This article is a follow up on yesterdays post…Housing Crash 2.0.

This is the time of year when all the self proclaimed housing gurus hit their stages making bold housing predictions. Many times their predictions go hand in hand with their agendas. We don’t do that. Our goal is to always prepare our students (and future students) for the worst and and hope for the best.

The simply, undeniable fact is we are in a long term housing bust. Terms like the ‘L Shaped Recovery’ are being tossed around. Some expect that the housing market and housing values will bounce along a very protracted horizontal line for 10+ years. In other words, no significant appreciation or depreciation. We agree with this stance to a point.

There is simply no way that the sheer volume of bank controlled ‘shadow inventory’ combined with….. 1) Changing attitudes about owning a home vs being a renter 2) Demographic shifts 3) Stricter lending standards 4) High unemployment 5) Over supply of housing stock…… won’t result in more price erosion in most major cities. When I drive past all the vacant, forlorn, massive Vegas residential condo towers its hard to believe we are anywhere near a bottom.

Here is the article. Please share your comments:

“It’s really not looking good,” Gao said. “If the housing market will dip, then why would you buy now?”

Thought the housing crisis was over? Not quite.

Despite four years of falling prices and recent signs that they were finally bottoming out, homes are expected to lose still more value in many metro areas over the next year.

Update: the S&P Case/ Shiller housing index was just released..Co-creator of the report Gary Shiller ‘unclear’ of which direction housing will now go….watch the video now.

Parts of the country already pummeled by the housing crisis, like Las Vegas, Phoenix and Miami, will be hit hardest. But even some places that have rebounded or held up relatively well — including New York, Los Angeles and Washington, D.C. — will suffer, too.

That’s the conclusion of economists who have been reducing their estimates for home prices as the outlook for the economic recovery has darkened. The number of homes for sale or headed for foreclosure is so high that they think prices will be even lower by next July.

And, we agree. We are not alone. A recent survey or top asset managers showed that the true insiders know there are more….waaaay more bank foreclosures/ REOs headed to market. Read the survey.

Because housing is such an important engine of the economy, lower prices could dim the recovery. When home values fall and people have less equity, they tend to cut back on spending. And as prices decline, potential homebuyers stay on the sidelines, slowing sales even more.

Agents, watch for info about DEFLATION. Deflation is Inflation’s ugly 3rd cousin. If you want to do a little research on what deflation will mean to housing…Google ‘Deflation, Japan, Housing’

Earlier this year, analysts said they thought home prices had finally reached their low point and were ready to start rising slowly in most areas of the country. Now, they think the actual bottom could be nearly a year away.

The average home price in the Standard & Poor’s Case-Shiller index of 20 big U.S. cities is forecast to drop nearly 2 percent this year from a year earlier, according to the average estimate of more than 100 economists polled this month by MacroMarkets LLC.

That’s more pessimistic than in May, when the consensus was for prices to be nearly flat. Other, more bearish analysts think prices will sink 10 percent or more.

Price drops of more than 10 percent are expected in the Phoenix, Miami and Las Vegas areas over the next year, according to Moody’s Analytics. Those areas have already been scorched by 50 percent declines in home values.

Moody’s predicts that other areas — New York, Los Angeles, San Diego, San Francisco, Denver, Detroit, Cleveland, Minneapolis, Tampa, Fla.; and Washington D.C. — will see declines of 2 to 8 percent by next July.

Many analysts expect home prices to rise for a few months because a tax credit offered to homebuyers through April increased demand. But the gains probably won’t last. By this time next year, Moody’s expects prices in 17 of the 20 cities to have fallen.

Why further price drops for already hard-hit areas, as well as in healthier markets like New York and Los Angeles?

There’s already a glut of homes left in each area by the real estate bust, and more foreclosures are expected as Americans fall behind on mortgage payments. Foreclosures add to the supply of homes on the market, bringing down prices.

The simple fact is that the continued ‘save housing’ programs have mostly simply extended the required correction…the correction must happen..it will happen.

Where are the opportunities now in real estate? You already know. Listing Bank Foreclosures/ REOs, Short Sales and Making Money now doing BPOs.

We have made it easy for you:

Free How to list bank foreclosures/ REOs video and book. Bonus: How to make money NOW from BPOs.

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In Miami, nearly a quarter of mortgage borrowers have missed at least three months of mortgage payments or are already in foreclosure, according to Moody’s. That’s the highest level in the country. In four other Florida cities — Fort Lauderdale, Cape Coral, West Palm Beach and Naples — the proportion exceeds 15 percent. The same is true for Las Vegas.

On top of that, so-called short sales, which happen when lenders let homeowners sell their houses for less than what they owe on their mortgages, are rising. They can drive down the value of neighboring homes, too. In Sacramento., Calif., short sales made up about 26 percent of homes sold in June, up from about 17 percent a year earlier.

Realtors, short sales are one of the best make money now opportunities in real estate. No doubt. Watch the FREE ASD (Accredited Short Sale Designation) video and download the FREE How-To Book.

Contributing to the problem is an economy grappling with high unemployment, relatively flat pay and tightened credit, all working to limit the number of people buying homes.

It could be a decade before the average price nationally reaches the peak it hit four summers ago, says Celia Chen, chief housing economist at Moody’s. Even when they do resume rising, prices may not outpace inflation.

The median price peaked at $230,300 in July 2006 before tumbling 28 percent to a low of $164,700 in January 2009, according to the National Association of Realtors. The median has since risen to $183,700.

Nationally, about 7.1 million homeowners — more than 13 percent of households with a mortgage — have either missed at least one payment or are in foreclosure, according to data provider Lender Processing Services Inc.

WOW! That is an amazing number. Here are a few more stats for you. Its estimated that 50% of all homes are owned…no mortgage. Of the 50% with a loan…50% of THOSE are upside down. Or, 25% of all homeonwers are upside down in their home. So, do you think this trend of underwater homeowners is going to increase or decrease?

In some Sun Belt cities, investors armed with cash are gorging on deep discounts for some homes, yet the foreclosures keep coming. The local areas remain stuck with depressed economies and a glut of vacant and soon-to-be-vacant homes.

“Even when demand picks up, prices aren’t likely to budge all that much,” said Mark Vitner, senior economist with Wells Fargo Securities.

Moody’s forecasts flat or only slightly lower prices over the next year in Atlanta, Chicago, Boston, Dallas and Portland, Ore. And Seattle and Charlotte, N.C., are expected to enjoy slight price increases. In those areas, the supply of foreclosed homes is smaller, and the local economies are faring better.

Sales of new homes jumped last month, but it still was the second-weakest month in the 47 years records have been kept, the Commerce Department said Monday. Sales for April and March were also revised downward.

Michael Gao, 31, a software engineer in Mountain View, Calif., is watching home listings but feels renting is the wiser option for now. He fears the economy will worsen and thinks the home market will suffer.

“It’s really not looking good,” Gao said. “If the housing market will dip, then why would you buy now?”

Source: AP

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