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Housing prices to free fall in 2008 - Merrill Lynch
By David Goldman, CNNMoney.com staff writer
Hey any ideas how this will ply out in Puna?
NEW YORK (CNNMoney.com) -- The worst housing financial crisis in decades is only going to get worse, a Merrill Lynch report said Wednesday.
The investment bank forecasted a 15 percent drop in housing prices in 2008 and a further 10 percent drop in 2009, with even more depreciation likely in 2010.
By contrast, the National Association of Realtors (NAR) expects housing prices to remain flat in 2008. NAR did cut its home price estimate for the current quarter, however, to a 5.3 percent year-over-year decline, which represents the steepest drop in that price measure on record. But NAR sees an uptick in home prices in the last two quarters of 2008.
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"Merrill Lynch's figures are way too pessimistic, and they are unprecedented," Lawrence Yun, the National Association of Realtors chief economist told CNNMoney.com. "There is so much variation in local housing markets, and we see stable price conditions for 2008."
The current housing crisis and the depreciation in home prices have pummeled the economy, with businesses and consumers cutting back on spending, raising the specter of a recession. "Lower sales and higher inventory for sales are lowering the velocity of transactions," said Fritz Siebel, Director of US Property Derivatives for Tradition Financial Services. "That cannot be a sign of good health for the economy."
But for those who think that the worst is over, Merrill Lynch said that housing prices still remain comparatively high. The brokerage believes that home prices are still far above historical norms when compared to other measures such as rent or GDP. "By our calculations, it will take about a 20 to 30 percent decline in home prices to correct this imbalance," said the report.
Merrill Lynch believes that housing starts will most likely slide another 30 percent by the end of 2008 - a historic low.
The report says that the inventory situation only continues to worsen, as homebuilders are now looking at more than a nine months' supply. "The current supply/demand environment does not favor a swift recovery in the housing market, in our view," according to the report.
Yun agrees that the reduction in housing starts will not bode well for the economy, especially in the homebuilding industry, but he believes that the reduction will soothe the housing market by slowing the glut in inventory. "The reduction in housing starts is not stabilizing the economy, but it will stabilize the market," said Yun.
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Will Peratino
Will Peratino
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If the prediction is correct, it will hurt me financially quite a bit. However, I'm leaning towards the idea that it will be good for our children, after the initial pain. Starter homes have gotten too expensive and are too much of a burden on young families that have just average young family incomes.
Pua`a
S. FL
Big Islander to be.
Pua`a
S. FL
Big Islander to be.
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The market is down, that is for sure. But you don't lose any money if you don't sell. We see this kind of thing every decade of so. Prices will go back up. It may take two or three years, but there are housing booms in the future.
It is difficult not to be concerned as you watch housing sales in your neighborhood fall month after month. On the other hand, this is a great time to buy that second property or rental.
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Our realtors will educate us on this, but until then, I will just talk out of my hat:
The Hawaii market will respond to fact that the mainland real estate market is falling through the floor and into the basement because, as everyone knows, it is mainlanders who drove up the prices in Hawaii. However, I think this will be balanced in part in the short run by the fact that the currencies of other nations are stronger against the dollar. In particular the Canadian <<looney>> is at near historical highs against the dollar. When I considered retirement in Canada, the dollar there was worth 25 cents more in Canada. You could get a great deal in Canada. Now it is the reverse. This makes land in Hawaii cheaper for Canadians. The Yen is also doing pretty well, I read today.
But I think that the Canadians and Japanese may be supporting a slightly different slice of the market in Hawaii ---prime condos and vacation home type properties.
I kind of think we will see a reversing of the trend we have seen in recent years. The Big Island was the last to benefit from the property rush. I think it will be the first to feel the impact of the mainland housing crisis, and then it will move out from there to Kauai, Maui, and lastly to Oahu.
The other complication is that the "housing crisis" may just be part of a much larger economic crisis. Today, a mere acquaintance asked me whether she should be concerned because she has slightly over $100,000 in a bank and she heard that the FDIC insures only up to $100,000. She was wondering if she should take her money out. I referred her to someone competent to advise on such matters but the question scared the hell out of me.
For the first time in my life, an apparently lucid American citizen raised to me the prospect of a so-called "run" on a bank. I am not sure exactly why she was scared, or why she was thinking about this (and why she asked me!). But there is a lack of confidence out there in the economy. Collectively, we seem to understand something that individually we don't. Sort of like gazelles who sense a lion...or in this case, a bear!
There are small ancedotal signs that suggest this all could get very, very bad indeed. If that happens, the Hawaii real estate market will be affected, except to the extent that foreigners pick up the slack on properties that appeal to them.
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quote:
Originally posted by Glen
......But I think that the Canadians and Japanese may be supporting a slightly different slice of the market in Hawaii ---prime condos and vacation home type properties.
This is exactly what an agent on Oahu has told us. We have been following the prices and news stories. Condos in resort areas are doing well but your basic family home is not doing nearly as well. We are keeping an eye on things and may buy a rental if things fall far enough. Right now prices are still close to their highs on Oahu.
We have some friends who bought on the ocean in Honolulu about five months ago. Condos in their building have gone up about 7 percent since then.
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[/quote]
Condos in their building have gone up about 7 percent since then.
[/quote]
Hawaii resort property prices increased 7% in 2006 and 14% in 2007 according to the Pacific Business News. Apparently, they are in a different "league" than the residential properties. Just remember the Golden Rule, there are good deals in every market and trying to time the market is like a Russian Roulette. [8]
Aloha,
John S. Rabi, ABR,CM,CRB,FHS,RB
http://www.JohnRabi.com
Typically Tropical Properties
"The Next Level of Service!"
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Our Realtors will educate us on this, but until then, I will just talk out of my hat: LMSS (Laughing my self silly) or is that a hysterical panic?
For out of the hat that was pretty good Glen, right on the mark I would wager.
Heard at a party the other night from an economy minded person that those who don't own a bike will soon and those who don't garden will learn a new skill in the not to distant future. Just party talk who knows.
mella l
mella l
Art and Science
bytheSEA
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No, Mella, I think our party goer is pretty much in touch with the what people are thinking. The dominoes just keep falling. Some keep talking about how the "fundamentals" are sound and so forth, but I don't believe them, and savvier investors than I don't either. I think this is going to get really, really, really bad. Worse than we have seen in our lifetimes. In fact, worse than Bill Tapia has seen in his lifetime, and he's a hundred years old.
The fundamentals are very, very bad.
Just read the Following:
Despite a national real estate recession, housing markets in at least six states are still showing that some areas of the U.S. are economically strong enough to produce appreciation......six states have made the Annual Housing Predictor Appreciation List at the start of the year. Texas, North Dakota, Washington and Hawaii are among the six to make the list.
And This Site provides predictions in over 250 markets. The site said this about Hawaii:
Empowered by a strong high-end market and few foreclosures, the Hawaii real estate market has not caught the national real estate recession. While Hawaiians see daily news reports of falling home prices on the mainland, they have defied gravity.
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Coming home soon!
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There's a saying: "A rising tide floats all ships". I guess the converse is also true: "A falling tide sucks 'em all down". If my California home continues to depreciate, I'll have (a lot) less equity to take with me to the BI at the end of 2009/early 2010, but on the other hand, the house that I may buy then will cost less, too. Is it a wash? I dunno, I'm not an economist. We'll see what happens in two years, find out whether the crystal ball-gazers in 2008 were correct.
Regardless, I'm at least committed mentally (Ha!) to retiring back to the Islands of my birth. More money or less won't affect that decision, although it may affect what kind of Hawai'ian home I have.
Aloha! ;-)
Aloha! ;-)
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