The US Housing Crisis is Over

Here’s a more bullish counterpoint to ‘Chicken little’ Lereah’s opinion that the US housing market is in for more pain – The Wall Street Journal is declaring that after 3 years of decline the US housing bust is over.

The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won’t happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.

Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.

Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what’s going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.

Thanks to BCbuds for the link (which will expire in 7 days)

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sheeplessinvancouver
sheeplessinvancouver
12 years ago

"That’s interesting. I have done the math over and over again in south granville (not the MLS south granville), and I just can’t justify paying about a 100% premium to buy *new* versus renting old." I bought old. The place is equivalent to an old rental which would probably be what I'd be living in if I still rented. I don't like to pay high rents and don't need granite countertops, although as an owner, I can always renovate if they suddenly become a "necessity". The value is mostly in the land the building sits on. Brand new buildings are like new cars. They depreciate a lot in the first few years. One place I looked at was only four years old and was listed at around 30% of what it cost new. But you have to be careful when… Read more »

Anonymous
Anonymous
12 years ago

I was also very concerned about the 2 big holes in the ground across the street, where Alto and some other condo building is going up. It’s also across from the Odyssey, so, it will be a very noisy block for a few years.

This is too much..in a few years, it will be the airport syndrome at Howe and Davie…new naive condo owners under water petitioning city hall to shut down all the bars (who pay high taxes) who were there first.

Anonymous
Anonymous
12 years ago

…i mean there is only sooo much i am willing to pay for a granite counter top and a rainscreen ticking time bomb.

franko
franko
12 years ago

WOW, that inventory is exploding!

I'm so friggin excited, I won't be able to sleep tonight.

Anonymous
Anonymous
12 years ago

I don’t know where everyone is getting the rental prices. I wouldn’t mind cashing out the equity in my condo, but have been looking for a rental for a couple of years and have yet to find anything in a neighbourhood I like that’s less than my mortgage + strata fees + taxes. My insurance would go up as a renter. And I have a dog.

That's interesting. I have done the math over and over again in south granville (not the MLS south granville), and I just can't justify paying about a 100% premium to buy *new* versus renting old.

franko
franko
12 years ago

.

.

225 new (net)listings per day in peak selling season is INSANE. Christ,that would mean over 19,000 inventory by the end of may. With sellers starting to panic, how long until we add 300 per day?

patriotz
patriotz
12 years ago

If I were to sell today and the market went down by 50%, I’d be mortgage-free, but I’d never make up what I’d have to pay in rent while waiting for the market to crash even if I invested all the equity when I cashed out.

That's absurd. Suppose your condo has a market price of 300K. If you sell you've got 150K cash since you say you have 50% equity.

You can easily rent a nice condo for 1250/month or 15K a year.

You can get 4% on the 150K no problem, that's 6K a year.

Net cost of shelter 9K a year or 750/month waiting out the crash.But that's less than what you're paying right now on mortgage, condo fees, taxes, etc.

When opportunity cost knocks, answer the door.

Strataman
Strataman
12 years ago

Great evening!! over 200 new listings on paulb's site tonight. All downhill from here! 🙂

sheeplessinvancouver
sheeplessinvancouver
12 years ago

"What do you mean it doesn’t hurt you if you are in for the long haul. Of course it does. Even if you have bought recently, it still makes sense to sell now and rent. Then buy when the market is 50% of its current value. You will have $150K less mortgage." I don't know where everyone is getting the rental prices. I wouldn't mind cashing out the equity in my condo, but have been looking for a rental for a couple of years and have yet to find anything in a neighbourhood I like that's less than my mortgage + strata fees + taxes. My insurance would go up as a renter. And I have a dog. If I were to sell today and the market went down by 50%, I'd be mortgage-free, but I'd never make up what… Read more »

Anonymous
Anonymous
12 years ago

That's funny, I was walking by 1212 Howe and I didn't see a line up.

patriotz
patriotz
12 years ago

Those of you waiting for a 50% drop, how do you plan to get a mortgage if that happens? If the market drops that much, there will be mayhem in the banking industry, which means they will stop lending. No there won't and no they won't. First, you're forgetting that only BC has such an extreme level of overvaluation. The rest of the country is not going to see anywhere near 50%, not even Alberta. So the effect on Canada's banks overall is going to be diluted. At the bottom of the early 80's bust, qualified buyers had no problem at all getting financing, and that was after a 45% nominal decline, both here and in Alberta. And to top it off the Bank of BC and two Alberta banks had failed. The upcoming bust is not going to be… Read more »

bdk
bdk
12 years ago

Seriously though, if San Diego and South Florida were the only places for retired people with "real money" to go to then where have these people with real money gone?

Did they all move to Vancouver?????

If you are retired and have real money and wanted great medical, the choices are South Florida and San Diego”

blueskies
blueskies
12 years ago

picking up some burritos at the taco del mar on west broadway.

burritos flammbe maybe?

richard
richard
12 years ago

"Richard, what do you mean by that? Do you know something the rest of us don’t? What does your crystal ball say about 2 years into the future? What will the Lottery numbers be next week?

Making predictions doesn’t mean they will happen."

Did i say i had a crystal ball? Did i make any predictions? Did i say i was better than any of you? Did i say "down"? Did I say "up"?

Maybe i just think things will be interesting 2 years from now? I'm sure i'm not the only one on this blog curious about what happens in the next few years.

Tony Danza
Tony Danza
12 years ago

We’ll all just have to wait and see.

Yeah, inventory is at 15,500 give or take, you won't have to wait very long. 15,500 might not be alot for NYC but it's eye popping for Vancouver.

stagnate
stagnate
12 years ago

holy shit, i just saw t.fu and nyc picking up some burritos at the taco del mar on west broadway.

nyc
nyc
12 years ago

Richard, what do you mean by that? Do you know something the rest of us don't? What does your crystal ball say about 2 years into the future? What will the Lottery numbers be next week?

Making predictions doesn't mean they will happen.

richard
richard
12 years ago

"2 years could potentially be a great time to sell right before the Olympics, or shortly after.

We’ll all just have to wait and see."

oh you can bet we'll be waiting to see.

Anonymous
Anonymous
12 years ago

NYC,

There are lots of egs for tony and bdk,lots of flowers for misanthropic curmudgeon and sonika and lots of krispy creamy donuts for all the bears and bulls,gst is at 5% based on any amount.

nyc
nyc
12 years ago

woodenhorse: if you’re here and planning on owning for only 2 years, that’s very dangerous.

2 years was the minimum time I'd be living there, but, I could stay 10 years if necessary. Why do you think 2 years is "very dangerous"? 2 years could potentially be a great time to sell right before the Olympics, or shortly after.

We'll all just have to wait and see.

Ogopogo
Ogopogo
12 years ago

franko, You're right about "I thought everyone wanted to live in Kelowna", don't let anyone trick you. It's like a formula, you sell in Vancouver, buy a nicer house in Kelowna and pocket oodles of cash. Ooops, I don't think it works that way any more.

Anonymous
Anonymous
12 years ago

How much do the marketers pay people to line up in front of a condo these days?

nyc
nyc
12 years ago

FYI, I was walking past Davie and Howe today and saw a long line of people waiting outside of 1212 Howe to be one of the first to buy a condo in that building. I was initially interested in condos in that building, but, then discovered I'd have to pay over $20K in GST on top of the sale price, and decided it wasn't worth it. I was also very concerned about the 2 big holes in the ground across the street, where Alto and some other condo building is going up. It's also across from the Odyssey, so, it will be a very noisy block for a few years. But, I was amazed to see people still lining up to buy a condo in the current environment. I thought they might have a hard time selling them now, but,… Read more »

franko
franko
12 years ago

.

.

O shit! I thought everyone wanted to live in Kelowna.

BBY
BBY
12 years ago

woodenhorse (so it seems…) said "One more thing: Why do so many posts that are replies to your own posts have your name as the poster as well? (see posts @ 2008-05-08 11:46:35 , 2008-05-08 11:42:28 , 2008-05-07 13:01:55)"

This is because somewhere in the cyberspace between my keyboard and your eyeballs, the blogging software incorrectly defaults the Name field when you're adding comment. For example, I had to delete "vanguy" from the Name field and enter my handle BBY. It's an annoying bug; so be sure to verify the name that you're submitting comments under. It's not just "nyc"; it randomly happens to quite a few posts I believe.

Again, CHECK THE NAME FIELD WHEN SUBMITTING COMMENTS!!!

[A public service announcement from BBY.]