Meredith Whitney predicting losses again in the real estate market is quoted in the Wall Street Journal recently Analyzing the market in those cities that have already suffered the most by the financial crisis in the mortgage industry leading to widespread foreclosures, she none-the-less includes the whole real estate market in her forecast.
Meredith Whitney a well known banking analyst feels the real estate market is in for another major shock, part of a cycle of tumbling home prices and escalating unemployment which she says could plummet another 25%. Despite her dire predictions, many analysts feel there is a marginal recovery in the market now and if as she suggests unemployment climbs, the drop will be significantly less than her 25% prediction.
Since here in Montana and other cities in the United States the real estate market is showing some signs of stabilizing, that is a pretty depressing prediction. Sales while slow have been gaining steady growth over the summer but dropping prices in other states will have its impact nationally and that would mean that mortgages can be higher than a home is worth in today’s market. This is untenable especially with declining employment statistics and someone in the household loses their job.
The cycle continues with those unemployed being unable to make payments losing their home to foreclosure, putting more distressed homes in the market, which in turn drives prices down even more. The only bright side is that these lower prices are bringing buyers out looking and finding bargains.
“I think there is no doubt that home prices will go down dramatically from here, it’s just a question of when,” Ms. Whitney, known for accurately predicting troubles for Citigroup Inc., told CNBC Thursday. “…If you look at the drivers for unemployment, I don’t see that reversing very soon.” (More on Ms. Whitney.)
Housing bubbles grew in Las Vegas, Los Angeles and many other American cities – unchecked for several years and now those cities have experienced a severe down market bringing prices down by as much as 50 per cent according to the S&P/Case-Shiller index. New construction – unrestrained in the boom years has left neighborhoods desolate and abandoned.
Slight improvements are showing up in the statistics in that prices fell less in the second quarter than in the first by 4.2%. This is the first positive comparison in three years. Some cities like Denver Colorado and Dallas Texas have consistent positive comparisons for the past 12 months.
“Moody’s expects a drop of about 10% from current levels, and the declines will continue late into next year, says analyst Joseph Snider.”
Many analysts feel Meredith Whitney’s doom and gloom forecast is not reasonable given the positive comparisons this quarter.
While S&P/Case-Shiller shies away from predictions, David Blitzer, chairman of the index committee, thinks Ms. Whitney’s is estimate is too negative. While prices may fall further, “a 25% decline from here sounds very steep, he said. “To say that we’re only half way through this sounds pessimistic.”
by Sherry Fields
http://www.sherryfieldsrealestate.com
Mail this post