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Hmm... Prices of new homes in China's capital plunged 26.7% month-on-month in March.
Thursday, April 14, 2011
Northern Virginia Bits Bucket 4/14/2011
Posted by Harriet at 11:21 AM
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11 comments:
Harriet
I was so Going to post that in Comments today.
" Prices of new homes in China's capital plunged 26.7% month-on-month in March, the Beijing News reported Tuesday, citing data from the city's Housing and Urban-Rural Development Commission.
Average prices of newly-built houses in March fell 10.9% over the same month last year to CNY19,679 per square meter, marking the first year-on-year decline since September 2009.
Home purchases fell 50.9% y/y and 41.5% m/m, the newspaper said, citing an unidentified official from the Housing Commission as saying the falls point to the government's crackdown on speculation in the real estate market.
"
So what do Underwater buyers in Beijing do?
http://www.youtube.com/watch?v=0h7V3Twb-Qk
$.02
"However, the Internet, and easy online access to tax, prior sales, comparables, etc, is truly a "it's different this time" impact on the housing market and I think that could result in a deviation from the longterm mean - much like post WWII."
It's never different, Housing is based upon Rent equivalents and Household income.
What's tragic is we had the Two Income Trap, where people bought houses based upon 2 incomes.
I remember when i knew people who bought houses and it was "My wife's job can pay the mortgage, so we are saving a buttload of money up".
Now it's all 2 income 100% leverage.
Frankly I think the 2 income family will become a anomaly again.
It's too hard on the kids and the family is economically unstable.
As for me being a renter?
As patrick Kalleia says'Kids do fine in rentals'
Pat-
It is possible that two income families will become the anomaly again, but I don't think it is likely. Everything is significantly more global, so now the US needs to compete with many emerging markets. People in these countries have lower wages so to compete wages will continue to be under pressure. I also think that in today's society most women want a career. Perhaps the number of hours women work will go down, but I really don't see the majority of women deciding that they will give up a career and lower their standard of living.
As for China I agree they will continue to have problems, but at least most peoples down payments were pretty high so prices will likely need to keep on falling dramatically before tons of people are underwater. I think the government wants prices to fall, but if they fall too hard I am sure they will intervene to reinflate the bubble
"Pat said...It's never different, Housing is based upon Rent equivalents and Household income."
With the caveat of course that some areas have diverged from those metrics for decades...In those places I think its safe to say it is "different".
WRT the future for national prices, this is about the most interesting thing I have seen in months (hattip to Pat for the ritholz link which led me to this):
http://www.macromarkets.com/incl/mar2011.pdf
I think its fascinating to see numerical predictions from some prominent "gurus" that we all see here from time to time. Wisdom of the crowds suggest the average of all their calls will be pretty close to reality. However, I think this isnt a good sample as some have the incentive to talk their book. That said, my thoughts on certain calls:
1. MARK HANSON. Not surprisingly, this hysterical permabear (FKA "Mr. Mortgage") thinks prices will drop another -18.44% overall. This guy has zero capacity for bullishness and his record for the last 2 years is abysmal so I think its safe to say the total national decline will be less than the -18.44% he predicts.
2. LARRY YUN. This uberbull came in with a surprisingly restrained call of bottom this year and a total gain of +12% over the next 4 years. I want to say this forecast is possible. However his track record is awful and the thought of agreeing with the head of the NAR turns my stomach. Then again, as a "stopped clock is right twice a day" bull, perhaps this is the time he gets it right.
3. MARK ZANDI. This bear has the proven he has the capacity for bullishness, and a decent track record (albeit early), so his -3.15% drop to bottom this year is possible. Imo, his +7.36% gain for 2013 looks a little high for me, but otherwise, his forecast looks reasonable.
4. BARRY RITHOLZ. Despite his occasional hyperbole and generally bearish outlook, he has shown the capacity for contrarian/bullish thinking. IMO his -10.19% drop over the next 3 years has a high probability of being the "worst case scenario", but certainly conceivable.
5. DEAN BAKER. Bearish outlook but the capacity for bullishness (he shocked many here by buying in DC in 2010). I think his timing is agressive (calling for an 11% drop this year). Still, I respect his opinion so this bears watching IMO.
6. TOM LAWLER. This bear turned bull is on fire lately. He was once adored by the bears for his "flip chart of doom" created during his fannie/freddie tenure. He then angered our local bears by accurately calling the N. VA bottom (with MD lagging) nearly perfect in early 2009. I think his 4 year rise of +18.67% is a little high, but given his track record lately, I will be watching carefully.
I would have loved to see the forecast of a few others who werent sampled. Bill McBride (i.e. Calculated Risk) would have been interesting. So would Nouriel (Dr. Doom) Roubini.
Anyone else have any thoughts on the forcasters or their calls???
Anon
Roubini is calling for a 15% decline, but he also went out and bought a 6 million dollar condo in manhattan last year. His only comment, he thought it was a good deal.
http://www.moneynews.com/StreetTalk/Roubini-Buys-5-5Million-NYC/2010/12/21/id/380642
Anon-
Bill McBride thinks housing prices will likely bottom this year (although I think he believes another couple months of downward prices). He then thinks nominals prices will rise for 1-2 years, but real prices will fall. (this likely means house prices will be pretty flat, because I don't think he is that worried about super high inflation). It sounds like after this he expects real prices to at least stay flat if not rise
Bill's forecast
http://www.msnbc.msn.com/id/42521765/ns/business-real_estate/
Taylor Connolly, a Redfin agent in the Washington, D.C., metro area, is optimistic — but his enthusiasm varies by geographic location within his large swath of turf.
Buyers and sellers in or near downtown cores are gaining confidence after six months of stabilized or even rising prices in their neighborhoods, while those shopping or selling in further-out suburban locations are not seeing the same market improvements.
That said, Connolly has some longer-term concerns about the volume of homeowners who are “underwater” on their mortgages, owing more than their mortgage balance. This could suppress some potentially nice listings, he says.
“Sellers may run the numbers and see them simply not add up,” Connolly says. “There are still quite a lot of people underwater around here.”
Anon
Interesting graph, it does
go with my sentiment that the market should clear in 2012.
Pat/HB -- thanks for the Roubini & CR forecasts.
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