Why the Housing Market Crisis Isn t .

Why the Housing Market "Emergency" Isn\'t Dr. Stanley D. Longhofer October 2, 2007

Some Scary Housing "Certainties" New and existing home deals are "diving" while inventories are "through the rooftop" New home development has "grind to a halt" Foreclosures are "soaring" Home costs are "in a freefall"

Why Do We Care? Macroeconomic effect of lodging Determine what is occurring to my own lodging speculation Should I purchase or offer? What is occurring to the estimation of my home? Keep in mind: No one claims the normal U.S. home

Home Sales are Down Year-over-year Percentage Change Existing Home Sales New Home Sales Sources: NAR; U.S. Enumeration Bureau

Inventories Are Up As Well Months Supply (SA) Existing Homes New Homes Sources: NAR; U.S. Statistics Bureau

Home Sales: The Real Story New and existing home deals have fallen and this is an across the country wonder The ascent in inventories is generally because of the decrease in deals, not an up-tick in new postings Question: Why are deals falling while the general economy is still genuinely solid? Genuine GDP development was up 3.4% in 2007Q2 Unemployment was 4.6% in August

What about Construction? New home development has fallen strongly also, regardless of how you measure it Building licenses Housing begins Completions This is of more concern, since it speaks to genuine monetary action, not just the exchange of existing resources

Are Foreclosures Skyrocketing? Disregard dispossession reports that utilization information from RealtyTrac The regions secured by these reports change from month to month, making examinations after some time negligible The "great" abandonment and misconduct information are ordered by the Mortgage Bankers Association of America

Severely Delinquent Loans Percent of Loans Serviced 14% of all advances Subprime Loans 2% of all credits 3% of all advances All Loans Prime Loans Source: MBAA

The Foreclosure Debacle? On the off chance that it were not for two issue territories, abandonments across the nation would have fallen in the 2 nd quarter A local subsidence in the rust belt Four states with a high rate of financial specialist advances: Arizona, California, Florida, and Nevada

Are Home Prices Falling? It relies on upon whom you inquire? NAR middle deal value OFHEO house value file S&P/Case-Shiller house value file

U.S. House Price Appreciation Year-over-year Percentage Change NAR Median Price S&P/Case-Shiller HPI OFHEO HPI Sources: NAR; S&P; OFHEO

Comparing House Price Indices The drop in the NAR middle deal cost reflects less deals in extravagant waterfront markets, not a decrease in the estimation of any given house The S&P list is built so it underlines changes in top of the line houses Centered on huge, expensive markets Includes costly houses Value-weighted

OFHEO HPI by S&P Coverage Quarter-over-Quarter Percentage Change States with Full Coverage States with Partial Coverage States with No Coverage Source: WSU Center for Real Estate, utilizing information from OFHEO and U.S. Registration Bureau

Comparing House Price Indices Differences between the OFHEO and S&P records gives us knowledge into what is truly occurrence to house costs Appreciation in many markets across the country has moderated, however is still positive High-end homes in extravagant markets are enduring the worst part of the downturn Even in these business sectors, costs are well above where they were only three years back

Comparing House Price Indices Index: 2000Q1 = 100 S&P U.S. HPI OFHEO HPI Sources: S&P; OFHEO

A Housing Market Crisis? New and existing home deals have fallen, yet it is not really the crash being depicted in the media A self-satisfying prescience? Abandonment issues are genuinely separated House value thankfulness has hindered, however costs keep on rising most markets over the U.S.

A Housing Market Crisis? From a macroeconomic point of view, there could barely be a superior time for a lodging log jam Interest rates are low Employment is developing, yet gradually GDP development is strong Housing market measurements commonly think about what is going in the general economy, not the a different way Housing Market Crisis? From an individual point of view, you ought to just disregard what you catch wind of the lodging market in the national media Focus on what is going on in your city or, far superior, your neighborhood

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