Ebb tide for real estate prices means "what hot economy?"
By Lee Russ
Tuesday, November 21, 2006 at 03:45 PM
Remember that "hot economy/" Remember all those credit accounts funded by equity in the home? Remember today's story from USA Today?
The White House on Tuesday lowered its forecast for economic growth this year and into 2008, reflecting the drag from the housing slump....
Under the administration's new forecast, gross domestic product will grow 3.1%, as measured from the fourth quarter of last year to the fourth quarter of this year. That's down from a projection of 3.6% made during in early June, but would still represent decent growth, especially given the strain on overall economic activity from the housing slump.
In 2007, the White House is now expecting the economy to grow 2.9% -- also lower than its previous forecast for 3.3% growth. And, in 2008, the White House is projecting a 3.1% growth rate, vs. its old forecast for 3.2% growth.
The nation's unemployment rate, which averaged 5.1% last year, is expected to dip to 4.6% this year -- a slight improvement from the administration's previous forecast for an unemployment rate of 4.7%.
Boy, did that housing slump sneak up on you? It did to a lot of people, because until pretty damn recently, the nationwide story tended to be reported only in sources that focus specifically on real estate, and they aren't read by most people, while the mainstream media tend to focus only on the local aspect of the story--housing prices are slipping here, in Shmuckatuck County.
But the news about the steep drop in new housing starts hit the headlines a few days ago:
Housing construction plunged in October, as builders slashed activity to the lowest level in more than six years.
Further declines were expected as the five-year housing boom turns into what is being described as a "housing recession."
Construction of new single-family homes and apartments dropped 14.6 percent to an annual rate of 1.486 million units, the slowest pace since July 2000.
A few weeks before that, there was a national story on housing prices also taking a tumble:
After offering incentives ranging from fancy kitchen upgrades to free swimming pools to move a glut of unsold homes, builders decided in September that they needed to cut prices.
The result was the biggest decline in median new-home prices in 35 years. Analysts are predicting more price cuts to come for both new and existing homes as sellers deal with near-record levels of unsold dwellings.
The Commerce Department reported Thursday that the median price for a new home sold in September nationwide was $217,100, a decline of 9.7 percent from September 2005.
That was the lowest median home price in two years and the sharpest year-over-year decline since December 1970, providing dramatic evidence of the slowdown in the once-booming housing market.
The price declines for new homes followed a report Wednesday that prices in the much bigger existing-home-sales market also dropped nationwide on a year-over-year basis in September by 2.5 percent, the largest decline in records going back nearly four decades.
But many potential buyers are still holding off, hoping prices will fall further.
Mark Zandi, chief economist at Moody's Economy.com....said he was forecasting that prices for existing homes would drop by 3.7 percent in 2007, which would be the first decline for a full year since the Great Depression.
There's that "first time since the Great Depression" concept again. Boy is that a hot economy.
You want to know how widespread this slide-cum-dive really is? Check out these URLs for stories on local areas:
http://www.prweb.com/releases/2006/11/prweb475128.htm (Luxury homes)
http://www.madison.com/wsj/mad/top/index.php?ntid=108230&ntpid=1 (Dane County Wis;
In Dane County, existing home sales plunged 18 percent to 1,991, down from 2,427 during the same quarter last year.)
And, of course, what follows a decline in home prices when so many people are covering their debt with home equity? Check out these URLs for stories on the growing rate of home foreclosures:
http://www.chieftain.com/business/1163234814/1 (Pueblo, CO)
Now compare what you're feeling right now with what the government and the propaganda outlets are saying. Could there be any greater disconnect on this issue?