Saturday, June 7, 2008

WSJ: "Little Indication" of Housing Bottom

We read, and enjoy reading, Real Estate blogs by both Agents and Bubblers and Economists (see our side blog).

Sometimes, though, even if you're an average citizen (not one of us here at Real C'ville who's afraid for the local (and national) economy) you have to wonder what some of the REAs are thinking.  

Below are examples of misinformation to be found on local RE blogs, AND what Economists polled by the Wall Street Journal have to say on the same topic.

Agents suggest buyers "View each real estate market as unique." Of course this means Agents would like buyers to view Charlottesville/Albemarle as a microeconomy untouched by what is known everywhere else, nationwide, as a "collapsing housing market."

While it's true that markets are unique, most economists suggest viewing markets as "Regional."

WSJ: The only region where sales declined last month was in the South, also a region with below-national-average prices. The Case-Shiller index, out earlier this morning, controls for these regional mix-shifts and shows continuing rapid declines in house prices.
–Michael Feroli, J.P. Morgan

On local blogs, you'll find natter such as this:

"During the boom, people forgot about fundamentals and started seeing real estate as a single market. Everyone (media, consumers, analysts) lost sight of the uniqueness of each marketplace."

While it's true that nowhere else has the University of Virginia, Rugby Road, the Downtown Area, the nearby Blue Ridge, TJ's home & influence, it's also true that all real estate markets, and economies in the United States, are connected and impacted by each other.

WSJ: Inventory of existing homes is still very close to its record high so prices will continues to fall rapidly. Since its May 06 peak the Case-Shiller index is now down 15.7%; we expect the peak-to-trough drop to reach 25-to-30%. –Ian Shepherdson, High Frequency Economics

And there's this:

WSJ: Despite the sharp drop in home prices, housing demand has remained depressed, leaving a huge overhang of homes on the market for sale. In addition, rising foreclosures puts downward pressure on home prices since foreclosed homes typically sell at a discount to the market clearing price. As such, we expect home prices to fall another 10% through the end of 2009 as the market slowly, and painfully, clears the hefty overhang of homes on the market for sale. –Michelle Meyer, Lehman Brothers

BUT on a local blog you'll find ravings such as this: "Mortgage rates are still low, the economy nationally is growing, and jobs and incomes are gaining."

This is from a post created in late May 2008. If you have a pulse, as we apparently do here at Real C'ville, you know just from glancing at headlines that this is absolutely false.

And if you actually read the paper during the first week of June, you'd know that Unemployment hit 5.5%, and Oil prices surged to a record $138.00 per barrel, forcing local gas prices over the $4/gallon price.
These factors further diminishes the buying power of the average home shopper.

Additionally, it can be difficult to get a mortgage, which you can read about here.

And then there's this: as the economy has weakened and home prices have fallen in many parts of the country, even homeowners with better loans are also falling behind. The most famous example of this is Ed McMahon. Sadly, he's not alone.

We believe in blogging. But we don't believe in misleading readers.

Read the more reputable, and informed, perspectives quoted above, here at the Wall Street Journal.

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