Ask A New Jersey Closing Expert

 Newsheadlines:

U.S. employers cut payrolls by a larger-than-expected 80,000 workers in March, as the unemployment rate jumped from 4.8% to 5.1%, the highest since September 2005, the Labor Department said April 4. Economists had forecast a decline of 60,000 in non-farm payrolls and a rise in the unemployment rate to 5%.

The number of new people signing up for jobless benefits for the week ending March 29 jumped by 38,000 to 407,000, the highest point since September 17, 2005, following the devastating Gulf Coast hurricanes. Analysts predicted claims would be about 365,000.

A 0.3% decline in construction spending in February — a record 24th consecutive month that building activity has tumbled — provided further evidence of the braking economy

In a quarterly study released April 3, the American Bankers Association said that the percentage of consumer loans at least 30 days past due rose to 2.65% in the fourth quarter from 2.44% in the third quarter, and from 2.23% a year earlier. The rate of delinquencies was the highest since a 2.75% rate in the first quarter of 1992.

All these headlines show a declining housing market. The economy is slowing which is having a circular negative affect on the condition of the marklet. The decline will cause a further downward trend in the housing prices and until the leading indicators such as construction turn around then only will we start to see a change in the housing market towards a positive.

Your friend,

Ankit Duggal

www.qualitycloser.com

Some gurus have looked at a value of a 50% fall in valuations.

I will say that number struck me as really high but then I thought that I would re-examine this view in light of recent developments, and the afforability index.

Here is some data a dug up.  If the ratio of homes to wages were to revert to it historical average the U.S. domestic real-estate market would lose $6.6 trillion paper value roughly 50% of most real estate valuations. 

 Here are the graphs that I found to suppor this idea.  The Green line is the average ratio.  Now many people will argue that homes are different etc. 2 people incomes etc.  I would counter the size of the average household has fallen dramatically.

Seems the housing market may have a ways to go in terms of dropping price value due to declining affordability by homeowners.

Take care,

Ankit Duggal

www.qualitycloser.com

 References:

“Will America Loose $6.6 trillion in paper value?” http://nickgogerty.typepad.com/designing_better_futures/2007/08/will-america-lo.html