"In addition to being the largest price drops in at least 38 years," The Wall Street Journal reported, "the back-to-back declines are the first time median home prices have fallen since 1995." And the decline is hardly over.
According to Karim Rahemtulla, an Advisory Panelist for Investment U, based in Baltimore, Md., the situation is about to get much worse.
"Homeowners are in denial," Rahemtulla said. "Right now, sellers aren't selling ... They're still waiting for Santa to deliver their asking price, or close to it."
Those who have interest-only, or "teaser-rate," mortgages could see their monthly payments more than double.
"Interest rates will rise on about $300 billion in adjustable-rate mortgages this year alone," he said. "That figure is projected to skyrocket to more than $1 trillion in each of the next two years."
Arizona, Nevada, Florida and California will be hit particularly hard, he said, and homeowners in these states may not see a 5% decline, as experts predict, "but could fall two or three times that number."
Homebuilders are feeling the pinch, too.
One of the healthiest builders, D.R. Horton, a well-managed company with a pristine balance sheet and a portfolio that encompasses all economic strata, said its cancellation rate [homes cancelled divided by gross homes sold] for the fourth quarter of 2006 was 40%.
According to Rahemtulla, the bottom of the housing market will be here no sooner than two years.
"So while the brokers are upgrading homebuilding stocks," he said, "and trying to make it seem that the worst is over for housing, my advice is to take the first reasonable offer and count yourself lucky ... The housing bust is not today's news. It is going to be tomorrow's."
Click here for the full housing bubble report:
http://www.investmentu.com/IUEL/2006/20061019.html
