Sunday, June 20, 2010

Macro Issues Predict More Housing Trouble

Admittedly, I haven't written about housing issues in a while. A false bottom created by the $8,000 tax credit kept things aloft for a bit, so I got busy working on other stuff finding it pointless to throw around opinions while buyers found motivation in the form of government issue tax credits. As many of us realized, the end of the tax credit hasn't been such a good thing for sellers in real estate markets across the land. I've held firm that remaining buyers out there will simply begin writing random $8,000 concessions into their future real estate purchase offers. Agents and sellers will probably be pretty surprised by the creativity of buyers who may, in the absence of the official government sponsored credits, quickly figure out how to privatize the loss via sellers already battered by housing deflation and negative equity.

Since the credit ended housing starts have declined sharply showing a drop in builder confidence. We've also seen new mortgage applications fall signaling fewer buyers entering the housing market. It seems even talking heads in the financial realms have begun to hum along to the double-dip housing market tune, and I can certainly understand their on-air laments, as I foresee a long period of flatness about to commence. After all, you can't re-inflate a bubble without more hot air. On the other hand, multitudes of factors affect national housing markets. Any one of them can sway the scales at any time. More importantly, housing is, and always has been local. Some locations see minute housing recoveries while others still suffer blindly with no idea when recovery will ever begin, undoubtedly, along with broken housing support mechanisms, like the GSEs and their ilk, clawing at the hope of any real near-term economic stabilization. In any case, I have found nothing to unglue my belief that it will take until 2011-2012 for real estate to level out. But, a whole lot of things can happen until then.

So, I leave you with Sunday morning reading should you desire to further examine current events contributing to the housing market correction. Of this set, I find China's announcement to allow the Yuan to appreciate this morning to be the most intriguing. As creditor to the United States, China's new-found flexibility will certainly be a market mover by next week, and over time, influence currencies, interest rates, manufacturing and global trade. It will be interesting to watch the outcomes unfold in this bold new move.

U.S. Economy: Factories Lead Rebound as Housing Falls, Bloomberg.

Housing Market Slows as Buyers Get Picky, New York Times.

Cost of Seizing Fannie and Freddie Surges for Taxpayers, New York Times.

World hopes China's yuan will rise, bring relief, Yahoo News.

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