Housing price fall still ongoing. 2nd derivative positive irrelevant.

[c1ue]

http://finance.yahoo.com/news/More-t....v=patrick.net

U.S. home values posted a year-over-year decline of 14.2 percent to a Zillow Home Value Index of $182,378, resulting in a total 21.8 percent drop since the market peaked in 2006, according to Zillow's first-quarter Real Estate Market Reports, which encompass 161 metropolitan areas and cover the value changes in all homes, not just homes that have recently sold.

U.S. homes lost $704 billion in value during the first quarter and have depreciated $3.8 trillion in the past 12 months, according to analysis of the reports.

Declining home values left 21.9 percent of all American homeowners with negative equity by the end of the first quarter, Zillow said.

By comparison, 17.6 percent of all homeowners owed more on their mortgage than their property was worth in the fourth quarter of 2008, and 14.3 percent were underwater in the third quarter of last year, the reports showed

I assume the percentage refers to those homeowners who have a mortgage, as opposed to all owners of homes.

Given the ratio of 2 to 1 mortgaged vs. paid off homes, 21.9% of mortgaged homes being underwater means roughly 14% of all owners of home are underwater, and in turn means roughly 9% of all homes period are underwater (64% home ownership overall, 64% mortgaged vs. all homeowners rule of thumb)

Almost 1 in 11!

But of course we are in recovery...

But in an early sign of improvement, 17 metropolitan areas across the country -- notably several hard-hit markets in California, including Los Angeles, San Diego and Modesto -- have seen two or more consecutive quarters of smaller year-over-year declines in home values, the reports showed.

Note - not staying stable or going up. Merely going down slower.

[cjppjc]

Re: Housing price fall still ongoing. 2nd derivative positive irrelevant.

http://finance.yahoo.com/news/More-t....v=patrick.net



I assume the percentage refers to those homeowners who have a mortgage, as opposed to all owners of homes.

You are probably right. But look at the way the article opens.

NEW YORK (Reuters) - Home values in the United States extended their fall in the first quarter, with more than one in five homeowners now owing more on their mortgages than their homes are worth, real estate website Zillow.com said on Wednesday.

If this is what passes for journalism, you can have it. Lately I find myself always looking hard at the choice of words being used in an article. In this case that would not have helped. Do editors exist anymore? Is the writer stupid? Or does he ignore the truth for the big headline?

[jimmygu3]

Re: Housing price fall still ongoing. 2nd derivative positive irrelevant.

You are probably right. But look at the way the article opens.

NEW YORK (Reuters) - Home values in the United States extended their fall in the first quarter, with more than one in five homeowners now owing more on their mortgages than their homes are worth, real estate website Zillow.com said on Wednesday.

If this is what passes for journalism, you can have it. Lately I find myself always looking hard at the choice of words being used in an article. In this case that would not have helped. Do editors exist anymore? Is the writer stupid? Or does he ignore the truth for the big headline?

Before declaring yellow journalism, can someone provide data to back up c1ue's notion that paid-off homes were excluded from this statistic?

[karim0028]

Re: Housing price fall still ongoing. 2nd derivative positive irrelevant.

Before declaring yellow journalism, can someone provide data to back up c1ue's notion that paid-off homes were excluded from this statistic?

I think by definition you cant really be "underwater" or under anything for that matter if you have no mortgage.....

If you own outright then your equity position just shrank, and falling 50-60k out of 300K you paid is not going to make you eat catfood for dinner... Plus no one can force you to sell, if you live in it you gain your place of domicile, if you rent it you still have rent coming in....

Its not a total loss thus it doesnt really impact you and you wont impact the community with a forced sale...

When you owe a mortgage, you will be a forced sale and it will be a total loss....

[rogermexico]

Re: Housing price fall still ongoing. 2nd derivative positive irrelevant.

I think by definition you cant really be "underwater" or under anything for that matter if you have no mortgage.....

If you own outright then your equity position just shrank, and falling 50-60k out of 300K you paid is not going to make you eat catfood for dinner... Plus no one can force you to sell, if you live in it you gain your place of domicile, if you rent it you still have rent coming in....

Its not a total loss thus it doesnt really impact you and you wont impact the community with a forced sale...

When you owe a mortgage, you will be a forced sale and it will be a total loss....

I would be wiling to bet that the denominator actually is the total number of homeowners, i.e., the fraction of those with a mortgage who are underwater is higher than 21%. I'll see if I can find another source.

Who in the hell decided that reporting year over year changes on a monthly basis was a good way to communicate anything about RE prices? This is probably because unit sales are reported that way by NAR, etc., but there is no seasonal variation in prices. Do you evaluate your stock portfolio that way? Of course not, you want to know your current profit or loss and how much it has changed recently.

So stupid journalists should stick to the only two things that matter: How much are we down from the peak and how much was the decline or gain last month, period.

[don]

Re: Housing price fall still ongoing. 2nd derivative positive irrelevant.

I was waiting to get a haircut last week, along with the newspaper publisher from the adjacent burg. We talked about how nearly all his copy comes from the central conglomerate offices, 3,000 miles away, the night before. He was proud that he put a local story on every day's front page. I asked him did he still do in-depth, local investigative pieces. He answered, "Don, I no longer have the employees capable of doing that anymore".

[c1ue]

Re: Housing price fall still ongoing. 2nd derivative positive irrelevant.

Before declaring yellow journalism, can someone provide data to back up c1ue's notion that paid-off homes were excluded from this statistic?

The previous 2 numbers were referring to those homeowners with mortgages. Thus the logical extension is the present underwater number refers to the same pool.

Still a dramatic increase: 50% in 2 quarters.

It ought to be interesting to see where this levels off. 30%? 40%? :eek:

[karim0028]

Re: Housing price fall still ongoing. 2nd derivative positive irrelevant.

The previous 2 numbers were referring to those homeowners with mortgages. Thus the logical extension is the present underwater number refers to the same pool.

Still a dramatic increase: 50% in 2 quarters.

It ought to be interesting to see where this levels off. 30%? 40%? :eek:

While i believe thats a great logical conclusion..... I still fail to understand how you can be "underwater" if you don't owe anything Perhaps i'm just making it too simple; but if there is no claim against you, you cant be underwater....

The financial circumstances are completely different; one is debt the other is equity.... You are never "underwater" with equity. Equity shrinks but it wont go negative unless you have a gas spill on your paid off lot (then you gotta pay to fix it)....

[c1ue]

Re: Housing price fall still ongoing. 2nd derivative positive irrelevant.

While i believe thats a great logical conclusion..... I still fail to understand how you can be "underwater" if you don't owe anything Perhaps i'm just making it too simple; but if there is no claim against you, you cant be underwater....

The financial circumstances are completely different; one is debt the other is equity.... You are never "underwater" with equity. Equity shrinks but it wont go negative unless you have a gas spill on your paid off lot (then you gotta pay to fix it)....

As I am the one pointing out that the 21.3% underwater number refers to only the pool of homeowners with mortgages - I fail to see what your first point is supposed to be.

As for your second point - again it can be correct in some circumstances but is not correct overall.

If you paid $1M cash for a house that is now worth $800K, you have lost $200K. Sure, you're not negative equity, but you still have less cash available than went into the home.

Secondly it is well known that the negative wealth effect on consumption is not a function of actual wealth, but is a function of perceived wealth.

Again with the previous example: if you bought a house for $800K, watched it go up to $1M in value, then watched it slide back down to $800K - you are effectively even.

But most people don't think this way: they think they gained $200K on the way up and lost it on the way down AND ACT ACCORDINGLY.

The only instance where falling home prices hence equity in paid off homes doesn't potentially matter is for those working poor who bought homes for $30K in 1970 and sell today for $800K.

These people know it was free money and aren't going to get all bent out of shape since they're still getting a huge windfall.

This mathematics doesn't work for someone who bought as long ago as 2001: no windfall.

[karim0028]

Re: Housing price fall still ongoing. 2nd derivative positive irrelevant.

As I am the one pointing out that the 21.3% underwater number refers to only the pool of homeowners with mortgages - I fail to see what your first point is supposed to be.

As for your second point - again it can be correct in some circumstances but is not correct overall.

If you paid $1M cash for a house that is now worth $800K, you have lost $200K. Sure, you're not negative equity, but you still have less cash available than went into the home.

Secondly it is well known that the negative wealth effect on consumption is not a function of actual wealth, but is a function of perceived wealth.

Again with the previous example: if you bought a house for $800K, watched it go up to $1M in value, then watched it slide back down to $800K - you are effectively even.

But most people don't think this way: they think they gained $200K on the way up and lost it on the way down AND ACT ACCORDINGLY.

The only instance where falling home prices hence equity in paid off homes doesn't potentially matter is for those working poor who bought homes for $30K in 1970 and sell today for $800K.

These people know it was free money and aren't going to get all bent out of shape since they're still getting a huge windfall.

This mathematics doesn't work for someone who bought as long ago as 2001: no windfall.

Clue i dont disagree with you, I was really addressing alot of the other folks talking about the whole "underwater" description.... From a fundamental standpoint it doesnt make sense.... As an equity buyer your equity shrank, for the most part it wont affect you that much if you live there you gain a place to live, if you rent you still get rent...

A person who paid cash or paid off their mortgage of 800K will FEEL poorer if the value is 600K (regardless of time of purchase bc they cant make their initial investment), the end result is completely different than someone who borrowed 800K and the value is now 600K, they ARE POOR AND INSOLVENT...

I dont believe the end psychological or real result is the same at all.... Cash buyers dont have the psychological fear of not being able to pay the mortgage or the threat of foreclosure or eviction and a total loss and getting kicked out on the street....

A cash buyer feels a slight pinch, a borrower gets a kick in the balls a complete and utter total loss with a still looming default judgment for the remainder of the debt, which is why i think this crisis is gonna be harsh, bc it affects the core of life unlike a stock market bubble...

[c1ue]

Re: Housing price fall still ongoing. 2nd derivative positive irrelevant.

Karim,

I think there are some people who will feel merely a pinch from losing 20% or 25% of the equity in their homes.

But for the majority of the population, the home is the largest single asset.

As an example (blast from the past):

The median net worth of U.S. households stood at $40,200 in 1995, not statistically different from 1993, according to results of a survey released today by the Commerce Department's Census Bureau.

Median home equity the largest part of household net worth was $50,000 in 1995, not statistically different from the 1993 value of $49,156, adjusted for inflation in 1995 dollars.

So, net worth is actually much less than home equity.

Massive drops in home equity have equally massive effects on net worth - because liabilities don't fluctuate to the same degree.

For those who had put everything into their homes as a piggy bank - the loss of 20% or 25% of their retirement funds definitely hurts even though this is less than the 40% losses from money put into stocks.

[cjppjc]

How's this for good journalism

http://finance.yahoo.com/news/Irish-...1451.html?.v=1

[stevejones]

Re: How's this for good journalism

its true that at present property prices are very affordable but as soon as economy will gain they will rise sharply again

[BiscayneSunrise]

Re: How's this for good journalism

Steve,

I see you are from central Florida. What little research I have done in that market does indicate there are some real bargains available there.

However, in south Florida things are a lot different. Homes that would be considered desirable by middle to upper middle class people are still seriously overpriced (using the old rule of thumb of 2.5X annual earnings) South FL property taxes are still too high and we have an overhang of thousands of ocean front condos still priced at 7 figures. Most baby boomers I know are interested in downsizing not upgrading. Also one has to calculate the cost of hurricane and flood insurance: then the total cost of ownership goes stratospheric pretty quickly.

I could go on but there are many threads here discussing the future of FL real estate you may want to research.

Could you elaborate on your insights and share some data that has you come to the conclusion of a sharp rise in prices?

[aaron]

Re: Housing price fall still ongoing. 2nd derivative positive irrelevant.

I look at Florida and think... So this is how the boomers will afford retirement! They've masterly driven everybody into foreclosure in the top three retirement areas in the country. Now, with the remainder of their savings they can buy a place in Florida, southern CA, and Vegas. Yay capitalism!


---> Actually, I heard a lot of "investors" are buying up properties. I suspect they are planning for the next Great Migration too. I was just kidding about the capitalism thing. I know these things will be rented out. Workers pay govt' ---> gov't pays social security --> social security pays landlord --> landlord pays banks --> banks pay self bonus --> bankers pay government bureaucrats --> bureaucrats vote for more loans and ss payments to the boomers. It is a virtuous circle, you see.

If the "right" investors are currently buying places, then yes, this is probably a bottom in some areas. Otherwise, expect another crash. Only oligarchs are allowed to perform God's work.