The Housing Data Wrap-Up: October 2010 was just published by the economics group of Wells Fargo Securities, LLC (link to full report on the bottom of this post). Here are some of the points in the publication that, in my opinion, are relevant to retail real estate (but most of you already knew these):
We estimate home prices will fall an additional five to eight percent by the middle of 2011.
most consumers will continue to keep their retail consumption at low levels while their home values are low and continue to drop, their HELOCs aren’t renewed due to lower home values, and little to no availability of new HELOCs. Where are consumers getting their money to spend? Credit cards? Higher bonuses and higher pay? Keep your belts tight and budgets in check.
The recent foreclosure crisis, which has led some lenders and servicers to temporarily suspend foreclose actions, threatens to lengthen the recovery process. An interruption in foreclosures and increased uncertainty about the foreclosure process could stretch out the recovery timetable and cause home sales to slow even further. Not only would it take longer to clear out the mountain of foreclosed properties, but it would also create more uncertainty about home prices, potentially leading to even more conservative appraisals and even tighter underwriting standards. Tougher appraisals and tight underwriting standards are already offsetting much of the benefit from record low mortgage rates and are a big reason why mortgage purchase applications have risen so little in recent weeks.
It’s probably going to take a lot longer than most people think
Much of the inventory of foreclosed homes and seriously delinquent home mortgages are concentrated in a handful of states, with Florida, Arizona, Nevada, California, Georgia, Illinois and Michigan heading the list of most troubled markets. Housing markets will likely take longer to recover in these states and prices will likely fall a bit further than in the rest of the country.
And it’s probably going to take even longer in Georgia. Bummer.
Construction is expected to finally move back above 1.0 million units in 2012, but only barely so. By contrast, a “normal” year for housing would see around 1.45 million housing starts. We do not expect to hit that level until 2014 at the earliest.
WOW! Housing starts probably not back to “normal” levels until 2014!