Thread: House prices seen falling 30 pct

House prices seen falling 30 pct
Thursday December 6, 6:41 am ET
By Julie Haviv

NEW YORK (Reuters) - Housing markets from Punta Gorda, Florida, to Stockton, California, will crash and suffer price drops of more than 30 percent before the housing crisis is over, a report from Moody's Economy.com said on Thursday.

On a national level, the housing market recession will continue through early 2009, said the report, co-authored by Mark Zandi, chief economist, and Celia Chen, director of housing economics.

The report paints a worsening picture of the hard-hit housing sector, which is in the midst of its worst downturn since World War II.

While activity will stabilize in 2009, it will not be until 2010 before a measurable improvement in sales, construction and pricing will emerge, the report said.

House prices are forecast to fall 13 percent from their peak through early 2009. After accounting for incentives home sellers are offering buyers, effective declines peak-to-trough will total well over 15 percent, the report said.

Punta Gorda, Florida, and Stockton, California, are the hardest hit markets in the U.S., with price declines from peak-to-trough forecast at 35.3 percent and 31.6 percent, respectively.

"This is the most severe housing recession since the post-World War II period," Zandi told Reuters.

These markets have been hard hit due to several reasons, namely the exiting of investors from the areas, a fair amount of subprime mortgage loans causing an increase in foreclosures and overbuilding by home builders, Zandi told Reuters.

Home sales, however, should hit a bottom in early 2008, which will mark a 40 percent drop from peak-to-trough.

"The housing market's most fundamental problem is it is awash in unsold inventory," the report said.

In addition, the housing downturn will take a large toll on the rest of the economy. During the height of the boom in 2004-05, housing contributed nearly a percentage point to annual real gross domestic product, or GDP, growth.

In the current downturn, housing will subtract more than one percentage point from U.S. economic growth this year, and a percentage point and a half in 2008, with the effect on growth seen most pronounced next spring and early summer.

"The intensifying housing recession is expected to weigh on the broader economy, but not break it," the report said.

The Moody's Economy.com's report, titled "Aftershock: Housing in the Wake of the Mortgage Meltdown," said that when house prices hit their nadir, some 80 of the nation's 381 metropolitan areas will experience a double-digit peak-to-trough price decline.

Price declines, however, will vary in degree throughout the nation, with more than a 15 percent peak-to-trough expected around Washington and Detroit.

Significant declines are also expected throughout most of Arizona, California, Florida and Nevada. During the housing market's heyday, speculative activity was rampant in these areas, causing prices to surge much higher than other regions.

The Northeast corridor, and markets such as Boise, Idaho, along with Denver and Salt Lake City, will experience between 5 percent and 15 percent declines. In the rest of the industrial Midwest and parts of the Mountain and Pacific Northwest, prices will fall more modestly.

While some point to rising default rates in the subprime mortgage market, which caters to borrowers with poor credit histories, as the root cause of the problems plaguing the housing market, Moody's Economy.com said an unwieldy supply of unsold homes is the prime factor.

The U.S. Census Bureau said that, as of the third quarter of 2007, there were close to 2.1 million vacant unsold homes for sale, equal to 2.6 percent of the stock of owner-occupied homes.

A well-functioning housing market has a substantial amount of inventory, but in the quarter century between the early 1980s and mid-2000s, the vacancy rate stayed near 1.7 percent.

The difference between the two vacancy rates provides a good estimate of the amount of excess inventory in the market, which currently totals nearly 750,000 homes and is by far the highest level of excess inventory in the post-World War II period, Moody's Economy.com said.

Moody's Economy.com, which is based in West Chester, Pennsylvania, is an independent subsidiary of Moody's Corp and provides economic research and consulting services to businesses, governments and other institutions.

http://biz.yahoo.com/rb/071206/usa_econ ... .html?.v=3

Here's my premice: George Bush's Open Door Policy with our borders gave cheap labor to build housing at an extounding rate and pump up his HUD Housing program to Minorities

The Average American is now going to suffer with lowered home prices to a level not seen by many Americans in almost 70 years.

As well.. we the middle class is being forced to subsidize the invassion through services such as schools, hospitals, HUD, Welfare and the list goes on.

What happens is the rich get richer, the poor gets poorer and the middle class is illiminated.

It's time for a whole lot of people to go to jail for stealing America's wealth. Much less for the crime wave that has killed thousands and thousands; maimed Americans from DUI Illegal Aliens, rapes of our women and children.

It's long past time for the Tea Party... It is time for these offials to go on trial for Treasonous activities designed to bring America down to a Third World Status

Breaking News from MoneyNews.com

Subprime Fiasco Fed by Mortgage Fraud

Certainly, lots of honest, innocent people got duped into signing loans they couldn’t pay and now need help with their adjustable-rate loans, as President Bush is now proposing.
But a surprisingly large number of them, it turns out, not only can’t pay but never intended to — because they’re common thieves.
Fraud committed both by shady loan brokers and by devious borrowers, combined with poor underwriting, may account for up to 25 percent of subprime mortgage defaults made last year, reports Fitch Ratings, which analyzed a sampling of defaults.
The 2006 vintage of subprime mortgages performed much worse than expected, even when taking into account risky products and falling home prices, the rating agency notes.
The ignominious group is infamous for early payment defaults, or loans that went bad in less than a year, sometimes less than a few months.
After examining 45 subprime loans, the rating agency said it found at least the appearance of fraud or misrepresentation in almost every file, problems which largely could have been caught with proper lending procedures.
Problems included occupancy misrepresentation, suspicious credit reports, miscalculations of debt-to-income rations, and questionable incomes.
“Products such as 'no money down' and 'stated income' mortgages appear to have become vehicles for misrepresentation or fraud by participants throughout the origination process,â€

Big nationwide homebuilding companies employing lots of illegals have brought about this housing glut.

Besides hiring illegal aliens, I have always witnessed incredible amounts of income tax evasion all throughout the construction industry. Yet the Federal Government does virtually nothing to stop it. So would they take action against employment of illegals? It seems the construction industry is a tacitly "Hands-Off" zone.

I'm planning a trip to the ICE regional office to raise some really big issues. This could be one of them, also. I'm pretty cynical about the Feds actually doing something but it would be worth a try. If I could actually get a whistle-blower's reward it would be worth a fortune.

It was just on the news that Gov Arnold is on hand in Oakland to help bail out CA defaulters - especially since our state is the hardest hit. I would like to think fraud would be ruled out before anyone gets a DIME of assistance, not that anyone else deserves it.

I see this homebuilding craze right around the corner from where we live ....illegal crews all out throwing up HUGE beautiful new homes overnight ...and then they just sit, with for sale signs in front of them ....for MONTHS, even half a year or more.

And they just keep building and building. So, everyone loves their new fancy homes and folks like us can't sell our homes or make any equity whatsoever.

It just seems like there is so much greed and dishonesty in America anymore.