Fed Chairman: Housing downtown 'appears orderly'
Here are some comments that Federal Reserve Chairman Ben Bernanke had to say about the housing market. A few of the highlights are:
"Softening in the housing market has been gradual"
"The downturn in the housing market so far appears orderly"
"The level of (housing) activity is still relatively high on a historical basis."
Bernanke said the Fed estimates that 20 percent of outstanding mortgages have variable rates. Half of those are set to change interest rates this year, he said.
"So there will be some effect on variable-rate mortgages," Bernanke said. "But it should be a relatively slow process that would provide some cushion."
Read more here:
http://www.planetrealtor.com/Florida/News/2006/n2-07212006.cfm
I am in a big office with alot of opinions. Some agents cry doom and gloom while others are very positive. No one knows what will happen. If you need a home over your head and don't have the expectation of flipping the property in a short time period for a huge profit then this is a good time to buy.
"Softening in the housing market has been gradual"
"The downturn in the housing market so far appears orderly"
"The level of (housing) activity is still relatively high on a historical basis."
Bernanke said the Fed estimates that 20 percent of outstanding mortgages have variable rates. Half of those are set to change interest rates this year, he said.
"So there will be some effect on variable-rate mortgages," Bernanke said. "But it should be a relatively slow process that would provide some cushion."
Read more here:
http://www.planetrealtor.com/Florida/News/2006/n2-07212006.cfm
I am in a big office with alot of opinions. Some agents cry doom and gloom while others are very positive. No one knows what will happen. If you need a home over your head and don't have the expectation of flipping the property in a short time period for a huge profit then this is a good time to buy.
posted by Marc Rasmussen at
4:16 PM
6 Comments:
This excerpt taken from the quarterly earnings report for Florida Rock Industries, the leading supplier of concrete and cement block to builders in Florida.
"Outlook: Residential demand is clearly on the decline. July pricing improvements have again been effected in most markets albeit in the face of more resistance than we experienced six months and a year ago."
I don't think it is a surprise to anyone that home demand has declined. Again, this is not a Sarasota issue but the case across most of the country. I am just glad to be in a state and more specifically a resort town where plenty of baby boomers will be buying 2nd homes for their retirements in the next 10 years. Many other cities can't say that.
Marc said:
"Again, this is not a Sarasota issue but the case across most of the country."
This is MUCH more of an issue in Sarasota than it is for other locations where price appreciation was restrained over the previous years.
The hottest Florida RE markets (Naples, Miami, Sarasota, etc.)are the ones which will feel the correction the most.
The chief economist for Fannie Mae, David Berson, thinks that rates are headed still higher and sees further declines in previously overheated housing markets.
I have heard personally several local home builders say that home contract sales for 2006 are nonexisitent. They're simply completing contracts that were on backlog from 2005.
The point is that when all that inventory is gone, many builders and construction workers will be looking for work - and there likely won't be any because very few people have signed to build new homes.
It's when that occurs that the recession will really take hold, when consumer spending comes to an abrupt halt - that will be the time when RE prices come down another 20%, maybe more.
My guess is sometime between the 1st and 2nd quarters of 2007 for this to occur.
Todd said, "This is MUCH more of an issue in Sarasota than it is for other locations where price appreciation was restrained over the previous years."
Other than a few pockets here and there where in the country were prices restrained the last few years? The boom in real estate was national. I have spoken to real estate agents across the country. All of them had double digit appreciation rates.
Todd said,
"The chief economist for Fannie Mae, David Berson, thinks that rates are headed still higher and sees further declines in previously overheated housing markets."
Here is a link to an article on more of what David Berson had to say:http://www.inman.com/InmanINF/mris/story.aspx?ID=54607
Some of the highlights are:
"weakening investor demand and a lack of affordability could bring sales volume down 8 percent to 10 percent this year"
"The falloff in sales will be most pronounced in areas with weak economies" - I would not say Florida has a weak economy.
"We expect the Fed to tighten one more time before the end of the summer, bringing the federal funds rate up to 5.5 percent, before it pauses for a while to observe the impact of … tightening on inflation and economic activity," they said. "If, as we project, core inflation falls back a bit as the economy slows, then the Fed could remain on the sidelines for a while -- and possibly even ease slightly in 2007 if economic growth remains at a below-trend pace." So he thinks the Fed might raise rates one more time, then pause, then possibly lower them.
I can't find where he said, "further declines in previously overheated housing markets." as Todd states.
"I have heard personally several local home builders say that home contract sales for 2006 are nonexisitent." I was in the Centex community of The Enclave last week. They had just sold 2 homes.
"It's when that occurs that the recession will really take hold, when consumer spending comes to an abrupt halt - that will be the time when RE prices come down another 20%, maybe more." That is a possibility but I don't think that will happen.
" 'The falloff in sales will be most pronounced in areas with weak economies' - I would not say Florida has a weak economy."
Certainly the economy in FL is still quite strong, but the point I was attempting to make is that when the REAL slow down in housing hits the state, ie: when all the construction backlog is completed - then the economy will definitely slow down in Florida.
There are so many ancillary businesses tied to the construction industry. When new home building slows down further, many realtors, mortgage brokers, appraisers, construction workers, etc. will be looking for work.
To stay on top you have to be forward looking and not just look at the current situation. What I'm suggesting is that the continued slowdown in new construction will lead to weakness in the economy which will then lead to further price declines.
That said, differing ideas is what makes a market.
Marc said:
"I can't find where he said, 'further declines in previously overheated housing markets.' as Todd states."
Check out this link:
http://www.housingzone.com/probuilder/article/CA6320256.html
From that link, here's an excerpt and a quote from David Berson:
In hot markets like Sarasota and Naples, Fla., where house prices escalated 30 percent or more each of the last two years, the investor component probably ran closer to 20 percent. But that began to change last fall, and now housing investors are hard to find in Southwest Florida.
"There's potential for significant declines in home building in those markets where investor demand and prices have gone up most, especially in the absence of a lot of permanent in-migration," Berson says.
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