Merrill analyst sees housing price fix

[spinbaby]

WASHINGTON (Reuters) - Prices in the hot U.S. housing market are poised to decline as demand dries up due to the inability of first-time buyers to afford a home, a Merrill Lynch analyst said in a research report on Monday.

"The housing market has become so stretched that the affordability ratio for first-time buyers, the folks who drive the incremental demand in the real estate sector, has deteriorated to levels last seen in the third quarter of 1989," wrote David Rosenberg.

The price of an average starter home in the United States has climbed 14 percent over the past year, while the average income for the first-time buyer family has risen just 4 percent, Rosenberg said, calling that an "unprecedented gap."

In the third quarter of 1989, bids evaporated and new home sales dropped 20 percent the following year in response to lofty prices that first-time buyers could not afford, the analyst said.


http://tinyurl.com/a6x3n

[henslee]

1. Fasten your safety belts, kiddies.

[VegasWolf]

2. I remember the "experts" saying that the stock market bubble would

never burst, that this was a new economy, one should buy YAHOO
at $600.00 before it went to $700.00, things were fine, prices
going up 10% per month, who could lose???

POP, FIZZLE, DUD, HISTORY, BANG, IMPLODE!!!!!

[AndyTiedye]

3. There IS a New Economy. There Was Also a Stock Market Bubble

As energy becomes more expensive, more of the growth has to come from
information -- data, software, movies, music, anything that can be
sent over the net. That is the essence of the new economy.

There was also a considerable amount of stock market speculation,
as there always is when the market has been rising for some time.
Just like the housing market now.

There is speculation, but there is also increased demand for
desirable urban real estate above all else. You get one guess
as to where that is coming from.

[xchrom]

4. the part that bothers me -- is i think the bubble burst

will be selective.
i.e. seattle may remain expensive -- but north carolina may not.

there are parts of the country where buyers were/are more dependant on increased proces in their homes -- places where since the eighties the economy has been tricky to say the least.

some parts of america -- like the rust belt -- have really taken a beating since reaganomics -- and they were looking for some good news from this housing market.

[LosinIt]

5. and just how much real estate do you own in seattle??

for such wishful thingking ;)