Housing....Bing, Bang, Bust!
As most folks probably know, the once hot real estate market has seen a significant cool down over the past several months, particularly in NOVA, the economic engine of The Commonwealth.
As I have stated previously, I work in a real estate related field where I get to work with both Realtors and homeowners and I have had the opportunity to see things play-out first hand – from ground zero if you will.
Today, while out in the “field”, I had a very in-depth conversation with a Realtor and here are a few things that were mentioned:
-In the community of Lansdowne, located near Leesburg, VA, there is a 55-month supply of unsold homes. Yes, folks, that’s 4.5 YEARS worth of inventory.
-Several of the companies that are responsible for placing “For Sale” signs in the front of homes have run out of wood to make the signs.
-If you have an open house don’t expect anyone to show-up.
-Most sellers are moving out of the area. For the most part, they are heading south.
I did some further research and found this piece written by Gary Shilling on my favorite business website, http://www.forbes.com/ (I urge you to read the entire piece.). Among the things Mr. Shilling points out:
“This is the first nationwide housing bubble since the 1920s, and it's driven by three nationwide forces: low interest rates, loose lending practices and the desperate search for a stock substitute after the 2000--02 debacle. Previous real estate bubbles were regional, spurred by economic cycles like the rise and fall of the oil patch in the 1970s and 1980s, and southern California's aerospace leap in the late 1980s during the Reagan defense buildup, ending with the Cold War's demise.”
“A house-price collapse will be far worse than the 2000--02 bear market on Wall Street and will bring a serious global recession. Half of households own stocks or mutual funds, but 69% own homes. The resulting unemployment will kill many subprime borrowers' ability to make payments.”
“Even a 20% price decline will be devastating for many homeowners. On average, those with mortgages have 37% equity in their abodes. Of those who borrowed or refinanced in 2005, 29% have zero or negative equity, calculates First American Real Estate Solutions.”
Legislators in Richmond take note. We may not need all that money for roads after all.
posted by RBV @ 2:01 PM
1 comments
1 Comments:
I would agree that the fallout from whatever is going to happen would be felt differently in different regions throughout the country. But, I think the point of the article is that regional corrections will have national implications, particularly if they occur at the same time.
Your point about stagflation is well taken. The Fed is obviously concerned about inflation (as they always are), and there is no way to tell when they will stop raising rates.
I drive through new developments every day and see all of the immigrant laborers building the huge Mcmansion’s and wonder the same things you do – what will happen if these folks are suddenly out of a job? Will they go back across the border? Will they stay? Call me crazy, but my bet is that most are staying.
What will the fallout be? It’s another entire post for another day.
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