Does housing need economic revival? Or vice versa?

February 25th, 2009, 5:05 am · 33 Comments · posted by Jon Lansner

Home Prices Continued To Decline In 2008, New Index Reports

Which comes first? Economic revival? Or housing rebound? Even President Obama’s Tuesday address to Congress didn’t make that clear.

A recent Rasmussen Reports national survey found that 63% of Americans say the housing market will improve only when the overall U.S. economy gets better. Details:

78% of Republicans agree.
61% of adults not affiliated with either major party agree.
54% of Democrats agree.

Rasmussen notes: “The strength of the Republican response is interesting, considering that GOP leaders in Congress earlier this month were arguing that the housing crisis is the root cause of the country’s economic problems and that the economic stimulus plan should ‘fix housing first.’”

Which comes first?

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BOGEY says:

February 25, 2009 at 6 am

OC had a ‘fairy dust’ pretend economy because it was largely driven by HELOC ATM machines. Now that they have run dry, the economy is in shambles. A housing rebound could reverse that but mathematically is not possible until an economic recovery comes first.

jennychang says:

February 25, 2009 at 7 am

the whole damn housing thing was what caused the whole economic meltdown! Let the damn housing reset in its natural course and everybody will come out great!!! Idiots lose their houses b/c they couldn’t afford will learn a lesson of the importance of saving. Those who CAN afford will start buying! STOP the damn gov’t artifical ways of trying to help these idiots.

Moopheus says:

There’s nothing wrong with the housing market. Prices got way out of line with reality, and now they are correcting to more rational levels, a process that still has a ways to go to be completely worked out. Sales have slowed, but again, they are slowing to more normal levels from levels that were a result of abnormal market distortions–easy money and speculators are being washed out of the market, and that is a good thing. Government should not be trying to “stimulate” the market–it’s had enough of that! If Realtors want to stimulate sales, they should cut their commissions. If builders want to sell more houses, they need to cut prices. It’s not that hard to figure out.

bloodinthestreets says:

.
Yahoo news headline this morning (AP):
“January existing home sales unexpectedly fall by 5.3 percent”
.
http://news.yahoo.com/s/ap/existing_home_sales
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Unexpected? Unexpected only by about 4 people on this blog, and nobody else.

Marcia says:

NAR is at it again. Lawrence Yun, NAR chief economist, tried to spin the decrease in inventory, but the increase in supply based upon January sales as a good thing. He said there was understandable hesitation by some home buyers:

“Existing-home sales – including single-family, townhomes, condominiums and co-ops – fell 5.3 percent to a seasonally adjusted annual rate1 of 4.49 million units in January from a level of 4.74 million units in December, and are 8.6 percent lower the 4.91 million-unit pace in January 2008.”

“Total housing inventory at the end of January fell 2.7 percent to 3.60 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace. Because sales were down, the January supply is up from a 9.4-month supply in December.”

“Existing-home sales in the West were unchanged at an annual rate of 1.20 million in January and are 29.0 percent stronger than a year ago. The median price in the West was $220,000, which is 25.5 percent below January 2008.”

You’ve got to admit that NAR gets their money’s worth with these guys.

February 25, 2009 at 8 am

.
The link below is of a very interesting (written) interview with Niall Ferguson, covering likely global reactions to this d.. d… de …. extended recession.
.
It is titled:
‘There will be blood’
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(You can understand why it caught my attention.)
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http://www.theglobeandmail.com/servlet/story/RTGAM.20090223.wferguson0223/BNStory/crashandrecovery/

sdduuuude says:

February 25, 2009 at 9 am

You need a third choice in there:
“Housing prices need to crash further”

That’s what really needs to happen first, then economic recovery, then housing recovery.

“Foreclosures aren’t the problem, they are the solution.”
- some guy on pigginton.com

mav says:

Let’s ask octo-mom and her merry band of California-eye-ay tax blood sucking gypsies…. let’s take it a step further and ask state workers, and the unions, whatever will they do without our state income taxes and bubble property taxes…..
.
20% in Los Angeles County receive public aid
By Garrett Therolf
February 22, 2009
One in five Los Angeles County residents — nearly 2.2 million people — are receiving public assistance payments or benefits, a level county officials say will rise significantly over the coming months as the fallout from the recession continues
.
http://www.latimes.com/news/local/la-me-welfare22-2009feb22,0,4377048.story

Dealtracker says:

February 25, 2009 at 10 am

It’s all connected. The armegeddon people here want will take them down with it. How much more proof do we need?

rants says:

jennychang– like minds think alike - are you single?

It’s really tiring hearing the simplistic rants so often found here. Did it occur to anyone that a three year housing crash has brought down far more innocent people than guilty ones? No, I’m sure it hasn’t. And please, for the love of all that is holy, don’t preach about how no one should buy a home unless they can pay if off without a job.

King says:

The Real Estate Market is a lagging indicator of the overall economy. Therefore, look for the stock market and unemployment to stabilize first and for the housing market to follow 1 to 2 years thereafter.

Dealtracker, you can kiss ANY type of sustained housing recovery…. GOODBYE in 09 or 10. It’s over, done kaput!
.
“Orange County poised to lose 43,200 jobs in 2009″

http://economy.freedomblogging.com/2009/02/24/orange-county-poised-to-lose-43200-jobs-in-2009/

“And please, for the love of all that is holy, don’t preach about how no one should buy a home unless they can pay if off without a job.”
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DT, they don’t need to be able to pay it off, but they do need to have savings to cover their mortgage for a long time….. if they don’t….. don’t buy…… period, you are not entitled to your income… nobody is…

February 25, 2009 at 11 am

Bogey, everyone has an opinion. Here are three more:

Chapman University estimated a loss of 9,000 Orange County jobs this year in a report released in December.

The UCLA Economic Outlook for Orange County, released in October, predicted that about 4,000 to 5,000 jobs would be added this year.

An October report from California State University, Fullerton forecast that Orange County would lose 57,000 jobs in 2009, then add 86,500 in 2010.

And the job losses will come from finance? That’s absurd. Finance shook out a long time ago and is going gangbusters right now. Yes, right now.

And Mav, what’s “a long time”? It’s been hard, for some impossible, to sell for three years.

DT, my oppinion, is a full year of savings…. but I believe banks will start looking for at least 6 months on top of the 20% down payment…… unfortunately for many people there is no hope and they should have walked away immediately…. I believe that is more responsible than milking the tax payer money and living rent free for a half a year….. DT I see the value of your contrarian view here, but really half of what you post is nonsense marketing data… and wishful thinking…. you have been posting here for years now under different names…. and the downward spiral just continued on….. I hope you didn’t fool too many people…

Eat it in the OC says:

So for all those “innocent” victims out there who are now posed to accept loan modifications bought by the taxpayer, will they then voluntarily choose to pay more when they either make more money due to raises or inheritance or will when their home value eventually goes up? I think this can work both ways. Of course, leave out the liar loans, HELOC abusers and flippers. An “innocent” homeower who accepts a modification of their loan will then be required to pay more when their income rises (31% of income right?) or if they sell any other assets (collectables, cars etc) or if they inherit any money. This is only fair, there’s no free lunch. I certainly won’t get the same benefits if I am distressed in my ability to pay my rent so neither should the homeower. How can you find fault with this idea? Shouldn’t the homeower honor their contract? Shouldn’t they be accountable at some level? Or are you suggesting they should just get a free ride with no strings attached?

Whatever, mav. This site, like 98% of websites in existence is a place for people to vent, nothing more. From stories on police beatdowns to car accidents to the Real Housewives of OC, you will see page after page after page of losers trying to build themselves up by putting down any and everything under the sun. Being a contrarian is just my nature. The blog certainly needs it, with all the gullible, uneducated things that get posted here. And “half of what I write” is hardly nonsense. I’ve adequately defended all of it and you know it.

The loan modifications paid for by taxpayers are, at best, 3.5% of their gross income. That’s $2,800/yr on an $80,000 income. The rest comes from investors. I’ll remind you that first time homebuyers are being offered $8,000 from the country and $10,000 from the state on top of tax relief and other breaks. Where is the great injustice, cause I missed it? Everyone who would give back their $8,000 raise their hand.

February 25, 2009 at 12 pm

Oh, really. No injustice you say? Maybe I don’t want to be bribed into buying an over priced asset? How long do think that $8000 dollars would last if I bought a home today? I’d rather have the $8000 cash now and use it when I see fit. Wouldn’t that be better and fair? Remember, originally the plan was to pay it back and it should have stayed that way.

Oh, and that $10,000 from the state is only for new homes so that money goes right into the pockets of the over leveraged and completely incompetent home builders.

The great injustice is that the government is scamming the taxpayer out of billions to trillions of dollars to rescue the financial markets due to the real estate ponzi scheme. I shouldn’t be outraged that AIG is again asking for more money? I shouldn’t be outraged that GM is asking for a bailout? I don’t recall getting dividends from them, do you? The outrage is that I rented, saved my money, didn’t take risks and waited without crying about getting a handout when the market was out of my reach. Now, that the shoe is on the other foot, poor babies are crying, waa waa, my mortgage is too expensive for me to live a lavish life that I’m entitled to. I want a handout! So, you think that I shouldn’t be outraged? Where is your outrage at the homeowner who risked the equity of entire neighborhoods so that he could extract every last dime from his home? Shouldn’t you be outraged at people who did this?

http://www.irvinehousingblog.com/blog/comments/everybody-wants-to-own-the-world/

Most people who accept the $8,000 won’t ever lose it, because they are buying a home to stay in. If you want to gamble that you’ll do better by waiting, that’s great. No problem whatsoever. And yes, I am outraged at much of this, but I have a more balanced view of what happened than you do. A person taking out an ARM didn’t cause AIG to collapse, nor did it bring about GMs trouble. Massively leveraged instruments that often have nothing to do with housing caused much of the damage. Sheer terror in the markets, completely disproportionate to the size of the problem, also played a role. This is one big negative feedback loop, but the anger is reserved for people who may have bought too much home or may have used an unsuitable loan. I’m more angry at the anger than anything else at this point.

not buying it says:

Dealtracker: “And please, for the love of all that is holy, don’t preach about how no one should buy a home unless they can pay if off without a job.”

Whoever stated that someone should only be able to buy if they can buy a home in cash? A job is needed for most buyers. Man - your points are way off in left field.

Concerning the bailouts - look. These people leveraged themselves in hopes of making a buck. They made a clear decision to take out a loan that they knew the principle would be virtually impossible to pay back on a fixed rate. And yes, people should be buying properties that they could pay back the loan with a fixed rate - even if they want to leverage an ARM with increased risk - its called a frickin’ contingency. The point is - they accepted the risk. Where did you read that the taxpayer accepted to pay these fools to help keep them in a home? You have any idea how many people foreclosed back in the 90’s because the Fed shut down entire defense and R&D projects? How many engineers do you know received such a handout when they couldn’t make their home payments that they could easily pay off if they had not lost their jobs because of what the presidency did?

Your views are very miopic and frankly, quite disturbing sometimes. They are entirely based on the fact that society should help others. I am stating that the policy wasn’t leveraged when a group of hard working people were effected by a move by the Fed. But now the policy is being leveraged because greed and stupidity prevailed for so long.

Frankly - encouraging consumer spending by the Fed is what caused this mess.

They are doing the exact same thing now to try and fix it. They are assuming that only homeowners buy. They are assuming that there are not people out there that have the cash to spend freely. They are assuming wrong. There is enough cash in the market today - its just that those with it were not stupid then and are not stupid now. Make it palatable to spend and it will be spent. They are trying to improve the ability of idiots to spend.

Talk about throwing fuel on a fire.

Their ultimate goal is to take the money from those that do not spend unwisely and give it to those that do.

Dealtracker: It is more simple than you think.

We are not just angry because its unfair. We are more angry because this will not fix the problem.

I am not angry over assisting businesses because that translates directly to jobs. I have always been for those concessions. There are always innocent and guilty mixed in that group.

But for homeowners that purchased using a loan with a principle that was over 5X annual income - they deserve nothing for making such a decision. That is a decision that RARELY turns out to be good. It takes SERIOUS discipline to manage that debt - we have seen the effect.

If I were any of you I would certainly not be angry. You just had a 6-7 year retrenchment in pricing. And Not buying it, I’m sorry, but you are one boorish person. You drop in once or twice a week and post your ridiculously long tirades without having followed the conversation, you brag constantly about your firm, you speak compassionately about your workers being able to buy homes, yet you are out there scooping up the deals that were meant for people like them. You ridicule anyone who doesn’t recognize your obvious brilliance. All in all, I would never want to know you. Hell, I’d have a beer with any of these guys, so that says alot.

Dealtracker: “Most people who accept the $8,000 won’t ever lose it, because they are buying a home to stay in. ”

You make so many assumptions it is ridiculous. That is why you get targeted. Your line of thinking requires so many assumptions that are very far fetched.

How long do people stay in their home on average?

Please - just stop with the nonsense assumptions. I appreciate reasonable, critical thinking. But you rip apart objective statements with subjective reasoning and off-beat assumptions.

There are reasons why there are not many other posts like yours, both in the media and on the internet. Its not becuase they are insightful. Its becuase they are full of assumptions that do not ring true.

You take the time to address my person but not the post.

What is it with you? Stick to the points man.

At least state what is not valid in my reasoning. Or what assumptions I make are wrong or not socially responsible.

Forget about what I know, earn, run, or help. Stick to the damn topic.

February 25, 2009 at 1 pm

Pot meet kettle:

“Your views are very miopic and frankly, quite disturbing sometimes.”

I would go so far as to say that you are routinely more insulting than any dozen other posters here combined.

My views are far from myopic. They are chock full of perspective and reason and are routinely supported with facts, figures and links. They slice and dice erroneous theories and reports and are rarely successfully refutedd. What planet did you just arrive from?

Dealtracker, then why the hell are you in the mess you are in? and why the hell have you been consistently wrong in how the housing market and economy have played out?…..the problem with you is that you are a contrarian on a need basis…… you need to be a contrarian…. it’s not by choice……. so you churn the marketing data to come to the conclusion you need to get to…. let’s not worry about the global economic reality…

Seriously, you need to get over yourself. Won’t lose that $8,000? So, what happens if they lose their job in a year or two years? Prices are declining at monthly rate of 2%. So, if I buy a $500K home, that $8,000 is gone in the first month. But if I wait and purchase later we prices have stabilized or even start rising, I not only won’t lose that $8,000, I won’t even need it to as an incentive (read: bribe) to buy.

February 25, 2009 at 2 pm

dealtracker: come on now. You have yet to address a point I made here.

As for your statements - yes, I have read many but not most of your posts. From what I read, I have seen you mix state stats with national, I have seen you make assumptions without stating them, you have taken certain metrics and “morphed” them into being something they were not - an example of which was your argument concerning affordability. But let’s not digress.

Let’s stick to reason - what assumptions did I make here are invalid? Why do you disagree with my statements? Stick to the points.

This is where it will get very interesting.

BTW: by myopic - I meant it to mean that much of what you write focuses only a few of the issues at hand, discounting others that many believe to be quite significant. Also, many times you make statements that address near term cause and effect - but you, along with so many others, fail to take into account the effect long term, on many aspects of our society. The FED continually makes the mistake of focusing only on several near term effects with little consideration for long term effects.

I would much rather read your response to my points made in earlier posts than bicker about who we are or what do and buy.

February 25, 2009 at 6 pm

so much for reasonable debate

Slice	Price	Ch.	Sold	Ch.
House	$500,000	+18%	1,833	+11%
Condo	$290,000	+7%	881	+22%
New	$617,500	+24%	171	-17%
All OC	$435,000	+10%	2,885	+12%

Orange County Register