Tuesday, July 28, 2009

More On The TRUTH About The Housing Market

Several analysts were spinning the slight bounce in the Case-Schiller home price index today by exclaiming that today's number is a green shoot. I'd like to un-spin this by saying that I predicted in February that we might see a slight dead-cat bounce in housing this spring as the trillions being printed by the Fed and injected into the system would cause a slight pause in the downward spiral in volumn and prices.

Enjoy this bounce while it lasts. Here is a very ominous quote from Mark Hanson of


“National New Home Sales, on a monthly basis, don’t even add up to half of the total foreclosure activity in California alone in a single month.”

And that is just California's foreclosures. Add in the rest of the country and you have a recipe for a supply/demand catastrophe. The next leg down in this mess is going to hit in the next few months. Anectdotally, I know someone who put a McMansion on the market here in Denver a few months ago priced at a $1 million. They had no showings. They reduced it to $900k - no showings. They are considering pricing it down to $700,000 to see if it will move.

This was in yesterday's Chicago Tribune, which featured a house that had been originally offered at $4 million and is now priced at $2.85 million:

"Luxury prices keep falling - Mansions priced at $1 million-plus are harder to sell, so owners ask for less -- and add perks"

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