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alstry (< 20)

Homes Sales.....It's About Price



August 25, 2008 – Comments (4)

Funny how people are waiting for the home sales numbers.  Wall Street and the pundits want you to focus on the number of homes sold.

Who really cares about the number of homes is the price that matters.  Could you imagine everyone cheering about a high volume day in the market and prices crashed 20%????

Real Estate prices in America are crashing.  Never before has residential real estate decreased in value as much as it has in the past few years.  And the pace of declines is accellerating. 

Whether it be residential or commercial.....  Real Estate is the most leveraged asset class...relatively and absolutely.  In the past five years, trillions in toxic loans were being issued at 100% and more to supposed value.  Now that value has eroded loans are defaulting at historically high rates.

It's not too difficult to understand.  As the loans default, more distressed properties will hit the market driving prices down further.  We are just in the early innings of this process. 

As more and more families are financially ruined from the spiral, expect the economy to slow further.

It has already have a dramtic impact an Auto sales and airline travel this fall.  Casinos are going bankrupt.  Retailers are shuttnig down and commercial vacancies are skyrocketing.  Tax revenues are evaporating.  Few realize how important real estate and toxic lending were to the economy in the past few years.

Now, with homeowners having the lowest equity in their homes in history....the question now is how much further will prices fall?????????????  How much slower will the economy settle?????

4 Comments – Post Your Own

#1) On August 25, 2008 at 9:09 AM, alstry (< 20) wrote:

Expect existing sales numbers to jump this month as lenders are slashing prices to move inventory.  The only problem is lenders are taking in more homes then they are selling.  When people finally realize how low prices have fallen.....we could start to see some forced selling from non bank owners adding even more downward pressure to the market.

The same cycle is beginning in commercial real estate.

If you think the stock market was leveraged in doesn't even play in the same league as real estate today.

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#2) On August 25, 2008 at 10:37 AM, griderX (97.16) wrote:

We need NYC housing prices to be slashed by 30-40%!

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#3) On August 25, 2008 at 4:26 PM, dexion10 (26.83) wrote:

I'm going to recommend this article on the merits of the subject line alone!

The problem with real estate is price... that is the reason that I am focusing on real-estate related shorts - REITS (SRS) and banks sitting on land loans. 

It's not necessarily that I think things will get a lot worse for real estate values (though they will in many markets)... but many stocks, balance sheets etc do not yet reflect the "true value" of land right now... when the balance sheets are reconciled with reality that is when the real tears will start to poor! 

fyi - I've been busy blogging this August so please visit my blog... I'm nearly finished with my nat gas series and I posted on an awful bank. You can see my blog here

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#4) On August 25, 2008 at 4:41 PM, alstry (< 20) wrote:

Its very funny.  Prices are crashing in both residential and commercial real estate.  Most of the debt in America is backed by real estate.

Much of the debt was incurred in the last seven years.  What do you think would happen if American businesses were honest with reporting the valuations of their assets to shareholders???

Its only a matter of time as prices keep falling and we all find out that we are all swimming naked.

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