Wednesday, November 19, 2008

Housing-led recession on, 2009 recovery unlikely

Dozens of economists say the nation has already slipped into what could be a lengthy, housing bust-induced recession and 2009 forecasts for the residential real estate market appear to confirm the worst isn't over.

by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - A slim majority of real estate agents expect a housing recovery in 2009, but those expectations are likely based on isolated local market conditions and training-induced Pollyannaism rather than hard evidence.

Dozens of economists say the nation has already slipped into what could be a lengthy, housing bust-induced recession. The 2009 forecasts for the residential real estate market are grim.

More than half of real estate agents believe the national real estate market will hit bottom in the first six months of 2009, according to a recent survey of 2,500 agents conducted by market research firm Campbell Communications.

Fifty-two percent of agents said the country will see the bottom of the housing market before July; 7.7 percent said prices have already bottomed out, and 16.5 percent believed the bottom will happen in 2010 or later.

However, the same survey reveals real estate agents reporting one in four signed purchase and sale agreements were canceled due to either a lack of financing or an inability of homebuyers to sell their current residence in September. Buyers had applications rejected because of inadequate credit scores and lack of a down payment, according to agents surveyed.

Ironically, surveyed agents indicated sellers may be just as ill-advisedly optimistic about selling prices as real estate agents are about the housing market's prospects for a 2009 recovery start.

Agents said sellers continue to be unrealistic about home values and price them above competing distressed properties, properties that account for a much larger than normal share of listings.

Nationwide, in September and October, traditional sellers made up 59 percent of listings, with 41 percent of the properties being discounted as bank-owned (REO) or short sales properties. In some California, Florida and other states' metro areas where home prices skyrocketed and then crashed back down to earth, that ratio is flipped with distressed properties comprising the bulk of homes for sale.

Housing recession has begun

Real estate agents' optimism also belies the growing volume of forecasts offering evidence of a drawn-out, housing-spawned recession that has already begun.

• In early November, the National Association for Business Economics reported the nation is in for a "prolonged" recession. Half of the group's 50 forecasters said the economic drought started scorching the nation in late 2007.

• All 51 economic forecasters in a the Federal Reserve Bank of Philadelphia's survey said they believe the nation is either in a recession or will enter one soon, with the majority believing April showers came with a light recessionary rain that will flood the nation, especially those low-lying markets suffering job losses.

The official keeper of national recession declarations, the National Bureau of Economic Research, likely won't make the official announcement until after two or more quarters of frozen wallets and iced spending.

But that hasn't stopped forecasters, pollsters, talking heads and others from looking ahead at what's in store for the residential real estate sector.

Don't expect to party like it's 1999 in 2009. Forecasts call for gray skies with only a few slivers of silver lining.

“Rather than the hiss of losing air or a louder pop from sudden deflation, the housing market looks more and more like a powder keg bristling with short fuses.” -- DeadlineNews.Com, 2005

ULI's 'Emerging Trends In Real Estate 2009': 'Ha. Ha.'

Urban Land Institute's (ULI) "Emerging Trends In Real Estate 2009" advises not to expect housing prices to bottom until late 2009, but concedes even that could be a tall order.

• The report surmises a 2009 bottom will arrive only if a host of conditions converge: the bulk of distressed properties move through the system; lenders loosen the purse strings; interest rates remain affordable; and job and wage gains ensue.

• The report actually sums up a housing development section in two words "Ha. Ha." True.

• The report goes on to suggest buyers and sellers can enjoy success if they pay close attention to three words, "location, location, location." ULI says homes closer to commercial cores, which are typically of the higher-density variety than single-family homes, will out perform many others because many buyers and current owners will downsize or buy small to save money.

Smaller home values will get a boost from a stepped-up reverse flight back to city cores in a quest for the convenience of nearby services and proximity to transit.

Investors who buy into a distressed condo development, at the right price, in urban areas, near transit hubs, and then convert properties to rentals, could enjoy a profitable return.

Master planned communities, on the other hand, are out. ULI says the outer-ring suburban and exurban areas will suffer most due to property size, transportation costs and back-to-town flight.
“If a time arrives when there are too many risky loans and the economy hits a recession, many home owners could default on the American Dream and take the economy down with it.” -- DeadlineNews.Com, 2005

Real Estate TRENDS 2009: '2009 will be pivotal'

The yet-to-be published report, "Swanepoel Real Estate TRENDS Report 2009" forecasts a similarly overcast future for housing.

With real estate research guru Stefan Swanepoel on point, the report is a compilation of research from the staff and 50 industry contributors.

• Good news for brokers who weather the storm. Next year will so challenge real estate and mortgage brokers, those who survive will gain unparalleled market experience that will catapult them to the position of standard bearers in customer service.

• Good news for buyers. Not so much for owners and sellers. In 2009, housing will become even more affordable, but only at the expense of those who purchased homes at the peak of the market (especially in a bidding war) and must endure at least another year of home price declines.

• In some markets, including Silicon Valley, where prices have plummeted, investors are already back scooping up repossessed residences, short sales and auctioned homes. Swanepoel says investors will return in droves as first-time and move-up home buyers sit it out waiting for the bottom of the housing market which may not materialize until after 2009.

Says Swanepoel, "I have been researching and reporting on the trends affecting the real estate industry, looking deep into 2009 for some semblance of an emerging course for the industry has been extremely challenging -- 2009 will be pivotal."

Deadline Newsroom: Housing recovery in 2010 or later

Deadline Newsroom's unscientific "When Will Housing Recover?" survey of blog visitors, found that among 237 of those who voted, 20 (8 percent) said housing would recover in 2008 (so much for that); 62 (26 percent) said 2009; 84 (35 percent) said 2010; and 71 (29 percent) said housing won't recover until later than 2010. The poll opened in May and ended in October.

Though the poll is unscientific, the DeadlineNews Group's DeadlineNews.Com reported back in 2005: "Rather than the hiss of losing air or a louder pop from sudden deflation, the housing market looks more and more like a powder keg bristling with short fuses."

Even earlier, the real estate news service reported: "If a time arrives when there are too many risky loans and the economy hits a recession, many home owners could default on the American Dream and take the economy down with it."

Place your bets, baby.

If you liked this story see:

Homeschooled Homeowners Surviving Crisis
Foreclosures Boost Sales, Depress Prices
States Step Up Foreclosure Relief
Lust To Bust

... and a lot more in the Deadline Newsroom

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also the Silicon Valley Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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1 comment:

Anonymous said...

Just feel totally screwed by this new 2009 tax credit. We aren't first time home buyers, but we took the risk last year, sold our old home and built a new one. Because that was in May 2009, we don't get ANY kind of credit. Why are we being left out - people who actually purchased a home during a terrible economic crisis? People who were responsible with their earnings?