Housing Market: Hitting Bottom?


Ever since the Federal government decided that it needed to subsidize home ownership, we’ve been heading for the bubble.crash.  And it hit.  Big.

Now we’re waiting for the bottom so that we can begin to climb our way back to positive ground.

I have seen two pieces of good news:

  1. My neighborhood Realtor has sold 2 properties on the street in the last couple of weeks.  Sellers are internalizing the new prices and buyers are responding by, well, by buying.
  2. This story about a first time home buy in Minneapolis:

Jessica Harrison thought she knew what to expect when she decided to look for a house: a buyer’s market.

And why not? Prices are down sharply since 2009. And with so many foreclosed properties for sale, Harrison was certain she would find a good deal fast.

Instead, the Minneapolis teacher waded through countless homes during what became a two-year search. Most needed too much work. When she found a move-in ready house, she lost out to bids she couldn’t match. Harrison tried to buy a home through a short sale, too, but the deal fell through after six months.

She finally reached a deal on a tidy house in south Minneapolis and expects to close at the end of this month. “There were multiple properties available, but I wanted to get a house that I could move into,” Harrison said. “A lot of the houses needed a lot of work, and I didn’t have the money or resources to do that.”

Home buyers can no longer assume that it’s easy to buy a cheap house in a good location. New local listings are down 17 percent in the Twin Cities over the past year, as would-be sellers are holding on to their homes until the market improves. “[Buyers] have to be patient until the right home comes along,” said Ryan Haagenson, a sales agent with Re/Max Results in Minneapolis. “And ready to pull the trigger when it does.”

Make no mistake: There are still more sellers than buyers. But the decline in listings and the quality of the options are slowing the search for those on the hunt. U.S. home listings in September fell to a four-year low, according to Realtor.com.

For whatever reason, when the supply of homes goes down, the price goes up.

We’re certainly not out of the woods yet, we still have Obama and the Democrats stalling foreclosures and incenting people to buy homes.  But we’re closer than we were last week.

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14 comments
  1. You can’t blame the housing bubble on the government. What happened was that when cheap credit lead to a bubble, private firms offering subprime mortgages took off — with no incentive from the government. Then smart minds on Wall Street decided that big financial institutions should buy these mortgages and then bundle them up as bonds — over the counter derivative bonds. This meant that the investor (buying the bonds) would assume the risk of the mortgage.

    These got rated AAA and were in high demand, and the big banks (Goldman, Lehman Brothers, etc.) were making lots of money selling them. They told mortgage brokers they needed more mortgages — they wanted to sell more bonds. The brokers realized they had no risk (they were selling the mortgages right away) , so they started cheating. They created new mortgages that delayed payment of principle so the buyer could refinance when the value “inevitably” went up. So mortgage brokers simply starting loaning to anyone, often falsifying information. So it appeared risk free to everyone, and the bond holders thought they were buying safe AAA rated bonds (the rating agencies, private actors making money on rating the bonds, didn’t want to lose the big name clients, so they didn’t scrutinize the bonds, which were very complex and opaque). Soon they started to buy and hold bonds too, and as these AAA bonds paid excellent interest, it seemed a great investment — until the inevitable bubble bursting. Oil prices were instrument, but the bubble was going to go anyway. Then mortgages went bad, the bonds turned out to be worthless, and a major global crisis ensued.

    This isn’t the fault of the government, certainly not Freddie and Fannie. This was a crisis brought on by Goldman Sachs, Lehman Brothers, Bear Stearns, and other big financial companies who were riding the bubble to record profits and bonuses by selling high risk investments as safe, not doing due diligence.

    • pino said:

      This isn’t the fault of the government, certainly not Freddie and Fannie

      We fundamentally disagree on this one Scott. Government mandated that banks loan money in certain amounts to at risk borrowers. Fannie and Freddie were required to carry more and more at risk loans. The whole thing was fed by more and more government requirements to increase home ownership among more and more people. Often to people who had no hope of paying that money back.

      One area where we don intersect is that the Ratings agencies got it wrong when they were rated AAA. If they knowingly did this in a quid pro quo scenario, then that is fraud and should and can be dealt with under existing laws and regulations.

      Last, with the change in accounting rules as it relates to valuation of loans, once the banks had to value their assets at essentially zero, they had to raise so much money so quickly that they found they couldn’t. And they failed.

      This was government at it’s worse. Fueled by the ratings folks. But it was government.

      • It’s a documented fact that Fannie and Freddie were not the cause of the run up or the reason so many loans were made that couldn’t be paid back. Read the full story in “All the Devils are Here” by Nocera and McLean, or the very well written “The Big Short” by Michael Lewis. The fact is that it is the derivatives trade and the demand for mortgages it created that led to the massive spike in subprime loans. Seriously, it’s simply wrong to claim that the crisis was created by government or the policies of Freddie and Fannie. They got into only a little bit, late in the game — this is a crisis made on Wall Street through unregulated OTC derivative trade. It’s not a matter of opinion, this is something documented. The subprime mortgage spike had nothing to do with government incentives. Please look at those books and other material. If you think I’m wrong point me to a source and I’ll read it. But I have really dug into this issue to figure out what happened. Not that I agree with all that Fannie and Freddie did, but if its the derivative trade that brought down the economy. I have never seen an iota of evidence that says the government was at fault, and I dug into this deeply in part because this crisis was part of a course I taught and I wanted to get it right.

        The Nocera and McLean book are very critical of Fannie and Freddie, but they were competing against the private sector (places like Countrywide and others) who made loans purely for profit. Please, investigate this and reconsider.

    • Dee said:

      Scott sure I can. I blame the government for everything! 😉

  2. Dee said:

    I will start here then go on to Occupy since I got here first…

    ‘For whatever reason, when the supply of homes goes down, the price goes up’ simple economics…supply and demand~but you know that 😉 My question is how does one compare NC to MN? Who wants to live in Minneapolis anyway?I would think you would compare apples to apples and oranges to oranges. I mean we are consistently on the FORBES list. THE place to live and work! Right up a Republicans ally right? Good old Steve tells us once a month how great we are! Gotta be true! The thing that strikes me as ‘off’ with this article is the fact that these days you have to have perfect credit and 20 percent down. The person in this article is a teacher and I am working on the belief she is single (needs move in ready) so my ‘educated guess’ she didn’t have a lot of options.
    Why do you think a lot of the houses need work? Pissed off homeowner tearing stuff up or that it took a year of it sitting empty before the ‘get out notice’ to the actual bank occupation? I have very mixed emotions about the whole foreclosure business. I was raised pay your bills, live below your means. So the ones who gave up their house on the principle it isn’t worth as much now as when I bought it should have their feet held to the fire. The ones who lost their job should get the help. The ones who got lied to should get the house for free. Come on; if you took out a loan you can only pay interest on you deserve what you get.

    Now to my rant part that ties this to Occupy..(you had to see it coming) True to your republican roots you blame Obama and the Democrats. But I would bet that most ‘bankers’ the ones who made the loans and talked people into the ‘American dream of home ownership’ were republicans. As you sit there and say ‘spoken like a true Democrat’ I assure you I am ‘agnostic’ 😉 Why must one point fingers and assign ‘blame’ when knowing full well it isn’t true? WE are all in this mess together from the sins of our past. When we lost sight of “WE THE PEOPLE” and we chose sides we sealed our fate.

    • pino said:

      My question is how does one compare NC to MN?

      You are right, there is no good reason to compare. The reason I did is because I am FROM Minnesota and LIVE in North Carolina. No other reason.

      Who wants to live in Minneapolis anyway?

      Minneapolis is the hardest city in America to recruit into. It is second only to San Diego to recruit out of.

      Why do you think a lot of the houses need work? Pissed off homeowner tearing stuff up or that it took a year of it sitting empty before the ‘get out notice’ to the actual bank occupation?

      In many cases yes. I resonate with those who got caught up in all of this though.

      Now to my rant part that ties this to Occupy..(you had to see it coming

      I did. I’m happy to debate the OWS protests and the movement

      True to your republican roots you blame Obama and the Democrats.

      I blame them now for the delay in the recovery. I blame all of government for getting us into this mess.

      To be clear, Obama had nothing to do with getting us here.

      But I would bet that most ‘bankers’ the ones who made the loans and talked people into the ‘American dream of home ownership’ were republicans.

      Maybe, yes. Wealth and conservatism trend.

      Why must one point fingers and assign ‘blame’ when knowing full well it isn’t true?

      As for the bubble…it’s both parties. As for the recovery, THAT is squarely on Obama.

      WE are all in this mess together from the sins of our past. When we lost sight of “WE THE PEOPLE” and we chose sides we sealed our fate.

      Very well said!

      Thanks for stopping by!

      • I love living in rural Maine, but my favorite place I’ve ever lived is Minneapolis. It’s the only place that could tempt me to move away from the paradise of the foothills of western Maine.

      • Dee said:

        My comment about MN was an attempt at humor. I lived in Bemidji for awhile. Also lived in Tomahawk WI. Both in the winter and I wasn’t good at it!

      • pino said:

        My comment about MN was an attempt at humor. I lived in Bemidji for awhile. Also lived in Tomahawk WI. Both in the winter and I wasn’t good at it!

        I’ll readily admit that God lives here in North Carolina. But when He wants to get away from it all and just relax, He goes to Minnesota.

  3. Alan Scott said:

    Dee,

    I can find evidence that Chris Dodd and Barney Frank should be strung up by their fat necks for causing the housing bubble and collapse. You can site similar evidence against ” Wall Street “, ” the Banks “, and Republicans . Not everybody that works at a bank or on Wall Street had anything to do with the housing mess. Not every Democrat is a liar . Instead of broad accusations , I prefer individual hangings.

    • pino said:

      To be clear, Tar Heel Red does NOT condone Capital Punishment!

      😉

    • Please give me that evidence. The books I cited above explains what happened. I’ve put it in short form in my blog:
      http://scotterb.wordpress.com/2009/11/12/the-economic-crisis-explained/
      and
      http://scotterb.wordpress.com/2010/11/04/markets-fail/

      I have never seen anything even remotely persuasive laying blame for this primarily on government policy.

  4. Alan Scott said:

    pino,

    Just for politicians, bankers, and welfare gun owners ?

    • pino said:

      Just for politicians, bankers, and welfare gun owners ?

      If you wanna scary story on the impact of the police state and blooging, google “tjic travis corcoran “.

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