Paul Bibb, CEO of National City Mortgage.

In Midwestern housing markets heavily hit by job losses, “the softness in those markets is going to continue to depress home prices,” Bibb said.

Patricia Cook, chief business officer of Freddie Mac, the nation’s No. 2 buyer and guarantor of home loans behind Fannie Mae, said investors in mortgage-backed securities likely will remain wary of committing more money to the cash-hungry market until they see a slowing in foreclosures. But that’s unlikely in the short term, because many at-risk homeowners will see their adjustable mortgages reset to higher interest rates in coming months and years. The Federal Deposit Insurance Corp. estimates 2.5 million mortgages made to borrowers with weak credit will reset at sharply higher rates by the end of 2008.

“Until we see that, I think it’s going to be hard for investors to come back in a meaningful way,” Cook said. “We’re probably in for a reasonable period of time that we’ll see continued slowing” in the housing investment market.

Cook and Lund expressed support for legislation that aims to infuse more cash into the market and give lenders more leeway to help at-risk homeowners refinance. Some lawmakers, mostly Democrats, have been pressing regulators to allow Freddie and Fannie to increase their holdings of mortgage debt by 10% above the current limit of $735 billion.

The federal regulator of Fannie and Freddie last month increased their investment caps by more than 2% annually but has declined to allow a larger increase. The White House has said it opposes raising the limits further until supervision of the two is tightened.

Higher investment caps could restore investor confidence that’s now lacking, Lund said.

Lowman and Bibb agreed but suggested such expanded authority should be temporary.

“We are in crisis, so we support temporary measures,” Lowman said.

This article was reported and written by Mark Jewell for The Associated Press.

http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/HousePricesExpectedToFallUntil2009.aspx?page=all

[dontfollowtheherd]

coop, Here's one from today's NY Times – at least its today's here in NY for another 10 minutes. lol. Lots of properties for sale everywhere in the East. Did a fall color trip w/ the wife and saw thousands of for sale signs everywhere and most with reduced banners. Did 5 states and Canada fwiw.

The truest part of this article 3/4 of the way down was this comment imo:

 

“I don’t really see that this is going to make a significant difference,” said Jan Hatzius, chief United States economist at Goldman Sachs. “It seems a little more like a P.R. move, frankly.” Mr. Hatzius said he wondered “why this is going on when previously the official word was that things were getting better.”

I've seen thousands of homes in Las Vegas, Phoenix and a few other states and cities where they are just sitting there. Hopefully no one is foolish enough to let these guys out of their SIV's. It's going to be a looooong time before we see any sense of normalcy in the r.e. market.

 

[dontfollowtheherd]

coop, Here's one from today's NY Times – at least its today's here in NY for another 10 minutes. lol. Lots of properties for sale everywhere in the East. Did a fall color trip w/ the wife and saw thousands of for sale signs everywhere and most with reduced banners. Did 5 states and Canada fwiw.

The truest part of this article 3/4 of the way down was this comment imo:

 

“I don’t really see that this is going to make a significant difference,” said Jan Hatzius, chief United States economist at Goldman Sachs. “It seems a little more like a P.R. move, frankly.” Mr. Hatzius said he wondered “why this is going on when previously the official word was that things were getting better.”

I've seen thousands of homes in Las Vegas, Phoenix and a few other states and cities where they are just sitting there. Hopefully no one is foolish enough to let these guys out of their SIV's. It's going to be a looooong time before we see any sense of normalcy in the r.e. market.

 

[Ex-SD]

They may be correct on their timing for hitting bottom for the nation as a whole but they are way off base where the bubble markets are concerned. With the large supply of REO’s that will need to be re-sold and with many more coming………..then add the huge number of foreclosures that will occur with the ARM resets over the next couple of years………..then add in the homeowners who will have to sell due to divorce, job loss, job transfer, etc, and you have so many homes and too few qualified buyers, even at 50% discounts from the peak. There’s a whole new set of qualifying rules for mortgage seekers and they’re not going to give any more $700k loans to berry pickers who make $10 an hour. (no offense intended to the berry pickers-just a reference to a story that I read in a NorCal paper).
So, it’s going to take a long time to get the supply of homes down to a normal level of supply for each market. The end of 2011 to the middle of 2012 will be the earliest time that CA and most of the other bubble markets will hit the bottom and when the bottom hits, prices will remain on the bottom for a long time. I just can’t see anything short of that occurring.

[Ex-SD]

They may be correct on their timing for hitting bottom for the nation as a whole but they are way off base where the bubble markets are concerned. With the large supply of REO’s that will need to be re-sold and with many more coming………..then add the huge number of foreclosures that will occur with the ARM resets over the next couple of years………..then add in the homeowners who will have to sell due to divorce, job loss, job transfer, etc, and you have so many homes and too few qualified buyers, even at 50% discounts from the peak. There’s a whole new set of qualifying rules for mortgage seekers and they’re not going to give any more $700k loans to berry pickers who make $10 an hour. (no offense intended to the berry pickers-just a reference to a story that I read in a NorCal paper).
So, it’s going to take a long time to get the supply of homes down to a normal level of supply for each market. The end of 2011 to the middle of 2012 will be the earliest time that CA and most of the other bubble markets will hit the bottom and when the bottom hits, prices will remain on the bottom for a long time. I just can’t see anything short of that occurring.

[Bugs]

Crap, if these guys are now saying 2010 that means I’m being too conservative when I think 2011 would be the earliest it could happen. Now I gotta move that back another couple years.

[Bugs]

Crap, if these guys are now saying 2010 that means I’m being too conservative when I think 2011 would be the earliest it could happen. Now I gotta move that back another couple years.

[patientlywaiting]

Great point Bugs. If they optimists are saying 2010, it won’t be until 2013.

[patientlywaiting]

Great point Bugs. If they optimists are saying 2010, it won’t be until 2013.

[(former)FormerSanDiegan]

If they optimists are saying 2010, it won’t be until 2013.
I have a different take… I expect the experts and media to continually point to a potential bottom 12-18 months ahead.
Even when we do hit bottom they will be saying this and they will be wrong. Don’t worry that your target and theirs line up. They will line up then cross at some point. Then, those who are correct in calling the bottom will appear to be too optimistic relative to the experts and the media.

Quote from Thornberg in LA Times today :
“This thing’s going to get worse when the peak of resets occur next year,” Thornberg, the L.A. economist, said. His prediction: Southern California sales and prices will decline into 2009.

This time next year he will be produce an identical quote with the year 2010 inserted.

[(former)FormerSanDiegan]

If they optimists are saying 2010, it won’t be until 2013.
I have a different take… I expect the experts and media to continually point to a potential bottom 12-18 months ahead.
Even when we do hit bottom they will be saying this and they will be wrong. Don’t worry that your target and theirs line up. They will line up then cross at some point. Then, those who are correct in calling the bottom will appear to be too optimistic relative to the experts and the media.

Quote from Thornberg in LA Times today :
“This thing’s going to get worse when the peak of resets occur next year,” Thornberg, the L.A. economist, said. His prediction: Southern California sales and prices will decline into 2009.

This time next year he will be produce an identical quote with the year 2010 inserted.

[kev374]

There is no need to wait for the absolute bottom because Real Estate is cyclical…as long as the price points make sense and you need to buy then go for it. Even if prices are 10% higher than the bottom I will buy, but since I believe prices are currently 100% overvalued I’m looking at least a 40% nominal correction before I even consider buying.

[kev374]

There is no need to wait for the absolute bottom because Real Estate is cyclical…as long as the price points make sense and you need to buy then go for it. Even if prices are 10% higher than the bottom I will buy, but since I believe prices are currently 100% overvalued I’m looking at least a 40% nominal correction before I even consider buying.

[davelj]

Maybe I’m nuts but I (still) think we’ll see the bottom in 2010-2011 or thereabouts. I think this time around, as opposed to the early-90s, we’re going to see more violent price moves each year going forward as institutions realize that things aren’t getting better and just start dumping properties. But, I think we’ll bounce along the bottom for several years after we hit bottom this time around. A philosophical question: If prices decline 35% peak to trough between 2005 and 2011, and then decline by another 5% cumulatively over the next 3-4 years, where was the bottom? The bottom will “feel” like 2011 but the stats will say it was 2014 (or whatever). I guess what I’m trying to say is that I think the lion’s share of the real price declines will occur by 2011, although there may be some nominal declines thereafter. But that’s just a gut guesstimate, of course.

[davelj]

Maybe I’m nuts but I (still) think we’ll see the bottom in 2010-2011 or thereabouts. I think this time around, as opposed to the early-90s, we’re going to see more violent price moves each year going forward as institutions realize that things aren’t getting better and just start dumping properties. But, I think we’ll bounce along the bottom for several years after we hit bottom this time around. A philosophical question: If prices decline 35% peak to trough between 2005 and 2011, and then decline by another 5% cumulatively over the next 3-4 years, where was the bottom? The bottom will “feel” like 2011 but the stats will say it was 2014 (or whatever). I guess what I’m trying to say is that I think the lion’s share of the real price declines will occur by 2011, although there may be some nominal declines thereafter. But that’s just a gut guesstimate, of course.

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