If you've been depressed about the state of the housing market, and were hoping the bleeding has stopped, you might not want to watch this video from Yahoo Tech Ticker (A Bottom in Housing? You've Got to Be Kidding). Host Henry Blodget talks with Barry Ritholz, CEO of Fusion IQ and financial blogger for The Big Picture. The video is five minutes long, and Ritholz packs more valuable information and honest insight into each minute on this subject than anyone I've heard to date. The bottom line, says Ritholz, is that the housing market is nowhere near a bottom, and it will likely wobble down and sideways for a at least a couple more years - a 25 percent further decline - until the price to income average returns to normal levels.
There are exceptions, like the New York City market, which has defied the laws of bubble-pop gravity. The location, location, location rule is in effect, and a Manhattan address is still on the covet list for those who can afford it. What bothers me is when the media throws out scary stats about this being the "worst housing price decline ever", when they fail to balance it with the fact that we had the "biggest price jump ever" from 2000 to 2005. Prices in my region (Northern Virginia) were jumping 25-30 percent per year at the height of the bubble, between 2003 and 2005. And if current home values around me have declined an average of 20 percent the past three years, how can we complain? If you make 60 percent, then lose 20, you're still up 40 percent in a relatively short period of time.
One sign that a bottom may be forming is that discounted, foreclosed homes are starting to be snapped up en mass. A New York Post article titled Lost Sovereignity: Oil Rich Fund Eying Foreclosed U.S. Homes, details what it terms a "new land grab in America", where billions of dollars in foreign money is now being focused on the foreclosure market. So basically, money we're sending to the Mideast for oil is now being used to purchase tens of thousands of our homes on the cheap.
I hope the housing pain won't continue for years, but I'm a realist, and Ritholz' analysis - while sobering - is probably right on the money.
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