This Story is Far From Over

"Housing is proving to be one of the biggest wild cards in the economy in 2007 ."

"Economist Tucker Hart Adams says the housing market won't stabilize in 2007. The combination of resetting adjustable-rate mortgages, homeowners unable to keep up with payments on so-called exotic mortgages such as interest-only loans, and other debt will lead to higher foreclosure rates and more homes on the market, she says."

'"It's really optimistic to think that it just took a little adjustment and everything is fine," she says. "It's one time I would like to be wrong."'

"The NAR's index of pending home sales, which is adjusted for seasonal variations, rose in December at the fastest pace since March 2004."

"Wachovia senior economist Mark Vitner says although recent housing data have been upbeat, they have been skewed by warmer-than-usual weather."

'"That brought out a few more buyers and allowed for more building in the Northeast," he says. Vitner says the warm weather "pulled sales forward." Come spring, housing activity will be slower than normal, he says."

'"I haven't met a home builder yet who thinks things have bottomed out," he says."

"Economists are zeroing in on a piece of data that could augur badly for the consensus view: the homeowner vacancy rate.That figure, an often-overlooked measure of how many homes for sale in the country are empty, has climbed to its highest level since the Census Bureau began tracking it four decades ago. Before 2006, the number had never risen above 2.0 percent."

The West had a 2.4 percent rate

"Goldman Sachs economist Jan Hatzius concluded in a report last Monday that rising vacancies signal that excess housing supply continues to grow _ and that new construction has to decline further this year."

"J.P. Morgan economist Haseeb Ahmed said the overhang of vacant housing stock could erode existing home values as sellers slash prices to move their vacant properties."

"Economists fear that many vacant homes are owned by speculators who are stuck with investment properties that they can't sell and may be under increasing pressure to drop their prices. ``We are concerned that there could be downward pressure on prices for awhile,'' Mr. Ahmed says."

"Jon Estridge, 34 years old, owned a pair of investment homes in Virginia that sat empty for several months last year. When the market slowed, it was difficult not only to find buyers, but also to find tenants who would pay enough rent to cover his mortgages. ``It eats you alive,'' said Mr. Estridge, who works for the federal government. ``The market is going down, and you are paying a mortgage.'''

"There's no doubt speculators had a major impact, but their numbers have been difficult to quantify. The recent vacancy data may be a useful measure of speculative activity and its fallout."

"A glut of vacant homes suggests that the U.S. housing market has not yet stabilized and may be poised for another downturn, Merrill Lynch said in a research note released on Monday."

"Merrill Lynch economist David Rosenberg wrote, "Looking at the inventory backlog and still-stretched affordability levels, this story is far from over."'

"A Commerce Department report showing the homeowner vacancy rate rose to 2.7 percent in the fourth quarter, well above the year-earlier level of 2 percent. That suggests a glut of almost 1 million homes sitting vacant, which will likely pressure selling prices for an extended period, Rosenberg said."

"Goldman Sachs analyst Jan Hatzius noted that the vacancy rate had fluctuated between about 1 percent and 2 percent for the past 50 years. "By itself, this would point to a fairly enormous supply overhang and little prospect of a bottom any time soon," Hatzius wrote in a research note."