This is what is going to happen, a drop of a couple of thousand points from the DOW in the past month and extreme volatility will keep people second guessing on making big purchases such as buying a house or a new car, even christmas gifts. Anyone buying a house now is an idiot, prices are going to come down even harder over the next 18 months, they are still propped up from just 2 years ago when they offered all that free money to first time buyers, fast forward and guess what, housing is still hurting, its not going to get out of this slump for at least another 10 years! There is no need to buy any real estate now, housing prices need to come down at least 40-50% before it turns around and that is going to take a really long time to happen. This market drop is going to be a huge problem for the overall economy, I would actually go as far to say that it will be even worse than the last drop just 2 years ago. People have not forgotten, those who have stuck it out and made back most of their money in the market will be most likely selling this time around and never getting back in again. Who wants to hold onto stocks and mutual funds in a market that's completely manipulated. Right now there is no place safe to park your money but under your mattress, anyone who says buy stocks because they are cheap are lying straight to your face, stocks aren't cheap as they will get cheaper and cheaper. BUBBLE ben bernanke can take the 30 year fixed to 2% and then to 1% it means nothing, it will not create demand in housing since millions of people cant even apply for a loan due to the new restrictions.
Many say that the economy and wallstreet really dont go together meaning there is somewhat of a separation of the two, well I believe those people are wrong, a down stock market means the economy isn't going to behave so well in the next 1 to 2 quarters.
Homebuyers Spooked by Stock Volatility
bloomberg
Kathleen M. Howley, On Monday August 22, 2011, 10:56 am EDT
Sanjay Jain called his real estate broker four days ago to cancel a deal to buy a three-bedroom home in Folsom, California, unnerved by another plunge in the most volatile equities market on record.
âSeeing whatâs happening on the stock market made me think that itâs not a good time to be buying a home,â Jain said. âIâm going to wait and see.â
As the U.S. economy shows signs of sputtering, instability on Wall Street is sapping the confidence of would-be property buyers, said Karl Case, co-founder of the S&P/Case-Shiller home- price index. That means housing, which aided every recovery except one before the most recent recession, may deepen its five-year drag on growth.
âThereâs a dramatic effect on an economy when a major sector is flat out,â said Case, professor emeritus of economics at Wellesley College in Massachusetts. âIf housing takes another leg down, itâs an accelerator. Itâs going to make a recession happen faster and deeper.â
Home sales in July fell to the lowest point this year, the National Association of Realtors said in a report last week. Applications for mortgages to buy homes dropped to a 13-month low in the week ended Aug. 12, even as borrowing costs tumbled, according to the Mortgage Bankers Association. The Bloomberg Consumer Comfort Index sank to the lowest since the recession.
Equities Slide
The Standard & Poorâs 500 Index has fallen for four straight weeks, losing 16 percent from July 22 through Aug. 19. On the day Jain canceled his deal to buy the Folsom house, global stock markets erased $1.8 trillion of wealth as Morgan Stanley said the U.S. and Europe were âdangerously closeâ to recession. After S&P cut the U.S. credit rating on Aug. 5, the Dow Jones Industrial Average had the biggest one-day loss since 2008, igniting memories of the housing-induced financial crisis that triggered a global recession and wiped out more than 8 million U.S. jobs.
âA lot of people have seen their down payments for a home disappear in the stock market,â said Keith Gumbinger, vice president of HSH Associates, a loan-data firm in Pompton Plains, New Jersey. âIt served as a reinforcement to the hunker-down mentality that a lot of homebuyers already had.â
Before the start of the economic recovery in mid-2009, the U.S. had not exited a recession without being aided by housing, its largest asset class, except for in 1981, according to data from the Bureau of Economic Analysis. That year, the recovery was followed by a second, and deeper, recession in 1982.
Since the 2006 real estate bust, a measure of homebuilding and brokersâ commissions known as residential investment has drained gross domestic product by almost three-quarters of a percentage point annually, on average.
Limiting Growth
For 2010, the first full year of the U.S. recovery, residential investment fell 4.3 percent. Going back to the Great Depression, it gained an average of 22 percent in the first year of expansion, excluding 1946, when it tripled as soldiers returned from World War II.
The U.S. recovery is weakening. The worldâs largest economy grew at a 1.3 percent annual rate in the second quarter, the Commerce Department said on July 29. That was less than the increase of 1.8 percent forecast by economists surveyed by Bloomberg. Jobless claims climbed to the highest in a month in the week ended Aug. 13, according to the Labor Department.
âThe typical homebuyer gets rattled when confronted with economic turmoil,â said Stan Humphries, chief economist of Zillow.com, an online real estate information service in Seattle. âThe type of fear weâre seeing could substantially worsen the housing market.â
Falling Sales, Prices
The real estate market has been struggling after a federal tax credit spurred demand in the second half of 2009 and early 2010. Home sales last month were 9.1 percent below their level at the beginning of the economic expansion two years earlier, data from the National Association of Realtors show. As of May, home prices were 7.3 percent below the start of the recovery, according to the Federal Housing Finance Administration.
The share of mortgages with late payments in the second quarter rose to 8.44 percent from 8.32 percent the previous three months, the Mortgage Bankers Association reported today.
The degenerating housing market has confounded attempts by Federal Reserve Chairman Ben S. Bernanke to revive demand by lowering interest rates. The Fed purchased more than $2 trillion of mortgage-back securities and Treasury bonds in the last two years to hold down long-term borrowing costs.
Bernanke got the cheaper home-loan financing costs he wanted -- last week, rates for 30-year fixed mortgages fell to 4.15 percent, the lowest in more than half a century, according to Freddie Mac. Still, rates that have been below 5 percent in all but two weeks of this year have failed to spur sales enough to support economic growth.
âDepressedâ Market
Bernanke and the other rate-setting members of the Federal Open Market Committee described the housing market as âdepressedâ in statements following their last 11 meetings, including the latest on Aug. 8. They pledged at that gathering to keep their benchmark interest rate at a record low for at least two years.
âLow mortgage rates are only helpful to homebuyers who arenât paralyzed with fear after watching their 401(k) disappear,â said Mark Goldman, a lecturer at the Corky McMillin Center for Real Estate at San Diego State University. âFor now, people see the stock market as a casino table.â
Homebuyer cancellations in the past two months rose about 10 percent from a year earlier, Lawrence Yun, chief economist of the Realtors group, said at a news conference on Aug. 18. He attributed the jump to trouble getting appraisals that match the loan amount and âoverly stringentâ lending standards. In addition, member agents mentioned a rise in âother problems,â which include waning buyer confidence, he said.
Waiting for Deals
Jim Hamilton, Jainâs agent at Lyon Real Estate in Folsom, said he is seeing more buyers hold back on purchases because they expect home prices to fall.
âPeople are watching the stock market as a major indicator of whatâs going on in the economy,â he said. âBuyers are beginning to think that if they wait, theyâre going to get a better deal in a few months.â
Last week, Freddie Mac said it expects home prices to decline 6 percent in the fourth quarter from a year earlier, worse than the 2 percent slump it estimated last month. The McLean, Virginia-based mortgage-finance company also reduced its 2011 GDP growth forecast to 1.6 percent from 2.7 percent.
The Aug. 16 report compared this monthâs stock market turmoil to the Cyclone roller coaster at the Coney Island amusement park in Brooklyn, New York.
âIn sharp contrast to the thrills provided by the Cyclone, those who rode the capital markets in recent weeks have had a far more shrilling cry,â wrote Chief Economist Frank Nothaft and his staff. âHeightened uncertainty, unfortunately, can be harmful to the overall economy. Perhaps itâs best not to look up nor down, but keep oneâs eyes on the track ahead.â
Many say that the economy and wallstreet really dont go together meaning there is somewhat of a separation of the two, well I believe those people are wrong, a down stock market means the economy isn't going to behave so well in the next 1 to 2 quarters.
Homebuyers Spooked by Stock Volatility
bloomberg
Kathleen M. Howley, On Monday August 22, 2011, 10:56 am EDT
Sanjay Jain called his real estate broker four days ago to cancel a deal to buy a three-bedroom home in Folsom, California, unnerved by another plunge in the most volatile equities market on record.
âSeeing whatâs happening on the stock market made me think that itâs not a good time to be buying a home,â Jain said. âIâm going to wait and see.â
As the U.S. economy shows signs of sputtering, instability on Wall Street is sapping the confidence of would-be property buyers, said Karl Case, co-founder of the S&P/Case-Shiller home- price index. That means housing, which aided every recovery except one before the most recent recession, may deepen its five-year drag on growth.
âThereâs a dramatic effect on an economy when a major sector is flat out,â said Case, professor emeritus of economics at Wellesley College in Massachusetts. âIf housing takes another leg down, itâs an accelerator. Itâs going to make a recession happen faster and deeper.â
Home sales in July fell to the lowest point this year, the National Association of Realtors said in a report last week. Applications for mortgages to buy homes dropped to a 13-month low in the week ended Aug. 12, even as borrowing costs tumbled, according to the Mortgage Bankers Association. The Bloomberg Consumer Comfort Index sank to the lowest since the recession.
Equities Slide
The Standard & Poorâs 500 Index has fallen for four straight weeks, losing 16 percent from July 22 through Aug. 19. On the day Jain canceled his deal to buy the Folsom house, global stock markets erased $1.8 trillion of wealth as Morgan Stanley said the U.S. and Europe were âdangerously closeâ to recession. After S&P cut the U.S. credit rating on Aug. 5, the Dow Jones Industrial Average had the biggest one-day loss since 2008, igniting memories of the housing-induced financial crisis that triggered a global recession and wiped out more than 8 million U.S. jobs.
âA lot of people have seen their down payments for a home disappear in the stock market,â said Keith Gumbinger, vice president of HSH Associates, a loan-data firm in Pompton Plains, New Jersey. âIt served as a reinforcement to the hunker-down mentality that a lot of homebuyers already had.â
Before the start of the economic recovery in mid-2009, the U.S. had not exited a recession without being aided by housing, its largest asset class, except for in 1981, according to data from the Bureau of Economic Analysis. That year, the recovery was followed by a second, and deeper, recession in 1982.
Since the 2006 real estate bust, a measure of homebuilding and brokersâ commissions known as residential investment has drained gross domestic product by almost three-quarters of a percentage point annually, on average.
Limiting Growth
For 2010, the first full year of the U.S. recovery, residential investment fell 4.3 percent. Going back to the Great Depression, it gained an average of 22 percent in the first year of expansion, excluding 1946, when it tripled as soldiers returned from World War II.
The U.S. recovery is weakening. The worldâs largest economy grew at a 1.3 percent annual rate in the second quarter, the Commerce Department said on July 29. That was less than the increase of 1.8 percent forecast by economists surveyed by Bloomberg. Jobless claims climbed to the highest in a month in the week ended Aug. 13, according to the Labor Department.
âThe typical homebuyer gets rattled when confronted with economic turmoil,â said Stan Humphries, chief economist of Zillow.com, an online real estate information service in Seattle. âThe type of fear weâre seeing could substantially worsen the housing market.â
Falling Sales, Prices
The real estate market has been struggling after a federal tax credit spurred demand in the second half of 2009 and early 2010. Home sales last month were 9.1 percent below their level at the beginning of the economic expansion two years earlier, data from the National Association of Realtors show. As of May, home prices were 7.3 percent below the start of the recovery, according to the Federal Housing Finance Administration.
The share of mortgages with late payments in the second quarter rose to 8.44 percent from 8.32 percent the previous three months, the Mortgage Bankers Association reported today.
The degenerating housing market has confounded attempts by Federal Reserve Chairman Ben S. Bernanke to revive demand by lowering interest rates. The Fed purchased more than $2 trillion of mortgage-back securities and Treasury bonds in the last two years to hold down long-term borrowing costs.
Bernanke got the cheaper home-loan financing costs he wanted -- last week, rates for 30-year fixed mortgages fell to 4.15 percent, the lowest in more than half a century, according to Freddie Mac. Still, rates that have been below 5 percent in all but two weeks of this year have failed to spur sales enough to support economic growth.
âDepressedâ Market
Bernanke and the other rate-setting members of the Federal Open Market Committee described the housing market as âdepressedâ in statements following their last 11 meetings, including the latest on Aug. 8. They pledged at that gathering to keep their benchmark interest rate at a record low for at least two years.
âLow mortgage rates are only helpful to homebuyers who arenât paralyzed with fear after watching their 401(k) disappear,â said Mark Goldman, a lecturer at the Corky McMillin Center for Real Estate at San Diego State University. âFor now, people see the stock market as a casino table.â
Homebuyer cancellations in the past two months rose about 10 percent from a year earlier, Lawrence Yun, chief economist of the Realtors group, said at a news conference on Aug. 18. He attributed the jump to trouble getting appraisals that match the loan amount and âoverly stringentâ lending standards. In addition, member agents mentioned a rise in âother problems,â which include waning buyer confidence, he said.
Waiting for Deals
Jim Hamilton, Jainâs agent at Lyon Real Estate in Folsom, said he is seeing more buyers hold back on purchases because they expect home prices to fall.
âPeople are watching the stock market as a major indicator of whatâs going on in the economy,â he said. âBuyers are beginning to think that if they wait, theyâre going to get a better deal in a few months.â
Last week, Freddie Mac said it expects home prices to decline 6 percent in the fourth quarter from a year earlier, worse than the 2 percent slump it estimated last month. The McLean, Virginia-based mortgage-finance company also reduced its 2011 GDP growth forecast to 1.6 percent from 2.7 percent.
The Aug. 16 report compared this monthâs stock market turmoil to the Cyclone roller coaster at the Coney Island amusement park in Brooklyn, New York.
âIn sharp contrast to the thrills provided by the Cyclone, those who rode the capital markets in recent weeks have had a far more shrilling cry,â wrote Chief Economist Frank Nothaft and his staff. âHeightened uncertainty, unfortunately, can be harmful to the overall economy. Perhaps itâs best not to look up nor down, but keep oneâs eyes on the track ahead.â