US:Barrons calls the bottom in house market

The wall street insiders weekly Barron’s (sister publication of the Wall Street Journal) calls the bottom in US house prices

Warning – long article ahead … ver-g.html
Short article from Bazzer.


"It is important to remember, as well, that even after a steep drop in the S&P/Case-Shiller Indices, long-term buyers in the top 20 U.S. metro markets have seen their properties appreciate by **70% since 2000. **Home prices often take five to 10 years to recover fully from severe declines such as this. But at least the available data suggest the scary dive in home prices soon will be over. "

The magic # is 70% appreciation in house prices since 2000.
In Ireland prices have appreciated by how much since 2000?
The American house price tail spin may be reaching an end but I fear the Irish/English decline will be long and painfull.

The US market topped in Summer 2005, I real terms I doubt the bottom of the cycle is in yet, but you probably have your ear closer to the ground and not all regional markets are the same. Since the price of housing is largely driven by the availabilty fo credit and the financial crisis is far from over, it’s too early to talk about a bottom being in.

I’m not expecting the bottom in Ireland until at least 2011, though this could accelerate when the Irish banks start acknowledging their losses.

Nothwithstanding large risk of capital depreciation, as there is likely more falls in the US, pending foreclosures blah blah… real estate is beginning to look like a decent investment in regard to yields, you can get a 7-8% yield in upmarket urban areas in South Florida/California, it’s a long time since you could say the same about the Irish property market.

What are employment conditions like in those areas and what are they likely to be for the next few years?, also how do property taxes affect the yield?
Since Florida/California/Arizona employment revolved around construction and the credit bubble, I would tend to avoid these areas. I have heard of specialised investors picking up repossed properties for 20c in the dollar.

Texas with the oil price boom is probably a better bet with regard to employment and the chance to grow yields? The primary disadvantage of the US is the decling value of the dollar versus the Euro.

When you look at those figures the US “property bubble” looks pretty tame.

At the end of the day, US Sub-prime was just the “catalyst” for pricking a much bigger “credit bubble” out there which fed housing, leveraged buy-outs, credit cards etc etc.
If sub-prime hadn’t forced us to wake up, then something else would have, maybe a large corporate bankruptcy on a failed LBO

I guess the point I am trying to make, is that yes, US property may be bottoming, but in general, the excess credit conditions of the last 5-7 years will not be returning for a very long time. Especially with a more uncertain macro backdrop.

This episode just exposed how leveraged the system had become and how exposed it was to even moderate changes in the prices of certain asset classes. A few banks went bust, a few hedge funds went under…There is a powerful lesson here and it will stick with the system well into the next decade.