Editor's Note: Keith Jurow is the author of Minyanville's Housing Market Report.
Bill McBride is a very credible economic analyst whom I respect. But he is dead wrong in predicting that the housing market is bottoming. Here is why.
I will not discuss the first part of his claim "“ about housing starts "“ because I do not care about that at all. Only economists and Bill think that this is important.
I will focus on prices in major metro housing markets. That is what you really care about, isn't it?
Let's start with a major metro to which investors have been flocking because they believe a bottom in prices is at hand "“ Greater Phoenix. Here is a chart that was custom-made for me by the housing data website "“ FNC.com
Source: FNC.com
The chart shows an index of the median sale price of only single-family homes in Maricopa County (where Phoenix is located) with livable space anywhere from 1,500 to 3,000 square feet. That is the heart of the Phoenix market. This price chart gives a much more accurate picture of what has happened in Phoenix than the typical median price charts which can be very misleading. You can see that there really was no uptick in price during 2009 and even early 2010. Can you see any bottoming over the past six months?
Investors paying all cash have flocked to Greater Phoenix because they believed all the talk about the housing market showing signs of a bottom there. We've been hearing that for more than two years now. Any investor who bought in Maricopa County in the last two years owns a property worth less than the purchase price.
You see, I'm the only analyst who discusses the significance of the home equity line of credit (HELOC) debacle and its impact today. Take a look at this shocking chart for refinancings in Maricopa County from data provider, mortgagedataweb.com
mortgagedataweb.com
Source: mortgagedataweb.com
During the years 2004-2006, there were a total of roughly 877,000 refinanced mortgages originated in Maricopa County. Wait a minute, you say. That's greater than the total number of properties in Greater Phoenix with first liens.
I've pointed out in previous articles that most of these refinancings were not for first mortgages. They were second liens, mostly home equity lines of credit (HELOC).
Keep in mind that those three bubble years were utter madness in Phoenix and elsewhere. Homeowners often refinanced first or second liens two or three times during this madness. The loans became known as "cash-out refis." They took advantage of the rising value of their property and pulled lots of cash out of their "piggy bank" home.
The Wall Street Journal finally recognized the magnitude of this second lien problem in a front page story on June 7, 2011. Discussing CoreLogic's latest negative equity report, the author briefly noted that the percentage of homeowners with a second lien who were "underwater" was twice as high as those who had only a first mortgage.
It is no exaggeration to suggest that at least 95% of these properties with refinanced liens are now underwater. There is strong evidence that as prices decline, a greater percentage of underwater homeowners choose to walk away from the mortgage(s). This creates a vicious circle. That is now happening in Greater Phoenix and other major metros around the country. Do you begin to see the scope of the problem?
The New York City Metro
It would be a huge mistake for you to think that this problem is localized and confined only to bubble metros such as Phoenix or Las Vegas. It is nationwide.
Let's look at the most misunderstood housing market in the country "“ the NYC metro. The published median sale price for both NYC and Long Island has seemingly held up better than other major metros "“ not much less than $400,000 for Queens or Suffolk Counties. This has fooled people into thinking that the worst is over in the NYC area. On the contrary, the real collapse in prices is imminent.
In November 2011, Minyanville.com posted my 30-page New York City Housing Market Report. The report included never-seen-before charts, graphs and data that revealed what has been going on there. The banks have not been foreclosing for the past three years. This started well before the robo-signing mess. On February 7, 2012 there were a total of only 242 repossessed properties on the active MLS in Queens according to foreclosure.com. This is a borough with a population of 2.2 million.
Because of this, the number of seriously delinquent properties throughout NYC has been soaring. Based on individual charts for each borough from the NY Federal Reserve Bank which I included in my report, there were roughly 80,000 properties where the mortgage had not been paid in more than 90 days as of
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