"an economic meltdown of historic dimensions"
- From: Confutius <proroku@xxxxxxxxxxx>
- Date: Sun, 23 Mar 2008 12:32:40 -0700 (PDT)
Housing Markets: A Vacant Look
As the speculative froth of the housing boom dissipates, which markets
are stuck with the most unfilled housing stock? Census Bureau data on
annual homeowner vacancy rates in the 75 largest U.S. metropolitan
areas help to fill in some of the blanks. Census numbers point to
areas in and around Orlando, Fla. as having the heaviest overhangs of
empty houses; its homeowner vacancy rate was 7.4% in 2007. Other
sunshine state markets also showed high-and-rising homeowner vacancy
rates: Tampa-St. Petersburg (5.1%), Jacksonville, Fla. (4.6%), and
Miami-Ft. Lauderdale-Miami Beach (4.4%). Bear in mind that the
national rate rose to 2.8% in the fourth quarter, matching a record
set in the first quarter of 2007. It's the highest the rate has been
since the government began tracking vacant homes in the 1960s.
Besides the Sun Belt, some Midwestern rust belt regional economies
also ranked high on the Census Bureau's list. Ohio cities of Cleveland
and Akron had some of the highest in the country. They both came in at
4.5% last year. And Indianapolis, Detroit, and Cincinnati, Ohio/
Middletown, Ohio, also all showed rates at 4% or more. For a detailed
look at homeowner vacancy rates -- and to hear three economists weigh
in -- see WSJ.com's interactive map.
So what can this data tell us about the future direction of prices?
Economists say that homeowner vacancy rates are indeed a decent proxy
for overall supply issues, with a mounting vacancy rate likely to
exert downward pressure on prices. But they also caution that it's
crucial to triangulate oversupply with a region's economic
fundamentals, such as employment and population growth, when trying to
augur where prices will go.
"I'd be more worried as an owner and investor in Michigan," said
Joseph Gyourko, a professor of real estate and finance at the
University of Pennsylvania's Wharton School. "Why? Because they don't
have strong population growth. Florida does. So Florida is going to
grow out of its excess supply. And even though it looks worse now, I
would suspect that, long run, it's better off." - Matt Phillips
Nice way to allocate wealth empty houses. Why doesnt the government
just give the homeless these houses and provide jobs for them by
keeping the nieghborhoods clean and safe.
Comment by Richard E Barsom Sr. - March 21, 2008 at 11:21 am
Florida may have population growth but there is little no no economic
growth other than low paying tourist jobs to support the kind of
prices they have been getting. One only need view the Miami Skyline at
night to see a multitude of brand new residential highrises with
little to no illumination....a fluke? I think not....
Comment by Joseph Ruscito - March 21, 2008 at 11:21 am
As we have seen with Bear Stearns, the massive amount of leverage
built upon the real estate market has increased the risk of
convulsions popping up virtually overnight threatening the entire
financial system. There is no time to wait for natural population
growth to put a floor under the real estate market. The Homeowners and
Banks Protection Act is urgently needed legislation if this country is
to avoid an economic meltdown of historic dimensions.
Comment by Thomas Chechatka, Rochester NY - March 21, 2008 at 11:36 am
There will be tens of thousands of houses bulldozed in the next few
years about the country. Many empty, partial completed, condo towers
across many cities will be in the skylines for years.
Comment by Akex - March 21, 2008 at 11:48 am
Akex.... Not where I live. Housing boom around the corner here!
Comment by Wall Street Warrior - March 21, 2008 at 12:12 pm
"The Homeowners and Banks Protection Act is urgently needed legislation if this country is to avoid an economic meltdown of historic dimensions."
Right! Let's keep people and investors who can't afford these homes
solvent at tax-payer expense! The result, INFLATION, hurts us all-
especially the elderly, the poor, and those on fixed incomes who had
no part in this greedy debacle.
Comment by INFLATION affects us all - March 21, 2008 at 12:13 pm
Inflation worries? Invest in equities and not fixed income!
Comment by Wall Street Warrior - March 21, 2008 at 12:17 pm
The INFLATION that "hurts us all" is that which got us to the very
point we are at. This has come by the peddling of credit instruments
whose real value is now proving fictional. What is urgently needed is
legislation that stabilizes both the real estate market and those
solvent banking institutions critical to a functioning economy.
Comment by Thomas Chechatka, Rochester NY - March 21, 2008 at 12:25 pm
Less regulation... please!
Comment by Wall Street Warrior - March 21, 2008 at 12:37 pm
Who needs Americans to buy back American property when you have
foreigners who will do it for less.
http://www.iht.com/articles/2008/03/21/business/21steel.php
Comment by iz - March 21, 2008 at 1:03 pm
Ya just gotta admire WSW aka Schmuck's enduring optimism. He may not
prove right, but it's always nice to have a sunny disposition around.
Comment by piqued - March 21, 2008 at 1:12 pm
My prediction is that we are on the verge of getting a huge federal
bailout, probably about Labor Day weekend, so it's far enough in front
of election day that all of the politicians can take "credit" for it.
Among the goodies in the bailout bag will be a "lease with option to
buy" program whereby the current occupants, aka the current pseudo-
owners, will get the first chance to stay in the home as a lessee from
the feds via some newly created public housing authority. If the
current occupants opt out, then the feds will go to an applicant list
and through a magical formula that only the feds could come up with,
determine who is most "qualified" to become the occupant. The new
occupant(s) will be required to maintain tenancy of 5 consecutive
years, maintenance and upkeep of the property and a strong lease
payment record. IF those criteria are met after the 5 year period, the
tenants will be deemed to be "qualified" for some newfangled 25 year
federally backed mortgage, the previous five years of lease payments
will be identified as the down payment and ownership of the home will
be transferred to the tenants. This sort of program will justify, in
the minds of the DC gurus, all of the many billions of dollars that it
will take to make this work. It will be sold to the public as a "win-
win" for current homeowners who can't pay but want to stay in their
homes, prospective homeowners who want a chance at ownership but
otherwise wouldn't qualify for a mortgage and oh, by the way, for the
finance industry who is currently in so far over their collective
heads that they can't even begin to see the surface and this is the
only way out for them. What we won't be told is how much taxpayers are
going to have to pay for this bailout and how long it will take to do
so.
Comment by Anonymous - March 21, 2008 at 1:41 pm
Sorry WSW. Increased inflation will adversly affect stocks as well as
bonds, i.e., unless earnings increase sufficiently to offset the
inflation.
Comment by TTT - March 21, 2008 at 2:57 pm
There is a very simple way to solve this "Vacant Look". Just lower the
house prices by 50%-75%. I am sure there will be many young couples
who need to buy their first homes. They had been priced out the market
by greedy speculators and ignorant people who cannot read contracts.
There is no unwant shares in the stock market (other than bankrupt
companies) because they are priced to demand and supply. Why can't the
house market do the same?
Comment by Let Free Market Rule - March 21, 2008 at 3:06 pm
We are advising our European clients to sell NYC real estate holdings
and other dollar assets. We've been advising them to do this for two
years and they did the opposite. Now they are starting to listen. They
tell me they are ready to sell their NYC $1m studio and that they made
a healthy 10% in 2 years. Then I remind them they got run over by the
Euro and they could have done much better in German bonds.
Comment by MktStrFinancial - March 21, 2008 at 3:29 pm
You have to love the euro-rich who buy negative cash flow NYC condos
to visit them for 4 days a year. Suckers...
Comment by JRR - March 21, 2008 at 3:30 pm
In Michigan we have a governor who spent $13,000,000 bucks of the
citizens money a on a primary the means nothing. So we end up being
cheated again by dumb arrogrance.
The attorney general who loves insurance companies.
And the mayor of Detroit who loves everyone. Himself the most.
When is someone going to give the retired citizens a break on their
property taxes instead of putting their friends and their selves
first.
Its our inept minor league politicians that are ruining the business
climate in our state, by not taking care of the citizens business.
They should resign if they can't get the job done.
Comment by swede - March 21, 2008 at 4:19 pm
Did the fed know?
http://www.washingtonpost.com/wp-dyn/content/article/2008/03/20/AR2008032003731.html
Comment by Fed Up - March 21, 2008 at 4:24 pm
Ho... "Hell yea they knew... you think"!
Comment by AnOZnymous - March 21, 2008 at 4:42 pm
In my opinion the fed knew and wanted it to happen. In my opinion they
want house prices to be high enough to force people to get a 2nd or
3rd job to pay for them but not dollars per hour wage increases.
Comment by Fed Up - March 21, 2008 at 5:26 pm
in Ca people are snatching up forclosure and short sales for 50 cents
on the dollar then moving into them and walking away from their upside
down house. The party's on!
Comment by loan guy - March 21, 2008 at 5:34 pm
This is all an example of the economic principal of "creative
destruction". There will be buying opportunities a plenty once the
Housing Market hits bottom. Keep your powder dry and just be patient a
while. You'll be amply rewarded.
Comment by Mike - March 21, 2008 at 6:58 pm
I've lived in Florida for over 20 years. In my area outside of Tampa
in Brandon, the area is still moving along pretty well. Prices have
certainly fallen 20%, but there are many good deals abound along with
highly rated schools. Employment seems somewhat stable for now. Retail
is off by some 15% to 20% so that remains a concern. South Florida is
somewhat a mess given the oversupply of beach front condos, but those
prices have also moderated in line with circumstances. Insurance and
taxes also remain a drag going forward.
Comment by Interesting - March 21, 2008 at 7:28 pm
To Wall Street Warrior: Obviously you have a high guaranteed income
continually flowing in so you can afford to keep buying stocks, even
if on balance, your return may be way down. You apparently have the
luxury of not having to deal with trivial concerns like managing risk,
since even if you are in the end a loser in the stock market, your
economic survival will not be in jeopardy. In other words you are in
the enviable position of not having anything better to do with all
your money. You told us several blogs ago that you live in Arizona,
and that your house has been appraised upwards of $200,000 since
December. So keep appraising your home every couple of weeks if that
confirms to you the validity the opinions you express here. But don't
continue pleading for others to join you in your ongoing quest of
buying ever more equities.
Comment by Observer - March 21, 2008 at 8:09 pm
Observer... I am afraid you are wrong with respect to my return on
equities. Dollar cost averaging over these many years has increased my
net worth many fold. Steady as she goes... one gets rich slowly. In the
90's, I purchased Microsoft in the single digits, and never looked
back. I still own the stock and never cashed in except for dividends.
A similar situation with google in later yeas. So... equities purchased
in a disciplined way... mutual funds, low cost mostly gets you to
critical mass.
The rest of you comment sounds like "sour grapes".
Again, equities (S/P) is a fire sale. One should entertain being a
value investor in order to do well in the Market.
I do not consider my home an investment but it has appreciated in this
"down market"
Real estate is local. Prices continue to appreciate.
I manage my risk well. I am well diversified in all asset classes.
Again, equities purchased on a regular, disciplined basis is the way
to go to stay ahead of the game. Leveraging into other asset classes
minimizes the risk!
Comment by Wall Street Warrior - March 21, 2008 at 8:39 pm
Last year Palm Beach Counties population grew by only 99 people. The
year before (2006) it was 7000. Last month only 14 house were sold in
Delray beach the hottest real estate market in Florida according to
Donald Trump. Numbers don't lie. There are to many houses and not
enough buyers. The values have to come down. Supply vs Demand. There
is a glut of condos. Don't catch a falling knife.
Comment by Tom Leeman - March 22, 2008 at 8:08 am
WSW: Bravo for you and as the song says "Whatever gets you through the
night" I'm glad you still have Microsoft (now $29/s.)to keep you warm
and never sold a share even when it was 105 to 110. Same for Google -
it was over $700 last year; now it's $450 but being the bulwark of the
market that you are, you couldn't cash in even a little and take your
wife on a well deserved cruise. In my book that's a shame and a waste.
As for my sour grapes I am a connoisseur of them and enjoy their
bouquet, particularly since I have been immensely lucky when it came
to selling stocks - twice in particular; at the end of 1999 and in
July of last year when by my perception the design of the market had
devolved chiefly into the financial injury of people through subprime.
Whatever fits one's style, if it is viable, is probably what matters
more than any maximum return. Or, to put it another way, there is more
than one way to skin a cat; you only need to make sure you aren't the
cat. Best of luck to you and may you continue to enjoy good fortune.
Comment by Observer - March 22, 2008 at 9:03 pm
Will someone please tell me how declining real estate prices is not a
boon for the economy? I mean, won't people have more money to spend
since they will bespending less of it on keeping warm and dry (and
less on keeping worthless government employees on the dole by paying
property taxes). Heck, I hope prices fall to 10 cents on the dollar.
Only idiots revel when their house doubles in value. They start
spending their hard earned money. When they run out of it, they
borrow, jacking up their mortgage, and spend some more. AMERICA WAS
BETTER OFF WHEN PEOPLE BOUGHT REAL ESTATE TO LIVE IN OR HOUSE A
BUSINESS...when home prices merely kept up with inflation.
Comment by Ricardo - March 22, 2008 at 10:20 pm
Feds are trying to bail buyers and lenders who are both responsible,
for this mess, which is called greed.U.S is what you called boxed in,
Food, ENergy,house,car payments, Kids,clothes, Insurance ect. Its
over, this country needs to roll up their sleeves and go back to work
and quit handing out welfare checks, No pain , no gain, Ever one needs
to start growing a garden if possible and rip up all your credit cards
and quit overspending and star sharing , quit wasting electic, water,
ect Everthing is overpriced, its really has gotten to be a joke. we
need to wake up or the Feds are going to be printing money 24 hrs a
day for many many years without anyway what so ever to pay it back.
Comment by George Neo - March 22, 2008 at 10:31 pm
Observer... Have you heard of "stock splits" ie. Microsoft since the
very early nineties. No, I am not interested in being the bulwark of
the Market only to make money!
Education.... If a stock is at a 100 and splits 5 for 1 the stock is
then 20. Now... if the stock goes to 40, do the math. Microsoft has
split multiple times.. Get it? The same for Google. The miracle of
equities, of course, chosen correctly.
Case closed.
Comment by Wall Street Warrior - March 22, 2008 at 10:32 pm
Yeah Great ! Foreigners buying real estate in the USA must be really
stupid. They are not allowed to live continuously in their property,
have to pay the US Gov. 20% of the sales value in case of sales, and
will be exposed to US tax system (world income) troubles. Thanks but
no thanks ! For Europeans it is still better to invest in Europe
rather tha the US !
Comment by Al VA 22039 - March 22, 2008 at 11:09 pm
I don't know what population growth he's talking about. Florida's once
robust population growth has evaporated. Schools have had fewer
students for 2 years now. Retiries have quit comming because of
abusive property taxes for new commers and high property insurance.
The only reason why population groth here is not negitive, is because
people can't sell their homes to leave.
Comment by Down and Out in Central Florida - March 23, 2008 at 12:24
am
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