Friday, August 29, 2008

Housing Market to Contine Its Wobble

Having been around the real estate industry in one capacity or another for nearly 30 years, reading just one story like this wherein Barclay's Capital estimates that over $300 Billion of US option ARM (adjustable rate mortgages) mortgages are still due to re-set, makes me aware that the housing market won't be out of its slump any time soon.

The "homeowner" (air quotes as they have no equity) will finally realize they can't afford a payment due to re-set typically 60-80% higher than currently. This will drive an unbelievable volume of homes onto the market.

Given the majority of these option ARMs don't re-set until 2010-2011, don't count on this housing market slump subsiding anytime soon.

Every housing rally for the next few years will inevitably prove to be a suckers rally, as more houses continue to pour onto the market under foreclosure - as the most financially desperate find the American Dream has collapsed on them.

I'll make one more wild-ass prediction - the housing market losses to date (around 18% nationally) will be roughly matched by a further loss of between 12% to 20% more. The roller-coaster hasn't reached the bottom yet folks - hang on - it'll likely take at least another 18 months before calls of "this is the market bottom" are likely to be close to being true.

Greenspan's legacy continues to be written.


The Confused Capitalist

No comments: