Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

U.S. Housing Market New Home Construction Up, But Building Permits Drop

Housing-Market / US Housing May 18, 2010 - 08:54 AM GMT

By: Mac_Slavo

Housing-Market

Best Financial Markets Analysis ArticleIn the not so bad news category, the government reports that the housing market is rebounding:


U.S. housing starts increased for the second straight month in April to an 18-month high, the government estimated, but building permits fell sharply, casting doubts on the momentum of the housing recovery.

Housing starts rose an estimated 5.8% in April to a seasonally adjusted annual rate of 672,000 from an upwardly revised 635,000 in March, the Commerce Department reported Tuesday.

This is, apparently, good news, especially coming off of April’s sales numbers showing a 27% increase Month over Month. As we pointed out in April, however, the sales numbers may be due, in large part, to the $8000 tax credit offered by the government for first time home buyers. While the near term trend seems positive, especially with new home construction numbers, concerns exist for the latter part of 2010, which many analysts have suggested would plunge the US economy back into a technical recession.

New home construction does not mean the homes have been sold, and building permits may be a forward indicator of this:

However, building permits fell 11.5% to a seasonally adjusted annual rate of 606,000, the lowest in six months.

Permits for single-family homes, considered by many analysts to be the number in the housing release, fell 10.7% to a 484,000 annual rate.

We have the government tax credit now expired, roughly 7 million plus foreclosed and delinquent shadow inventory homes that have not yet been reflected on banks’ books, credit markets remain tight, mortgage rates will likely rise due to federal debt problems, millions of adjustable rate mortgages are resetting interest rates higher over the next two years, and home prices in many areas have resumed their downward slide.

While today’s news may seem positive, one must consider the dynamics of the entire real estate market before rushing to judgment about a recovery in real estate.

Our view since the Summer of 2009 has been that the bottom for real estate is not yet in, with average national home prices still well above the historical, inflation adjusted price of around $110,000 (going back 100 years).

This is a credit contraction and the pendulum is now swinging in full force from the top of the bubble to the extreme opposite. If history is any guide, corrections are equally as violent as bubble formations, if not more, because the momentum in the other direction can be ferocious and very fast. This means that the pendulum will not simply revert to the mean, but will likely overshoot in the opposite direction.

Since the housing bubble’s peak, which reached an average national home price of around $200,000, we’ve seen real estate prices deflate nearly 20% to about $165,000. So, just to revert  to the historical average of around $110,000 housing prices would need to slide another 30% from here. While these are rough estimates based on Glenn Beck’s History of Home Values, other sources cite similar numbers, including percentage declines. And while the “average” home price may be more for the last couple of decades (about $140,000 from 1975 through 1999) than it has been for the last 100 years, we’re still looking at a significant decline if the housing market should turn down from here. The pendulum is swinging, and will likely overshoot the average in the opposite direction, so prepare to see real estate take a serious hit going forward.

It’s hard to imagine the average price of a home losing 40% - 60% of its value during the course of this real estate bust. For those who say its impossible, we point you to the Japanese real estate decline of the 1990’s, which saw Japan’s property values lose more than 70% from top to bottom, and the Japanese have yet to recover.

Developers, both residential and commercial, can build all they want, but if nobody is buying or renting, then it really doesn’t mean much. In the coming years, we expect to see hundreds of residential developments sitting without residents and continued commercial vacancies.

Real estate is not bouncing back any time soon - perhaps for a decade or more.

By Mac Slavo
http://www.shtfplan.com/

Mac Slavo is a small business owner and independent investor focusing on global strategies to protect, preserve and increase wealth during times of economic distress and uncertainty. To read our commentary, news reports and strategies, please visit www.SHTFplan.com

© 2010 Copyright Mac Slavo - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules