Bangkok--15 Jun--Standard & Poor's
Opinions are still somewhat mixed about whether the U.S. housing market is headed for a true double dip, but most market observers agree that home prices have yet to bottom, as discussed during several panel discussions at last week's Standard & Poor's Housing Summit 2011: Boom, Bust and Beyond in New York.
In looking at the data, the March 2011 data from the May 31 S&P/Case-Shiller Index confirmed a double dip in its 20-City composite. Data from the 10-City composite has yet to follow suit, however, as Robert Shiller, co-founder of the S&P/Case-Shiller Home Price Indices discussed during the opening discussion at the event.
Although he stressed his comments were not forecasts, Mr. Shiller reiterated a statement he made earlier this year—he wouldn't be surprised to see home prices fall another 10%-25% before bottoming out.
The recent declines, he noted, have proven more worrisome than some of the seasonal fluctuations during the downturn because they've occurred during warmer months, including the typically active spring buying and selling period.
From a buying perspective, it's almost never been a better time to purchase a home—that is, if you can get approved for a mortgage. Mortgage rates for 30-year fixed loans have fallen to the mid 4.5% range, and prices in major metropolitan areas are more attractive than they've been in many years.
When asked whether owning a home is still the American dream, CNBC real estate reporter Diana Olick said that many people just don't want to reach out to catch what they believe is a falling knife.
"In many markets, the cost of ownership is below the cost of construction," added Christopher Mayer, Senior Vice Dean and Paul Milstein Professor of Real Estate at Columbia Business School. "But the effect of this affordability on the economy is very negative. Fundamentally, home prices should have bottomed by now."
The continued price drops add weight to Mr. Shiller's statement that the recent housing crash represents the largest and most unique downturn the U.S. has ever seen.
"This is the biggest housing boom and bust in U.S. history," Mr. Shiller said. "That makes it impossible for statisticians to forecast because they deal with things that repeat themselves."
During the panel focused on the future of the residential housing market, Diane Westerback, Managing Director of Global Surveillance Analytics at Standard & Poor's, commented that the current fallout from over-leveraged buyers during the recent boom is one of the main factors creating today's housing landscape. The result today? Too many people own more than their properties are worth.
"This is an increasing driver of defaults that we didn't see in previous cycles," Ms. Westerback said. "The unemployment rate was a factor before, but we didn't have the amount of underwater borrowers that we have now."
For the complete article that discusses the participants' outlook for the U.S. housing market, please see "Experts Discuss U.S. Housing As A Falling Knife, But How Sharp Is The Blade?" published June 13, 2001.
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