Lex 2009-07-29
http://www.ftchinese.com/story.php?storyid=001027843&lang=en
“Who would sell their house in this market?” For the many who have only known house prices go up, that is a pretty rational position to take. It is impossible, however, to say for sure how many dwellings are waiting to be put on the market. One thing is for certain, however. If the S&P/Case-Shiller Index – which on Tuesday showed house prices in May increasing month-on-month for the first time in three years – is finally turning upward, expect a wave of new For Sale signs.
But if prices are heading higher, why sell now? Because many homeowners are suffering. They are either out of work, or, knowing that unemployment is still rising, worry they soon will be. Foreclosures were up by a fifth in the second quarter versus last year and if anything are accelerating. And for those households still lucky enough to wave someone off to work each day, 20-odd per cent are in negative equity, according to First American CoreLogic data. With stagnant income growth and ongoing worries about the economy (the expectations component of Tuesday's Conference Board Consumer Confidence Index fell yet again in July) many mortgage holders will be tempted to sell the second they can pay off their oversized mortgage off in full – especially now rents are falling.
It is likely that the foreclosure moratoria earlier in the year helped skew recent prices by restricting supply on to the market. Ultimately, the unpalatable truth for the housing market is that it is stuck which ever way the economy turns. If things stay weak and deflation kicks in prices will be bogged down for years. But if confidence returns and prices tick higher, not only will new supply dampen prices again, but so will rising borrowing costs if interest rates are raised.
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