Amy's smart nervousness
A couple of months ago, Amy and I found ourselves unexpectedly thrust into the housing market, a place we never expected to be here in south Florida, since up until last year, this was one of the hottest housing markets in the country--median house prices for a single family home were somewhere north of $300K
for a while (Update: they're still north of $300K--well north, in fact), to give you some sense of where we were, and for two full-time-but-not-tenure-track faculty members, that was well out of reach.
A couple of months ago, though, what looked like the perfect house came out of nowhere--a small two-bedroom across the street from Amy's uncle and blocks away from her parents, in the neighborhood where she grew up. It seemed idyllic, but it was just out of our price range.
It's just as well that we were forced to wait, because it looks like the market still has a ways to fall.
Countrywide’s stark assessment signaled a critical change in the substance and tenor of how housing executives are publicly describing the market. Just a couple of months ago, some executives were predicting a relatively quick recovery and saying that most home loans would be fine with the exception of those made to borrowers with weak credit who stretched too far financially.
Executives at Countrywide had for some time been more skeptical than others but the bluntness of their comments yesterday surprised many on Wall Street. In a conference call with analysts that lasted three hours, Countrywide’s chairman and chief executive, Angelo R. Mozilo, said home prices were falling “almost like never before, with the exception of the Great Depression.”
Nationally, home prices have not fallen in the 35 years or so that the government and private services have tracked them. Some researchers like Robert J. Shiller of Yale have compiled data that goes as far back as 1890 and shows that home prices fell for several years during the 1930s.
Mr. Mozilo said that because of a large number of homes on the market, the housing sector would continue to suffer until sometime in 2008 and not begin recovering until 2009.
Now, a number of bloggers have been predicting that the housing market was going to stay soft for a while--Atrios and Bonddad are the ones I've read most--because of the coming resets in the adjustable rate mortgage markets, and the papers have been full of stories about the problems in the sub-prime mortgage market, including the announcement from Bear Stearns that one of their hedge funds is basically worthless now. But the above NY Times article says the problems are growing beyond the sub-prime markets.
Countrywide said about 5.4 percent of the home equity loans to customers with good credit that it held an interest in were past due at the end of June, up from 2.2 percent at the end of June 2006. By comparison, more than a fifth of subprime loans were past due at the end of June, up from 13.4 percent a year ago.
Now, I'm certainly no economist, but even I know that when the good credit people are having trouble, there's nothing but bad news ahead overall. 42 has an interesting take on the market as well, and it's worth taking a look at. It seems to me, that at least for the moment, buying a house in any market that was recently hot is a sucker's bet. Fortunately, we just signed a lease on a new place, so we won't have to think about the potential of buying for at least a year, and that's oddly comforting. We have enough to worry about right now.
Labels: housing market