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alstry (36.01)

Housing heading for Disaster

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September 23, 2008 – Comments (5)

"I barely have money to survive," he said.

Ray is one of more than 7.5 million people -- almost 15 percent of American homeowners with a mortgage -- who are spending half of their income or more on housing costs, according to 2007 data released Tuesday by the U.S. Census Bureau. That is up from nearly 7.1 million the year before.

Traditionally, the government and most lenders consider a homeowner spending 30 percent or more of their income on housing costs to be financially burdened. But that definition now covers almost 38 percent of American homeowners with a mortgage -- 19 million of them.

Though home prices have fallen this year, in the most expensive markets where home prices tripled during the boom, many working families still cannot afford to buy a home.

"We had a bubble," said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. "This is a case where we absolutely want the market to adjust."

http://biz.yahoo.com/ap/080923/cash_strapped_homeowners.html

50% on home expenses...the other 70% on basic necessities....the numbers just don't add up.  Factor in rising food and fuel prices and the numbers are even worse.  Add in rising unemployment and we are right in the cross hairs of nothing America has ever seen before.

Just with what we can identify...we are looking at millions of additional foreclosures hitting the market.  A much higher number than we have already seen. 

Most Americans now are having trouble paying for food fuel and shelter.  The cost of living has simply out paced the fall in incomes over the past eight years.  Home prices need to fall BELOW pre bubble pricing before we will see any stabilization...right now my estimates are to 1990 prices.

With rising costs...it will be very difficult for any homebuilder to make a profit for the foreseeable future.  Expect foreclosures to skyrocket without massive government intervention and a dramatic fall in home prices....from here.

The problem is a mess and getting messier.  Until the average American Family can afford food fuel and shelther on an average income....expect dramatic slowing ahead as many families are leveraged.

5 Comments – Post Your Own

#1) On September 23, 2008 at 10:53 AM, gsricks55 (< 20) wrote:

I work in a housing related industry and I can tell you without exaggerating that housing is already in a depression.

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#2) On September 23, 2008 at 12:22 PM, leohaas (32.35) wrote:

"Until the average American Family can afford food fuel and shelther on an average income....expect dramatic slowing ahead as many families are leveraged."

You nailed it! It is not just financial companies that need to deleverage (read: sell stuff; anything worth any money will do). Same is true for many families. That will put an awful lot of pressure on the markets (not just the housing markets, but also the stock markets, commodities markets, and so on). Remember, a company or person in need of deleveraging will sell anything for which there is a market!

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#3) On September 23, 2008 at 9:00 PM, RainierMan (74.38) wrote:

Since it's clear that even non-sub-prime mortgage are showing increasing distress, and the economy is getting worse, I don't see how housing can recover any time soon.

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#4) On September 23, 2008 at 9:31 PM, alstry (36.01) wrote:

Its all about price....as prices keep falling more homeowners are underwater and more homes will get foreclosed....as more homes get foreclosed.....prices will keep falling

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#5) On September 23, 2008 at 10:38 PM, GeneralDemon (< 20) wrote:

It's not about price Alstry - wake up!!. Price matters little with sharply rising unemployment. If you have no wage, no cash, and no credit - how is it that price matters?

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