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Showing posts with label RECESSION. Show all posts
Showing posts with label RECESSION. Show all posts
Wednesday, March 11, 2009
Roubini on the Credit Crunch, Global Recession, and Deflation (Part Two)
Part two of Nouriel Rubini's speech at the 2009 CBOE Risk Management Conference. He discusses several topics including: the credit crunch, global recession, and deflation.
Roubini on the Housing Sector
The following is from the RGE Monitor email I received this morning.
Housing Sector
The fourth year of housing recession - and the worst housing recession since the Great Depression - is well on course.
Total housing starts have plunged from the 2.3 million seasonally adjusted annual rate (SAAR) peak of January 2006 all the way to the 466 thousand SAAR of January 2009 (the last data point available), an all time low for the time series that started in January 1959. Single-family starts built for sale are down 81% from their Q1 2006 peak (since seasonally adjusted data is not available, we performed our own seasonal adjustment).
On the demand side, new single-family home sales are down 76% from their July 2005 peak. Both demand and supply of homes are therefore still falling very sharply which does not bode well for inventories. Inventories are the mortal enemy of prices for any goods-producing sector, including housing.
The sharp and unprecedented fall of starts might not have reached a bottom yet. In this economy-wide recession, weakness on the demand side of housing is bound to persist and we believe that supply will have to fall further, given the great wave of foreclosures that is adding to the excess of supply in the market.
We believe that home prices will not bottom out until the middle of 2010. Our target is a 38% peak to trough (so far prices have fallen over 27% from the peak) but given the worsening conditions on the real side of the economy, we see a meaningful chance for over-correction that would bring prices down 44% from the peak reached in the first half of 2006 (Case-Shiller is the reference index for these predictions.)
RGE Monitor offers and premium service that provides more detailed information.
Housing Sector
The fourth year of housing recession - and the worst housing recession since the Great Depression - is well on course.
Total housing starts have plunged from the 2.3 million seasonally adjusted annual rate (SAAR) peak of January 2006 all the way to the 466 thousand SAAR of January 2009 (the last data point available), an all time low for the time series that started in January 1959. Single-family starts built for sale are down 81% from their Q1 2006 peak (since seasonally adjusted data is not available, we performed our own seasonal adjustment).
On the demand side, new single-family home sales are down 76% from their July 2005 peak. Both demand and supply of homes are therefore still falling very sharply which does not bode well for inventories. Inventories are the mortal enemy of prices for any goods-producing sector, including housing.
The sharp and unprecedented fall of starts might not have reached a bottom yet. In this economy-wide recession, weakness on the demand side of housing is bound to persist and we believe that supply will have to fall further, given the great wave of foreclosures that is adding to the excess of supply in the market.
We believe that home prices will not bottom out until the middle of 2010. Our target is a 38% peak to trough (so far prices have fallen over 27% from the peak) but given the worsening conditions on the real side of the economy, we see a meaningful chance for over-correction that would bring prices down 44% from the peak reached in the first half of 2006 (Case-Shiller is the reference index for these predictions.)
RGE Monitor offers and premium service that provides more detailed information.
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Wednesday, January 07, 2009
According to Prudential Douglas Elliman's Dottie Herman, what likely sparked a 3.6% drop in Manhattan apartment prices?
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Question: According to Prudential Douglas Elliman's Dottie Herman, what likely sparked a 3.6% drop in Manhattan apartment prices?
Answer: Lehman Bros. bankruptcy
Manhattan Apartment Prices Fall Nearly 4%
Prices of existing Manhattan apartments fell nearly 4 percent in the fourth quarter, two reports showed, and analysts warned of much deeper declines in coming months in the wake of turmoil on Wall Street and financial sector layoffs.
The median sales price—in which half the sales prices were higher and half were lower—of an existing Manhattan apartment fell 3.6 percent to $732,500, according to the Prudential Douglas Elliman Manhattan Fourth Quarter Market Overview.
"You could say it started the second week of September when Lehman (Brothers) filed for bankruptcy," said Dottie Herman, chief executive of Prudential Douglas Elliman, one of the United States' largest real estate companies. "Up until then, New York City was holding its own and after that people were in shock. Things they trusted their whole lives just fell apart."
Herman sees a possible price decline of 20 percent to 25 percent afflicting the entire Manhattan market in the first quarter.
According to the Corcoran/PropertyShark report, median existing sales prices fell 4 percent year over year to $759,000 in the fourth quarter.
Prices of existing homes, also called resale prices, fell in only one other quarter in the past five years, by 1.1 percent in the fourth quarter of 2006, and that was something of a blip, said appraiser Jonathan Miller, author of the Prudential report.
These numbers, on the other hand, are a leading indicator of more declines to come, because resale prices are not susceptible to distortion like sales figures for new construction, in which contracts are signed up to 18 months before the sale is completed.
The lag time between the signing and closing of a resale contract is much shorter, Miller said.
In this quarter, for example, the median sales price of new housing in Manhattan rose 33 percent to $1.54 million, but that number is not necessarily indicative of the current market because many of those contracts were signed months or even years ago, according to the Corcoran/PropertyShark report.
Such sales distorted this quarter's figures altogether, Miller said, resulting in an overall rise in median sales prices of 5.9 percent to $900,000. Without them, the rest of the market would look more like the lackluster resale market.
A telling sign of further future price declines is Miller's monitoring of contracts in the works, pre-closing.
Current contract price levels show an average drop of 20 percent from August 2008, said Miller, who said such price declines are a real possibility marketwide in Manhattan.
Indeed, the first quarter will reveal the depths of the damage wrought by the implosion of the banking sector and tens of thousands of layoffs on Wall Street in a way the fourth quarter has not, said Gregory Heym, the chief economist for brokerage Brown Harris Stevens.
His fourth quarter report showed a very slight rise in the median sales price of Manhattan apartments, both new and existing, to $895,000 from $828,000, but more financial sector job losses could lie ahead for Manhattan, which means more pain for real estate.
"We're just going to be living with a certain degree of uncertainty for a lot longer," Heym said. "I know it's been about a year and a half and people would like things to calm down a bit but it's going to take a bit longer."
Copyright 2009 Reuters. Click for restrictions.
URL: http://www.cnbc.com/id/28517399/
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© 2009 CNBC.com
CNBC Million Dollar Portfolio Challenge
The Call
Question: According to Prudential Douglas Elliman's Dottie Herman, what likely sparked a 3.6% drop in Manhattan apartment prices?
Answer: Lehman Bros. bankruptcy
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Manhattan Apartment Prices Fall Nearly 4%
Prices of existing Manhattan apartments fell nearly 4 percent in the fourth quarter, two reports showed, and analysts warned of much deeper declines in coming months in the wake of turmoil on Wall Street and financial sector layoffs.
The median sales price—in which half the sales prices were higher and half were lower—of an existing Manhattan apartment fell 3.6 percent to $732,500, according to the Prudential Douglas Elliman Manhattan Fourth Quarter Market Overview.
"You could say it started the second week of September when Lehman (Brothers) filed for bankruptcy," said Dottie Herman, chief executive of Prudential Douglas Elliman, one of the United States' largest real estate companies. "Up until then, New York City was holding its own and after that people were in shock. Things they trusted their whole lives just fell apart."
Herman sees a possible price decline of 20 percent to 25 percent afflicting the entire Manhattan market in the first quarter.
According to the Corcoran/PropertyShark report, median existing sales prices fell 4 percent year over year to $759,000 in the fourth quarter.
Prices of existing homes, also called resale prices, fell in only one other quarter in the past five years, by 1.1 percent in the fourth quarter of 2006, and that was something of a blip, said appraiser Jonathan Miller, author of the Prudential report.
These numbers, on the other hand, are a leading indicator of more declines to come, because resale prices are not susceptible to distortion like sales figures for new construction, in which contracts are signed up to 18 months before the sale is completed.
The lag time between the signing and closing of a resale contract is much shorter, Miller said.
In this quarter, for example, the median sales price of new housing in Manhattan rose 33 percent to $1.54 million, but that number is not necessarily indicative of the current market because many of those contracts were signed months or even years ago, according to the Corcoran/PropertyShark report.
Such sales distorted this quarter's figures altogether, Miller said, resulting in an overall rise in median sales prices of 5.9 percent to $900,000. Without them, the rest of the market would look more like the lackluster resale market.
A telling sign of further future price declines is Miller's monitoring of contracts in the works, pre-closing.
Current contract price levels show an average drop of 20 percent from August 2008, said Miller, who said such price declines are a real possibility marketwide in Manhattan.
Indeed, the first quarter will reveal the depths of the damage wrought by the implosion of the banking sector and tens of thousands of layoffs on Wall Street in a way the fourth quarter has not, said Gregory Heym, the chief economist for brokerage Brown Harris Stevens.
His fourth quarter report showed a very slight rise in the median sales price of Manhattan apartments, both new and existing, to $895,000 from $828,000, but more financial sector job losses could lie ahead for Manhattan, which means more pain for real estate.
"We're just going to be living with a certain degree of uncertainty for a lot longer," Heym said. "I know it's been about a year and a half and people would like things to calm down a bit but it's going to take a bit longer."
Copyright 2009 Reuters. Click for restrictions.
URL: http://www.cnbc.com/id/28517399/
Privacy Policy . Terms of Service
© 2009 CNBC.com
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APARTMENTS,
CREDIT CRUNCH,
DECLINES,
housing,
MANHATTAN,
mortgage,
PRICES,
REAL ESTATE,
RECESSION
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