Housing Slump in U.S. May Lead to First Drop Since Depression

[NVMojo]

Sept. 18 (Bloomberg) -- Nancy and Brian Christopherson are asking $389,900 for their eight-room Colonial Revival home in Westford, Massachusetts, featuring a new kitchen with maple cabinets. Even at that price, they'll lose $14,100.

Monthly price reductions since they listed it in May for $429,900 have lured no offers for the house, bought for $369,000 in 2004. ``It's getting scary,'' says Nancy Christopherson.

The sharpest slowdown in U.S. home-price growth in three decades is trapping owners with mortgages they can't afford, pushing unsold homes to a record 4.42 million and gutting profits for builders such as Lennar Corp. and Toll Brothers Inc. The U.S. median home price next year may fall for the first time since the Great Depression, says Gabriel Stein, chief international economist with Lombard Street Research in London.

Economists such as Nobel laureate Joseph Stiglitz warn that the reduced sales may push the world's largest economy into recession, and concern is mounting over economic growth in Europe and Canada. The Federal Reserve will reduce its U.S. benchmark lending rate, says Jan Hatzius, chief U.S. economist with Goldman Sachs Group Inc. Last month, the central bank ended a two-year streak of 17 increases that pushed the rate to 5.25 percent, citing cooling home sales.

``The housing slowdown will be a large drag on economic activity,'' Hatzius says. ``The Fed will cut rates to 4 percent next year as the housing downturn starts to push up the unemployment rate.''

more...

http://www.bloomberg.com/apps/news?pid=20601109&sid=a4Naw1mqxCRw&refer=home

[MadMaddie]

1. I have believed for the last 4-5 years that the housing

prices were inflated.....and what goes up must always come down....
Do you think it will be be as bad as the 80's housing slump?

[rubberducky]

3. Just a guess but, I think it will be much worse...

Here in Michigan, it`s going to be very ,very bad.

[lyonn]

6. Maybe if the interest rates take a big dip again

that might save some. Will this really make news before the election is my thought. bush can't have any more bad or "badder" news than he already has as he knows full well that the Dems would want investigations. Oh how we need subpoena power! Then we could see the "bush melt down" we have all waited for. The man has no heart so it should be justice served, if we get this miracle.

[enid602]

8. debt

The problem is, if we artificially lower interest rates for any amount of time, global investments will tend to be diverted to other countries, and we won't be able to keep financing our foreign debt. It's a bad situation.

[Warpy]

11. It'll be worse because it'll be widespread

Here in central NM, which realty trades were pushing as a sure thing only two months ago, no one is buying anything. I think the same thing is happening all over the country.

We didn't really see much inflation here, although you'd never know that if you went by Zillow. Housing stock here is still listed as being slightly undervalued. Still, nothing is selling.

Fast buck artists who snapped up a newly renovated "flip" a couple of doors down from me 3 months ago are now starting to reduce the price again and again. Nobody's come to look at it.

Most housing here is still a fairly good deal, if only as a hedge against increasing rents. Nobody's buying.

This is a massive perception problem and it's nationwide, that ALL housing stock has inflated beyond reason and that people who buy now will find themselves in a hole and losing everything.

The 80s slump was mostly on the coasts and in the big cities, and was particularly bad in Houston, if I recall. It was also relatively short lived, as we got rid of the GOP for eight years.

Not going to happen this time, I'm afraid.

[Erika]

2. Recession, here we come

W's policies have hurt the working class to the point they can't even meet higher demands for gas and insurance, much less any other spending.

[Kutjara]

4. I sold my house in February of this year and put the money in the bank.

The indicators are that the market is wildly out of whack and will correct itself painfully during 2007-8. Nobody seems to agree what 'painfully' means exactly, but some fall in values seems inevitable. I'm going to sit in a rental until I know just what the hell is happening.

[NVMojo]

10. we did the same thing in August ...knowing how things are so f'd up

right now, why would we risk buying only to end up owing a ton when it is worthless?

[flyarm]

5. sales in NJ shore area..down 60%..from what a realtor in my neighborhood

said last week..lots on the market just no buyers..and this is beach property..so even the $$ buyers are not buying!

fly

[The_Casual_Observer]

7. The whole economy is bogus. It's been relying on unsustainable

low interest rates for cheap & easy money years now, no manufacturing or r&d base, it's all services & government jobs. It's all pretend.

[fasttense]

9. Even at 5.25% the interest rates are very low.

I remember in 1996, talking about waiting for interest rates to drop to about 6.5% so we could buy a house. Lets face it, interest rates are still very low and the housing market is in a slump. Something is not right here.

[phantom power]

12. remember the double-digit mortages of the 80s?

starting in 2007, many of those ARMS will be re-adjusting to double-digits. Saddle up the tiger!