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The housing crisis is over

... according to an editorial opinion in the Wall Street Journal.

"The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now." Read more by Cyril Moulle-Berteaux. 

Remember the headline effect. By the time the media reports the top or the bottom, the trend has already shifted. Time Magazine is the best indicator. Home $weet Home was the cover in June 2005, give or take a month or two from the top.

While I was googling for the cover, I came across a brilliant article that forecast much of what we have seen over the past few years. Written by Bill Fleckenstein in August 2005, he surmised the end of the housing boom and referred to the Time Magazine cover as well as making points about the death of the housing ATM, condo mania, liar loans and insane speculation. This is just fascinating reading. Click here for the story.

My suggestion is that you pay very close attention to inventory levels and absorption rates in the Charleston real estate market. Bottom line, it's always about supply and demand.

And I'm hearing anecdotal evidence from areas like Phoenix that inventory is now declining and sales are increasing. It makes sense, housing is once again more affordable.

Published Thursday, May 15, 2008 10:00 AM by Howard Arnoff

Comments

# re: The housing crisis is over

Funny you should reference Bill Fleckenstein and that article. I read that article and a few others he has written and I must say I was one of the non believers..I thought there would be some correction...but I never imagined the meltdown we are witnessing.

We live & we learn.

Thursday, May 15, 2008 8:51 PM by Mike G

# re: The housing crisis is over

Mike, I certainly can't believe what we've seen the past few years and the Charleston market is reasonably healthy.

I just hope this Cyril character is just as right in his forecast as Bill Fleckenstein was.

Friday, May 16, 2008 5:20 AM by Howard Arnoff

# re: The housing crisis is over

Thanks for this blog.  I am glad a local professional posts useful info about the local market.  I, too, have followed Fleck in his MSN column.  From Bloomberg:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aH3.rQtrE6Gw&refer=home

Specifically:

``There may be signs that we are getting close to a bottom but we don't think we're there yet,'' said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. ``The housing market still has a ways to go towards working off its problems.''

Many in my industry have been concerned about the disconnect between the average family income and the price of a new home.  Also, the 28/36/20% Standard should become law.

Friday, May 16, 2008 9:54 AM by Charlie

# re: The housing crisis is over

Charlie, thanks for stopping by and for your comments. Actually, I don't necessarily think that the housing crisis is quite over but Cyril over at the WSJ did and he is probably smarter than me :)

I know that Bill Fleckenstein is way smarter than me.

As to the idea of a 28/36/20 law, it's just my opinion but I believe in letting market forces operate, not have more regulation and oversight by lawmakers. And by the time lawmakers actually do something, the crisis is firmly over.

Will a windfall profits tax lower the cost of a gallon of gas. Will subsidizing farmers to not grow crops bring down the cost of food. How has the government's "help now" mortgage program worked out so far.  

Correct me if I'm wrong but I think what you are saying and I agree is that homeowners should have some "skin" in the game, it used to be called a down payment and we sort of got away from that concept as lending standards (well, we shouldn't really call them standards, should we) got rather lax.

On the other hand, very few buyers have 20% to put down and mandating it will simply put a swift end to the housing industry. There are consequences for every action, this one is particularly dire.  

Friday, May 16, 2008 1:27 PM by Howard Arnoff

# re: The housing crisis is over

Re: Downpayment

 I wanted to buy a place in the eighties and was offered a 5% down/36 mo negative amortization loan.  I said no but many others said yes because the concept was that the market would (and did) move up.  On the sell side, cautious misses the deal but on the buy side lack of caution got us where we are.  The problem is that the brokers(mortgage and real) dont have any "skin" in the game....unless you can cite a returned commission.

 I am interested in how many first time buyers  are closing...Is that data available?

Friday, May 16, 2008 6:15 PM by charlie

# re: The housing crisis is over

Charlie, I appreciate your caution. The other day, I pointed out where several real estate agents made the newspaper in a bad way, they are being foreclosed upon for either their home or an investment property.

If you go back through the blog archives, you'll notice I'm not a big fan of negative amortization products highlighted by the most dangerous of all, the option arm.

Having said that, there is currently a fairly strong requirement for some sort of down payment by almost every mortgage product that I'm seeing being made available.

Frankly, I won't work with anyone unless they are pre approved and has money to put down, the other real estate agents can waste all day driving around burning gas, it simply is something I won't do. (add lunch and that is my skin in the game.)

As to first time home buyers closing, there isn't a list that I know of and I'm doubtful it exists, all I can tell you is that my last few first time home buyers have closed but then again, I'm selective about who I work with.

Friday, May 16, 2008 6:31 PM by Howard Arnoff
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