Home prices forecast to drop for first time
The median price of U.S. homes is expected to take an unprecedented fall. Many officials believed that would never happen.
By David Leonhardt and Vikas Bajaj, New York Times
Last update: August 25, 2007 – 9:45 PM
The median price of homes in the United States is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950.
Economists say the decline, which could be foreshadowed in the government home price index to be released this week, will probably be modest -- from 1 to 2 percent -- but could continue in 2008 and 2009. Rather than being limited to the once-booming Northeast and California, price declines are also occurring in such cities as Minneapolis, Chicago and Houston, where the increases of the past decade were modest by comparison.
The reversal is particularly striking, because many government officials and housing-industry executives had said that a nationwide decline would never happen.
There next are reported glass half full and half empty views:
While the housing slump has already rattled financial markets, it has so far had only a modest effect on consumer spending and economic growth. But forecasters now believe that its impact will lead to a slowdown over the next year or two.
Jim Paulsen, chief investment strategist at Wells Capital Management in Minneapolis, said the decline is a reflection of just how much prices have risen over the past several years. "So in some sense, if we drop 1 to 2 percent, that's a celebration of how well we've done," he said.
In some respects, the Twin Cities metro area has mirrored the national market. During the first six months of this year, the median sale price of houses fell 2.17 percent compared with the same time last year, according to data from the Regional Multiple Listing Service.
That's a modest decline compared with price increases of as much as 10 percent over the past four years, according to Deb Greene, president of the Minneapolis Area Association of Realtors. She said it is "just a balancing of the market."
On an inflation-adjusted basis, the national median price -- the level at which half of all homes cost more and half cost less -- is not likely to return to its 2007 peak for more than a decade, according to Moody's Economy.com, a research firm.
And, for the shared-wall used unit market, this story wrap-up, as might be the case at the Ramsey Town Center:
"We are having to start from scratch and rebuild for a down payment," said Kenneth Schauf, who expects to lose money on a condo in Chicago he and his wife bought in 2004 and have been trying to sell since last summer. "We figured that a home is the place to build your wealth, and now it's going on three years and we are back to square one."
Staff writer Jim Buchta contributed to this report.
Next, Countrywide Financial Corporation is the poster child for the sleazy sub-prime profiteer, per the NYTimes focus piece on the firm and its practices. No excerpt, but the detail is troublesome, and it makes you yearn for the days of regulated lender conduct. They are financial predators, or seem so from the NYTimes account. (And if you have trouble with the link and a "subscription" page, I got a linkover from Google News - so a search on the firm name there should link to the item without any subscription intercept.)
You can see for yourself, the firm's website, here and here.