Post by unlawflcombatnt on Sept 2, 2006 21:51:02 GMT -6
9/2/06
I read a good, 3 1/2 page summary of the causes of the housing bubble and why it is bursting called Requiem for a Housing Bubble. Though I can't quote it, I can re-state some very interesting points. One is that median existing home prices have now declined in 3/4 of the United States. The fact that appraisers were forced to inflate their assessments of home values has not received a lot of publicity. It's estimated that 43% of homes purchased in 2005 were with interest-only loans. The estimate that 50% of jobs created in the last 5 years came from the housing boom has been stated by others as well. The monthly inventory of unsold homes has nearly doubled over the last year.
I think his best point, which really hasn't been stated before, relates to where the source of increased demand for housing will come from. Everyone who was going to be drawn in, has already been drawn in. Who else is left? Where will the source of the ever increasing demand necessary to sustain the boom come from?
There's simply no one left to even maintain current demand. The number of homes on the market continues to rise faster than new families are created. With speculators now leaving the market, the demand will fall even more.
Below is a graph from investech.com showing the rise in unsold new home inventories.
This graph can be seen at found at www.investech.com/ or seen directly at:
www.investech.com/others/upload/cw060902_unsoldhomes.gif
Add these to the roughly 3 million existing homes on the market and you've got a record level of over 3.5 million homes for sale at present. The number of new families created per year is less than 500,000. It appears the supply is greatly exceeding the demand.
I read a good, 3 1/2 page summary of the causes of the housing bubble and why it is bursting called Requiem for a Housing Bubble. Though I can't quote it, I can re-state some very interesting points. One is that median existing home prices have now declined in 3/4 of the United States. The fact that appraisers were forced to inflate their assessments of home values has not received a lot of publicity. It's estimated that 43% of homes purchased in 2005 were with interest-only loans. The estimate that 50% of jobs created in the last 5 years came from the housing boom has been stated by others as well. The monthly inventory of unsold homes has nearly doubled over the last year.
I think his best point, which really hasn't been stated before, relates to where the source of increased demand for housing will come from. Everyone who was going to be drawn in, has already been drawn in. Who else is left? Where will the source of the ever increasing demand necessary to sustain the boom come from?
There's simply no one left to even maintain current demand. The number of homes on the market continues to rise faster than new families are created. With speculators now leaving the market, the demand will fall even more.
Below is a graph from investech.com showing the rise in unsold new home inventories.
This graph can be seen at found at www.investech.com/ or seen directly at:
www.investech.com/others/upload/cw060902_unsoldhomes.gif
Add these to the roughly 3 million existing homes on the market and you've got a record level of over 3.5 million homes for sale at present. The number of new families created per year is less than 500,000. It appears the supply is greatly exceeding the demand.