Expert sees 'long, painful end' for housing slump
By Martin Crutsinger, Associated Press
Monday, May 26, 2008
Like spring flowers, "For Sale" signs are sprouting in front yards all over the country.
But anxious sellers face the most brutal environment in decades, with a slumping economy, falling home prices and rising mortgage foreclosures.
And even the faint promise of better days ahead might not come true, given all of the headwinds that the housing industry is facing at the moment.
"This is going to be another difficult spring," said Mark Zandi, chief economist at Moody's Economy.com. "I think we are at the beginning of the end of the housing downturn, but it is going to be a long and painful end."
The devastation is certainly a far cry from the boom years from 2001 to 2005, when sales of new and existing homes were setting records for five straight years. During that time, home prices were soaring, luring thousands of investors into the market, hoping to buy homes and flip them for quick profit.
But since 2006, the country has been mired in a housing bust that, in many ways, is the worst since World War II.
Construction is expected to drop to the slowest pace since the 1940s and prices are expected to decline by the largest amount since the Great Depression.
Hardest hit are the states where sales boomed the most: California, Florida, Nevada, Arizona and parts of the Northeast.
In the Midwest, the problem is shrinking jobs in the auto industry, making homes hard to sell.
But virtually all of the country has felt the aftershocks of the housing slump, either through weaker home sales or the massive drag housing has imposed on the overall economy.
Housing has shaved more than a full percentage point off economic growth, trimming the gross domestic product for the past two quarters to a barely discernible 0.6 percent rate and raising the threat that the country could topple into a full-blown recession.
As the spring sales season got under way, the slump was continuing. The Realtors reported Friday that existing home sales fell 1 percent in April, the eighth drop in the past nine months, with the median home price falling 8 percent compared with a year ago, the second-biggest drop on record.
So just how much worse will things get? Lawrence Yun, chief economist for the Realtors, sees some hopeful signs. Some parts of the country that have been hammered with sharp declines in sales and prices, such as San Diego, Calif., and Fort Myers, Fla., are now reporting sales increases, as buyers are being lured back into the market, looking for bargains.
"Lower prices and low interest rates are starting to generate results," Yun said, noting that 30-year fixed-rate mortgages averaged 5.92 percent in April, down from 6.18 percent in April 2007.
That reflected an aggressive rate-cutting effort by the Federal Reserve to try to keep the country out of a recession.
By the numbers
46 states saw sales decline in the first three months of this year compared with the same period in 2007, according to The National Association of Realtors.
7.7 percent is the price decline nationally in the first quarter, with the biggest plunge a 29.2 percent decline in the Sacramento, Calif., area.
* Two-thirds of 149 metropolitan areas saw prices decline during the same period, the largest percentage of cities reporting price drops in the history of the NAR survey, which goes back to 1979.
* The state with the biggest sales decline was Maryland, with sales down 38.6 percent in the first three months of this year compared with the same period in 2007. The drop nationwide was 22.2 percent.
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May 27, 2008
9:18 a.m.
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oceanview78382 writes:
Why doesn't the News publish more Colorado specific information. How bad is it in Colorado? What neighborhoods in Denver and elsewhere are being hit worst? What is the outlook? What about multifamily housing?
May 27, 2008
10 a.m.
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Dinty writes:
Same information below, but a different slant. Guess it depends on your agenda:
By MARTIN CRUTSINGER, AP Economics Writer
40 minutes ago
WASHINGTON - Sales of new homes rose in April for the first time in six months although the unexpected increase still left activity near the lowest level in 17 years. The Commerce Department reported Tuesday that sales of new homes rose 3.3 percent in April to a seasonally adjusted annual rate of 526,000 units. But the government revised March activity lower to show an even bigger drop of 11 percent to an annual rate of 509,000, which was the weakest pace for sales since April 1991. Economists believe that new home sales will remain weak for some time as the housing industry struggles with falling prices and rising mortgage foreclosures, which are dumping even more homes on an already glutted market.
May 27, 2008
11:23 a.m.
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JWinters writes:
I wish everyone would stop quoting Lawrence Yun-- what a pigeon. He's a talking head for the NAR and that's it. How much more biased could you be? Anything he says is not news- its spin.
May 27, 2008
4:40 p.m.
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Geta_clue writes:
The aggregate Case-Shiller statistics for the Denver MSA were almost unchanged from February to March with the lower and higher tiers declining and the middle tier increasing.