Mortgage lenders can’t hide the obvious – the housing market is in freefall

Nothing changes the picture that the housing market is in free fall and has considerably further to go given the scarcity of mortgage finance

House prices fell by 2.5% in December, says Nationwide. Photo: Andrew Parsons

You have to hand it to the Nationwide, and, indeed, the Halifax.

Both lenders, in producing their monthly reports showing prices fell more than 2% in a single month in December, are saying that things are not as bad as they look.

The pace of decline is steadying, they argue, rather than accelerating. The Nationwide said this morning argued that the three-month on three-month fall was “only” 4.2%. That may be true but it would still give you an annualised fall of 17%.

Its monthly figure of 2.5% would give you an annualised figure of 30% while the Halifax’s December figure of 2.2% down, reported last Friday, gives you an annualised pace of tumble of around 26%.

The truth is you can take your pick but nothing changes the picture that the housing market is in free fall and has considerably further to go given the scarcity of mortgage finance, particularly for first-time buyers, and given the idea that people don’t want to buy now when they think they can buy cheaper in year’s time.

Quite how far house prices will fall is anyone’s guess. Prices are down now about a fifth from the peak in autumn 2007. Add in inflation over that period of 5-6% and you have a real-term fall of about a quarter.

Read moreMortgage lenders can’t hide the obvious – the housing market is in freefall

Once Booming Dubai Goes Bust

CBS Evening News: Following Wave Of Speculation, Real Estate Collapses In Middle East’s Capital Of The Ultra-Rich

Downturn In Dubai: The worldwide economic crisis has even struck the once-booming oil city of Dubai. As Sheila MacVicar reports, developers and investors are now facing a financial standstill due to mass overexpansion.

The Palm Jumeirah, Dubai, the world’s biggest artificial island. Home prices there are down 40 percent in the last year.
Photo: ThePalmJumeirah.

(CBS) Over the years, booming oil prices helped turn Dubai into a land of opportunity and playground for the ultra rich.

But that was then and this is now. And as CBS News correspondent Sheila MacVicar reports, even Dubai is feeling the pinch of the worldwide economic crisis.

Related articles:
Dubai dream turns sour (The Straits Times)
Owner of Dubai landmarks eyes float (The Telegraph)
Dubai Bonds Signal Economic “Depression,” ING Says (Bloomberg)

The gulf city state’s property prices went up as fast and as high as the towering buildings. But reality has suddenly intruded.

One investor said it was as if someone had thrown a switch, as the global credit crunch slammed a city that was, in effect, the world’s biggest construction site

It took just 20 years for Dubai to go from a desert outpost with a handful of office towers to a world metropolis, where one fifth of the world’s cranes operate, and property became a very hot commodity, with some people playing real estate the way others play poker.

Read moreOnce Booming Dubai Goes Bust

October Home Prices in 20 U.S. Metro Areas Fall Record 18%

A for sale sign stands outside a home in Boston, on Sept. 5, 2008. Photographer: Michael Fein/Bloomberg News

Dec. 30 (Bloomberg) — Home prices in 20 major U.S. cities declined at the fastest rate on record, depressed by mounting foreclosures and slumping sales.

The S&P/Case-Shiller index declined 18 percent in the 12 months to October, more than forecast, after dropping 17.4 percent in the year through September. The gauge has fallen every month since January 2007. Year-over-year records began in 2001.

See also: U.S. Economy: Confidence Sinks to Record Low on Jobs (Bloomberg)

The financial market meltdown that’s reverberated around the globe has prompted banks to curb lending, signaling the housing slump will persist for a fourth year in 2009. Falling property values have eroded household wealth, causing consumers to pare spending and deepening what is projected to be the longest recession in the postwar period.

Read moreOctober Home Prices in 20 U.S. Metro Areas Fall Record 18%

New Zealand recession deepens

New Zealand’s economy has contracted for a third straight quarter as the combination of a weak housing market and a slowing global economy takes its toll.

The country’s gross domestic product contracted 0.4pc in the three months to the end of September and that follows a 0.2pc decline in the second quarter and a 0.3pc shrinkage in the first three months of the the year. The decline for the latest quarter was in line with economists’ expectations.

Like that of its larger neighbour Australia, New Zealand’s economy has enjoyed a booming housing market over the past decade. However, the bursting of the housing bubble has prompted New Zealanders to apply a sharp brake to their spending.

Read moreNew Zealand recession deepens

U.S. Economy: Housing Prices Collapse at Near-Depression Pace

Dec. 23 (Bloomberg) — Sales of single-family houses in the U.S. dropped in November by the most in two decades and resale prices collapsed at a pace reminiscent of the Great Depression, dashing speculation the market was close to a bottom.

Purchases of both new and existing houses dropped 7.6 percent, the biggest decline since January 1989, to an annual rate of 4.43 million, government and industry figures showed today. A 13 percent drop in the median resale price was the most since records began in 1968 and was likely the largest since the 1930s, the National Association of Realtors said.

“Housing is still in a freefall,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.

The figures were worse than economists had forecast and signal that the battered housing market that led the economy into a recession may be taking another lurch down. Sliding property values mean more Americans will be under water on their mortgages, destroying household wealth and undermining consumers’ purchasing power.

Read moreU.S. Economy: Housing Prices Collapse at Near-Depression Pace

UK house prices won’t recover for a decade

UK house prices will not recover their 2007 peak for at least a decade, Legal & General Investment Management (LGIM) has warned.

In what ranks as the gloomiest forecast for the UK property market to date, LGIM economist Tim Drayson has predicted that house prices will “fall another 10pc-15pc next year followed by four to five years of stagnation as incomes catch up with house prices”.

“It will be at least 10 years before we see prices return to their 2007 peak levels,” he said. LGIM, part of the insurance giant Legal & General, has been remarkably accurate with other economic predictions in the past year.

Read moreUK house prices won’t recover for a decade

Analysts say Federal Reserve has fired all shots in its armoury

Shares soared on Wall Street last night, but the dollar tumbled after the US Federal Reserve’s shock decision effectively to cut American official interest rates to zero.

The Dow Jones industrial average jumped by more than 359.61 points, or 4.2 per cent, as markets hailed the US central bank’s landmark move to cut its key Fed Funds rate from a previous record low of 1 per cent to a target range of zero to 0.25 per cent.

The broader-based S&P 500 index of US blue chip shares also surged by more than 5 per cent as investors cheered the Fed’s decision to combine last night’s historic cut in rates with a raft of other ground-breaking steps to combat the economic slump.

Related article: Fed throws out the rulebook

The Fed fulfilled predictions that it would announce extraordinary moves to bolster America’s economy through so-called “quantitative easing”. It confirmed that it will buy up “large quantities” of mortgage-backed securities to try to ease the flow of lending to a slumping US housing market.

Read moreAnalysts say Federal Reserve has fired all shots in its armoury

New Zealand November House Sales Plunge 45.4%, Institute Says

Dec. 11 (Bloomberg) — New Zealand home sales plunged in November as a contracting economy and tighter credit deterred buyers.

A total of 4,279 homes were sold last month, down 45.4 percent from the same month in 2007, the Auckland-based Real Estate Institute of New Zealand Inc. said today in an e-mailed report. The median house price dropped 4.1 percent from a year earlier to NZ$337,500 ($183,000).

Home sales are near an 18-year low, adding to signs that nation’s first recession in 10 years will be prolonged by the effects of a global credit freeze on bank lending and consumer spending.

Read moreNew Zealand November House Sales Plunge 45.4%, Institute Says

House prices fall at fastest pace in 25 years

British house prices tumbled at a record 16.1 per cent in November, marking the sharpest drop in property values for a quarter of a century.

Figures released this morning by Halifax revealed that prices fell 2.6 per cent in November compared with October, and are 16.1 per cent lower than in November 2007.

The year-on-year decline is deeper than falls recorded during the last recession in the early 1990s, and is the biggest drop since 1983.

Read moreHouse prices fall at fastest pace in 25 years

China Property Slump Threatens Global Economy as Growth Slows

China Property Slump Threatens Global Economy as Growth Slows

Dec. 2 (Bloomberg) — House prices in Shanghai, Shenzhen and Guangzhou are plunging, and the global economy may grind almost to a halt next year because of it.

Construction of homes, offices and factories fell at least 16.6 percent in October after rising 32.5 percent a year earlier, according to Macquarie Securities Ltd. That’s squeezing an economy already slowed by recessions in the U.S., Japan and Europe that have cut demand for exports. Building is the biggest driver of China’s expansion, contributing a quarter of fixed- asset investment and employing 77 million people.

The central bank cut its key interest rate by the most in 11 years last week and the government said “forceful” measures were needed to arrest a faster-than-expected economic decline. Without more rate cuts and government spending, China is unlikely to contribute the 60 percent of global growth Merrill Lynch & Co. forecasts for next year, further slowing the world economy.

“China is now at the heart of the global slowdown,” said Jim Walker, chief economist at Asianomics Ltd., an economic advisory firm in Hong Kong. “It means that global growth is probably going to be dragged down close to zero next year.”

Read moreChina Property Slump Threatens Global Economy as Growth Slows

Home Prices for 20 U.S. Cities Decline Most on Record

A new price sign stands atop a sign outside a home in Park Ridge, Illinois, on Nov. 6, 2008. Photographer: Tim Boyle/Bloomberg News

Nov. 25 (Bloomberg) — House prices in 20 U.S. cities declined in the year ended in September at the fastest pace on record as rising foreclosures pushed down property values.

The S&P/Case-Shiller home-price index dropped 17.4 percent in September from a year earlier, more than forecast, after a 16.6 percent decline in August. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.

Mounting foreclosures are contributing to the drop in home prices, while adding to the inventory of unsold homes on the market. Lower property values are weighing on household wealth, causing consumers to cutback on spending and increasing the likelihood that the U.S. economy will contract for a second consecutive quarter.

Read moreHome Prices for 20 U.S. Cities Decline Most on Record

50,000 estate agents face axe in next nine months

Experts have warned that up to 50,000 estate agents may lose their jobs in the next year

As many as 50,000 estate agents could lose their jobs by next Autumn because of the worsening economic crisis, experts today warned.

Economists said the collapse in the housing markets meant the true figure would be double previous predictions of 15,000 job losses, with some experts forecasting at least 50,000 out of work by next year.

The panic has led to some businesses making desperate attempts to secure their survival, with one estate agent even converting part of his office into a cafe to generate extra income.

Ben Read, managing economist at the Centre for Economics and Business Research, said the toll of job losses would be shocking.

He told the Evening Standard: ‘It will definitely be worse. The housing market has dropped significantly more since May and the outlook for the next nine months is pretty ropey.

‘Because of the worsening situation in the economy you could easily expect that figure of 15,000 to go up by 50 per cent. The true figure could even be as much as 50,000.

‘Most estate agents have let go significant numbers of staff and are working on skeleton staff. I’m sure it will surprise everyone how bad it is.’

Read more50,000 estate agents face axe in next nine months

Housing market ‘far worse’ than figures suggest

Online estate agent says latest figures underestimate fall in prices by two-thirds

House prices across the UK have already fallen far further than official data and market indicators suggest, Rightmove, the online estate agent warned yesterday, as it revealed that up to 300 estate agents were quitting its service every month.

While the latest figures from leading mortgage lenders such as Halifax suggest that prices are down by 15 per cent from their peak, Rightmove said the falls were up to two-thirds higher.

Miles Shipside, the commercial director of Rightmove, said: “Estate agents tell us that the actual prices that are being achieved [initially between buyers and sellers] for property are down by about 20 to 25 per cent beneath peak asking prices. That has not come out in the national indices.”

His revelation suggests that house prices have not only fallen much further than the highly regarded surveys of Halifax and Nationwide, which both track house prices based on agreed mortgages, but could also be lagging behind the situation on the ground.

Read moreHousing market ‘far worse’ than figures suggest

One in five US homeowners with mortgages underwater

NEW YORK, Oct 31 (Reuters) – Nearly one in five U.S. mortgage borrowers owe more to lenders than their homes are worth, and the rate may soon approach one in four as housing prices fall and the economy weakens, a report on Friday shows.

About 7.63 million properties, or 18 percent, had negative equity in September, and another 2.1 million will follow if home prices fall another 5 percent, according to a report by First American CoreLogic.

The data, covering 43 states and Washington, D.C., includes borrowers nationwide, even those who took out mortgages before housing prices began to soar early this decade.

Read moreOne in five US homeowners with mortgages underwater

House prices fall 14.6pc in a year

House prices have fallen for the twelfth month in a row and are now 14.6pc lower than last year, the latest figures from Nationwide show.

Houses for sale: house prices are falling by almost £80 a day, according to Nationwide
The average house price has dropped by £27,000 in the past year, says Nationwide Photo: PA

Prices fell 1.4pc in October and the average house has seen £27,000 wiped off its value in the past twelve months.

The number of completed housing sales has now fallen to its lowest level since the Nationwide series began in 1974, the building society added in its lastest House Price Survey, driving the decline in prices.

The crisis in the financial sector and the latest Government data suggesting a recession is imminent is likely to worsen the housing market slump and has “uncomfortable implications”, Nationwide said.

“A looming recession and continued financial market instability have uncomfortable implications for the housing and mortgage markets, and will undoubtedly affect the pace of recovery in house prices,” Fionnuala Earley, the Nationwide’s chief economist, said.

Read moreHouse prices fall 14.6pc in a year

Traders predict house prices will fall by 50% in four years

· Investments based on property ‘fall off a cliff’
· Job losses hit estate agents and mortgage firms

The slide in house prices will continue for at least three years and crush the value of a home by almost 50% in real terms, according to a key index of property price futures. Indications from futures trading on long term property prices shows that the average UK home will recover its current value only in 2017.

By the end of this year prices will be down by 10% and by a further 10.5% in 2009, according to the index. Prices will keep dropping through 2010 and cut values by 23.5% when they hit rock bottom in 2011. House prices will then begin a slow climb back to current market values over a period of about six years.

If an average retail price inflation rate of 4% is included in the calculation and in addition the 8% drop in prices over the last eight months already registered by the Halifax index, the fall in values over almost four years will reach 47.5% in real terms.

The Liberal Democrat Treasury spokesman, Lord Oakeshott, said the figures revealed that property investors had little confidence in the market and were predicting steep and prolonged falls in prices.

“This government says this housing depression will be different from the early 1990s. Yes, that’s right. It will be worse.”

Read moreTraders predict house prices will fall by 50% in four years

Bernanke Warns of Possible Recession

WASHINGTON (AP) – Federal Reserve Chairman Ben Bernanke said Wednesday a recession is possible and policymakers are “fighting against the wind” in trying to steady a shaky economy. He would not say if further interest rate cuts are planned.

Bernanke’s testimony before the Joint Economic Committee of Congress was a more pessimistic assessment of the economy’s immediate prospects than a report he delivered earlier this year. His appearance on Capitol Hill came amid a trio of economic slumps in the housing, credit and financial areas.

“It now appears likely that gross domestic product (GDP) will not grow much, if at all, over the first half of 2008 and could even contract slightly,” Bernanke told lawmakers. GDP measures the value of all goods and services produced within the United States and is the best barometer of the United States’ economic health. Under one rule, six straight months of declining GDP, would constitute a recession.

Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington,
Wednesday, April 2, 2008, before the Joint Economic Committee.
(AP Photos/Susan Walsh)

Read moreBernanke Warns of Possible Recession

“Pay day” loans exacerbate housing crisis

CLEVELAND (Reuters) – As hundreds of thousands of American home owners fall behind on their mortgage payments, more people are turning to short-term loans with sky-high interest rates just to get by.While figures are hard to come by, evidence from nonprofit credit and mortgage counselors suggests that the number of people using these so-called “pay day loans” is growing as the U.S. housing crisis deepens, a negative sign for economic recovery.


“We’re hearing from around the country that many folks are buried deep in pay day loan debts as well as struggling with their mortgage payments,” said Uriah King, a policy associate at the Center for Responsible Lending (CRL).

A pay day loan is typically for a few hundred dollars, with a term of two weeks, and an interest rate as high as 800 percent. The average borrower ends up paying back $793 for a $325 loan, according to the Center.

The Center also estimates pay day lenders issued more than $28 billion in loans in 2005, the latest available figures.

Read more“Pay day” loans exacerbate housing crisis