But those who think that the worst may be over for the housing market should take another look at the data, economists say. For the figures on new-home sales have a strange wrinkle that, in the current environment, may lead the government to overstate sales (and to understate inventory) by up to 20 percent. “The market is weaker than the data say,” said Mark Zandi, chief economist at Moody’s/Economy.com.
… But here’s the rub: If a contract to buy a home, signed in November, is canceled in December, the Census Bureau does not subtract the failed transaction from the number of sales, or add the house back to its inventory total. In the last year, as the housing market has cooled, the volume of cancellations has risen to epidemic proportions. [emphasis added]
… Just as the rising tide of cancellations leads the Census Bureau to overreport sales in the short term, it leads the government to underreport inventories. New homes on which contracts are not consummated are not added back into the inventory figure.
T wo weeks ago, I wrote that many Americans might lose their homes because they would not be able to make the mortgage payments.
It is worse than I expected. On Dec. 16, the Center for Responsible Lending held a telephone press conference to announce the finding of a new CRL study of sub-prime mortgages.
According to the study, 2.2 million American families with sub-prime mortgages could lose their homes. The problem is escalating and 1 in 5 of this year’s sub-prime mortgages may fail. Foreclosures may cost $164 billion.
You can download the study from Responsible Lending’s Web site, www.responsiblelending. org. Foreclosure rates were estimated using housing appreciation forecasts developed by Moody’s www.economy.com.
Several factors contributed to the year’s increasingly high foreclosure rates. Most prominent was the especially high number of subprime mortgages granted over the last several years as well as the sudden increase in energy costs. Also contributing were slowing home sales and rate adjustments.
Rosen sees home prices dropping by about 8 percent in the San Francisco Bay Area and 11 percent in Miami over the next few years. NAR predicts increases in home prices next year. Some think we’ve already hit bottom; others think we haven’t hit bottom yet.
That’s not much help. Heh.
Here’s a great headline: HIGH PRICES BLAMED FOR HOUSING SLUMP. D’ya THINK?