Merrill Lynch states housing will drop another 20-30%

NEW YORK (CNNMoney.com) -- The worst housing financial crisis in decades is only going to get worse, a Merrill Lynch report said Wednesday.
The investment bank forecasted a 15 percent drop in housing prices in 2008 and a further 10 percent drop in 2009, with even more depreciation likely in 2010.
By contrast, the National Association of Realtors (NAR) expects housing prices to remain flat in 2008. NAR did cut its home price estimate for the current quarter, however, to a 5.3 percent year-over-year decline, which represents the steepest drop in that price measure on record. But NAR sees an uptick in home prices in the last two quarters of 2008.
"Merrill Lynch's figures are way too pessimistic, and they are unprecedented," Lawrence Yun, the National Association of Realtors chief economist told CNNMoney.com. "There is so much variation in local housing markets, and we see stable price conditions for 2008."
The current housing crisis and the depreciation in home prices have pummeled the economy, with businesses and consumers cutting back on spending, raising the specter of a recession. "Lower sales and higher inventory for sales are lowering the velocity of transactions," said Fritz Siebel, Director of US Property Derivatives for Tradition Financial Services. "That cannot be a sign of good health for the economy."
But for those who think that the worst is over, Merrill Lynch said that housing prices still remain comparatively high. The brokerage believes that home prices are still far above historical norms when compared to other measures such as rent or GDP. "By our calculations, it will take about a 20 to 30 percent decline in home prices to correct this imbalance," said the report.
Merrill Lynch believes that housing starts will most likely slide another 30 percent by the end of 2008 - a historic low.
The report says that the inventory situation only continues to worsen, as homebuilders are now looking at more than a nine months' supply. "The current supply/demand environment does not favor a swift recovery in the housing market, in our view," according to the report.
Yun agrees that the reduction in housing starts will not bode well for the economy, especially in the homebuilding industry, but he believes that the reduction will soothe the housing market by slowing the glut in inventory. "The reduction in housing starts is

I've been looking to buy a house sometime in the next two years...looks like it should open up nicely for me.

thats nuts and the fact that all these know it alls on cnbc are stating otherwise makes me believe things are only gonna get much much worse...

Merrill Lynch better get their "own house" in order before anyone takes any of their predictions seriously.

Ok, when should I build my house then.....wife and I have been mulling it over. Now, or wait until 2009? Interest rates are great now though too.

The Wolf said:

Ok, when should I build my house then.....wife and I have been mulling it over. Now, or wait until 2009? Interest rates are great now though too.

Click to expand...

Risk vs Reward

How much lower can the rates really get? Yes, you can possibly save more money, but to me this great time to lock in rates and you will have all the power in negotiating. Builders are back logged and you can ask and receive more than you normally would get from a builder.

Now is as good a time as any to get into real estate. As far as Merrill's predictions...while i do think the market will be volatile over the next couple of years, a lot of these financial companies are going to be very very conservative in their predictions, as they've already been bitten once and don't want to get bitten again.

Another interesting view/artilce on the future of some housing.

As baby boomers retire, home markets will hurt
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<!--endclickprintexclude--><!-- /EdSysObj -->By Noelle Knox, USA TODAY
The next housing downturn is already on the horizon — and it looks like it's going to be a long one.

In the next two decades, as millions of aging baby boomers put their homes on the market, they'll put downward pressure on prices, and their exodus will reshape neighborhoods and cities coast to coast, according to research released Wednesday.


BIG ADVANTAGE: Older boomers caught all the breaks


In some states, the trend has already begun, making it harder for areas to recover from the real estate recession, which isn't expected to bottom out until the second half of this year at the earliest.

There are already more sellers than buyers in six states: Connecticut, New York (excluding Manhattan), North Dakota, Pennsylvania, West Virginia and Hawaii. The trend first hits areas with cold weather and traffic congestion, which tend to drive retirees away.

FIND MORE STORIES IN: William Frey

Boomers were "an incoming tide for four decades. Now the tide's turned, and it's going to make it much harder for housing markets to rise," said Dowell Myers, professor of policy, planning and development at the University of Southern California and co-author of the study. The trend has long been anticipated, but Myers is the first to analyze buying and selling, state by state.

Nationwide, the ratio of seniors to working-age residents will increase by 67% in the next 20 years. As boomers age, more will move into assisted-living centers, apartments or relatives' houses. Those with two homes may sell one and retire to their vacation house. And when they pass on, many of their heirs will sell the properties.

Last hit should be warm-weather states, such as Florida, Arizona and Nevada, where retirees usually sell late in life. That's good news for homeowners in those states, where prices and sales are reeling from the collapse of the real estate bubble.

Myers' research, which included population and immigration projections from the U.S. Census, shows that the baby boom housing bubble will hit the Northeast and Midwest hard.

"It's most pertinent to declining parts of the country," said William Frey, a demographer at the Brookings Institution who agrees with Myers' conclusions. "The glut of homes on the market from baby boomers will depress the housing market and have an impact on some suburban neighborhoods that will come to look like older city neighborhoods that have undergone blight and disrepair."

The math is simple: 79 million boomers have driven up housing demand. That trend will reverse itself when boomers are age 65 to 75; there will be three sellers for each buyer, Myers says.

He and Frey say governments need to help create jobs so young adults and immigrants can buy homes.

Gotta believe 18-24 months from now that homes in most areas of the country will be cheaper than they are now.........and rates will not be any higher.

Gotta agree with Fish. I've been looking at condos every month for about a year and just about every month, the prices fall.

The recent write offs of bad debt tell you many more foreclosures will be hitting the market. Until we have a few quarters without billions in write offs, the housing market is not going to improve.

well no shit

I have had my house up for 1 year making 2 mortgage payments. I just dropped it from $339,000. to $279,000 and still think I have to go more. And this house need nothing I just put a new roof, AC, pool, and tikki bar. I wish I could have that money back. The kick in the nuts is a month ago one block over a guy puts the same style house up and in 3 week it sells for $313,000. The double payments are killing me, so when I read shit like this I just gohno:.

http://www.thedesimag.com/2011/07/14/real-estate-will-decline-by-20-percent-in-2012/

Look for another 20% decline in 2012:



Real Estate will decline by 20 percent in 2012?
July 14, 2011 Ravi Bhatia




So you think we are out of the woods with respect to the housing crisis. Think again! Per Gary Shilling, a leading economic pundit and the man who warned against the danger of sub-prime mortgage lending, we are likely facing another downward spiral in home values. Possibly as much as 20% by next year.*He stated*”Economic growth here and abroad is slipping, making a 2012 recession a distinct possibility, when you have slow growth it doesn’t take much of a shock to throw you in negative territory.”*Mr. Shilling’s research shows there is 2 + million surplus of homes in the U.S. that markets cannot support and because of this, the housing prices will continue to decline.

While Bernanke’s actions may have propped up equity markets, they have to date, done little to spearhead confidence in the housing market. What does this mean for you, the American homeowner? Your home will either remain underwater or your path towards increasing home equity will be severely curtailed, at least for the foreseeable future. This is a sobering prediction.

bellyputter said:

Merrill Lynch better get their "own house" in order before anyone takes any of their predictions seriously.

Click to expand...

Merrill Lynch has no idea what they are talking about!

Housing will not come back up until wages come back up, and once that happens then housing will be fighting higher interest rates which will also keep prices down.

This was the bubble of all bubbles.

The reason real estate will NEVER get back to pre 2007 levels is because those levels should have never existed in the 1st place.

Stagnant wages were replaced by home equity loans, so normal to me will be wages increasing and housing decreasing or staying about where they are right now .