The good news: central banks in the U.S., the EU, Britain, Canada, China, Australia, Sweden, and Switzerland all coordinated lower interest rates to boost economic activity. The bad news: markets tumbled yet again; my FOX INDEX, which measures the distance to a healthy market (12,000 Dow, 1,300 S&P, 2,500 NASDAQ), dropped another 900 points to -3,819, its new low (index two months old—we run the FOX INDEX whenever it hits new lows). It’s now 57% of the way to the bottom the market hit in October 2002, during the dotcom bust bear market. No guarantee the current market won’t tear right through those 2002 lows.At bottom, we’re looking for the point where housing prices hit bottom. James R. Hagerty and Ruth Simon, writing today in the Wall Street Journal, make these points about what’s happening to housing:
nearly one in six U.S. homeowners are "under water"; owing more on a mortgage than their home is worth and threatening a default that would further stress credit markets. Also, loss of equity makes people less rich and less inclined to shop.
Among people who bought within the past five years, 29% are under water.
Among mortgages on one- to four-family homes, 9% were a month or more overdue or were in foreclosure in the second quarter-- the highest level since surveys began 39 years ago.
On a national basis, home prices peaked in mid-2006 after rising 86% since January 2000. Since peaking, that index has fallen 13%.
In the second quarter, the median home price was 1.9 times average pretax household income, close to the 1.87 times income norm for 1985 through 2000, before the boom.
That last point is good news. But the article notes housing markets don't tend to turn around quickly. Last round, Los Angeles prices peaked in June 1990, bottomed only in March 1996, and didn't get back to 1990 prices until 2000.
No comments:
Post a Comment