It's Just Going To Be Bad....
Really? I take my eye off the blog to tend to some problems I actually get paid to solve and look what makes the national headlines... wow... what a shock... ;-)
"After another monthly dip in June, sales of previously owned homes have fallen in all four major regions of the United States from a year ago, with nationwide sales volume down 9 percent, according to a report released Tuesday by the National Association of Realtors."
"These trends are rippling into the broader economy. Home builders, among the most impressive contributors to gross domestic product in recent years, are scaling back their plans. And millions of consumers face indirect effects: With interest rates rising even as home prices stall, fewer people can borrow on home equity as a source of free cash. Many others – those with adjustable-rate loans – are now being hit by a jump in their mortgage payments."
"The question is how far housing's slowdown will go, and how fast. So far, the impact on the overall economy has been, in the words of Federal Reserve Chairman Ben Bernanke, "orderly."
Economists generally expect that it will remain that way, although some high- flying real estate markets may face a harder fall."
'"We don't think it's going to be a disaster. It's just going to be bad," says David Wyss, chief economist at Standard & Poor's in New York."
"What this housing downturn could do is slow the pace of economic growth significantly.
Economists at Merrill Lynch, for example, reckon that the dive in homebuilding alone could subtract a percentage point from overall gross domestic product in the third quarter, tugging GDP growth down to perhaps 2.5 percent, annualized, for that quarter."
"And recession is a real possibility, in the view of Merrill Lynch's David Rosenberg. After the past 10 peaks in new-home starts by builders, an economy-wide slump has followed seven times. Housing starts, like home sales, peaked last summer."
Now that gusher is fizzling out.
'"Households are beginning to feel the full impact of higher borrowing costs, a softening housing market, and high gasoline prices," Nariman Behravesh, chief economist at the consulting firm Global Insight in Lexington, Mass., wrote in a report this month."
"If a construction slowdown represents a cut of nearly 1 percent from GDP growth, the impact from a slowdown in home-equity extraction could be almost as large, some economists say. Fixed-rate mortgage rates have jumped more than a full percentage point during the past year, as the threat of inflation has loomed larger and the Federal Reserve has raised the short-term interest rates it sets."
"The higher the Fed raises interest rates, the worse the problem gets," says Mr. Wyss at Standard & Poor's. "The rising level of home prices has been a big boost for consumers."
"The full extent of the housing slowdown will unfold slowly, and in ways that are often unique to individual markets, economists say."
"Often a down cycle involves two or three years of flat or falling prices, followed by a slow recovery."
"Nationwide, the inventory of homes for sale is up 39 percent – leaving a 7-month supply of homes on the market."