Posted on 02/02/2011 7:22:53 AM PST by blam
Housing Armageddon: 12 Facts Which Show That We Are In The Midst Of The Worst Housing Collapse In U.S. History
2-2-2011
We are officially in the middle of the worst housing collapse in U.S. history - and unfortunately it is going to get even worse. Already, U.S. housing prices have fallen further during this economic downturn (26 percent), then they did during the Great Depression (25.9 percent). Approximately 11 percent of all homes in the United States are currently standing empty.
In fact, there are many new housing developments across the U.S. that resemble little more than ghost towns because foreclosures have wiped them out. Mortgage delinquencies and foreclosures reached new highs in 2010, and it is being projected that banks and financial institutions will repossess at least a million more U.S. homes during 2011. Meanwhile, unemployment is absolutely rampant and wage levels are going down at a time when mortgage lending standards have been significantly tightened.
That means that there are very few qualified buyers running around out there and that is going to continue to be the case for quite some time to come. When you add all of those factors up, it leads to one inescapable conclusion. The "housing Armageddon" that we have been experiencing since 2007 is going to get even worse in 2011.
Right now there is a gigantic mountain of unsold homes in the United States. It is estimated that banks and financial institutions will repossess at least a million more homes this year and this will make the supply of unsold properties even worse.
At the same time, millions of American families have been scared out of the market by this recent crisis and millions of others cannot qualify for a home loan any longer. That means that the demand for unsold homes is at extremely low levels.
So what happens when supply is really high and demand is really low?
That's right - prices go down.
Hopefully housing prices don't have too much farther to go down. Ben Bernanke and the boys over at the Federal Reserve are doing their best to flood the system with new dollars in order to prop up asset values, but you just can't create qualified home buyers out of thin air.
Many analysts are projecting that U.S. housing prices will decline another ten or twenty percent before they hit bottom. In fact, quite a few economists believe that the total price decline from the peak of the market in 2006 will end up being somewhere in the neighborhood of 40 percent.
But whether prices go down any further or not, the truth is that the housing crash that we have already witnessed is absolutely unprecedented.
The following are 12 facts which show that we are in the midst of the worst housing collapse in U.S. history....
#1 Approximately 11 percent of all homes in the United States are currently standing empty.
#2 The rate of home ownership in the United States has dropped like a rock. At this point it has fallen all the way back to 1998 levels.
#3 According to the S&P/Case-Shiller index, U.S. home prices fell 1.3 percent in October and another 1 percent in November. In fact, November represented the fourth monthly decline in a row for U.S. housing prices. Many economists are now openly using the term "double-dip" to describe what is happening to the housing market.
#4 The number of homes that were actually repossessed reached the 1 million mark for the first time ever during 2010.
#5 According to RealtyTrac, a total of 3 million homes were repossessed by mortgage lenders between January 2007 and August 2010. This represents a huge amount of additional inventory that somehow must be sold.
#6 72 percent of the major metropolitan areas in the United States had more foreclosures in 2010 than they did in 2009.
#7 According to the Mortgage Bankers Association, at least 8 million Americans are at least one month behind on their mortgage payments.
#8 It is estimated that there are about 5 million homeowners in the United States that are at least two months behind on their mortgages, and it is being projected that over a million American families will be booted out of their homes this year alone.
#9 Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011.
#10 Some formerly great industrial cities are rapidly turning into ghost towns. For example, in Dayton, Ohio today 18.9 percent of all houses are now standing empty. 21.5 percent of all houses in New Orleans, Louisiana are standing vacant.
#11 According to Zillow, U.S. home prices have already fallen further during this economic downturn (26 percent) than they did during the Great Depression (25.9 percent).
#12 There are very few signs that the employment situation in the United States is going to improve any time soon. 4.2 million Americans have been unemployed for one year or longer at this point. While there has been some nominal improvement in the government unemployment numbers recently, other organizations are reporting that things are getting even worse.
According to Gallup, the unemployment rate actually rose to 9.6% at the end of December. This was a significant increase from 9.3% in mid-December and 8.8% at the end of November.
But even many Americans that do have jobs are finding out that it has become very, very hard to qualify for a home loan.
In an attempt to avoid the mistakes of the past, banks and financial institutions have become very stingy with home loans. While it was certainly wise for them to make some changes, the truth is that perhaps the pendulum has swung too far at this point. The U.S. housing industry will never fully recover if they can't get their customers approved for mortgages.
Congress is talking about passing even more laws that will make it even more difficult to get home loans. Even though they give speeches about how they want to help the U.S. housing industry, the truth is that Republicans and Democrats are both backing proposals that would make home mortgages much more expensive and much more difficult to obtain as a Bloomberg article recently explained....
"Government officials and lawmakers want to make the market less vulnerable to another credit crisis, and all the options lead the same general direction: Borrowers will need larger down payments than in the bubble years, have higher credit scores, and pay extra fees to cover risks and premiums for federal guarantees on government-backed mortgage bonds."
While all that may sound reasonable, the truth is that the U.S. middle class has become so cash poor that the vast majority of them cannot afford homes without the kind of mortgages that were available in the past.
Not that we should go back and repeat the mistakes of the past 20 years. It is just that nobody should expect the U.S. housing market to "bounce back" in an environment that has fundamentally changed.
The housing market is not like other financial markets. It is difficult to artificially pump it up with funny money. If the U.S. housing market is going to rebound, it is going to take lots of average American families getting qualified for loans and going out and buying houses.
But they can't do this if they do not have good jobs. Today, only 47 percent of working-age Americans have a full-time job at this point. Without a jobs recovery there never will be a housing recovery.
In fact, there are all kinds of warning signs that seem to indicate that the U.S. economy could get even worse in 2011. Many economists are now openly using the word "stagflation" for the first time since the 1970s. Back in the 70s we had both high unemployment and high inflation at the same time.
Well, we have already had very high unemployment, and thanks to the relentless money printing of the Federal Reserve, it looks like we are going to have high inflation as well.
Middle class American families are going to be spending even more of their resources just trying to survive, and this is going to make it more difficult for them to purchase homes.
In fact, in recent years average Americans have been getting significantly poorer. Over the past two years, U.S. consumers have withdrawn $311 billion more from savings and investment accounts than they have put into them. That is very troubling news.
Now the price of food is soaring and the price of oil is about to cross $100 a barrel again. So what is going to happen if we have another major financial crisis and we witness another huge spike in the unemployment rate?
The Federal Reserve is trying to smooth all of our problems over with a flood of paper money, but it isn't going to work. Yes, increasing the money supply will produce some false highs on the stock market and some false economic growth statistics for a while, but the tremendous damage that will be done to the economy is just not worth it.
In any event, let us all hope that we see some really great real estate deals over the next couple of years, because in the times ahead land will be something very good to own. In fact, down the road it will be much better to own land than to have your money sitting in the bank where it will continuously decline in value.
Use your paper money wisely. It will never have more value than it does today.
Now owning land is simply a means for a municipality to tax you to death; what a change...
Today’s young people know that buying a home is the worst possible investment right now; you’re being set up with a 5-figure tax bill (at least here in NJ), and the mortgage interest and property tax deductions aren’t worth so much when your income is 60% of what it was 2 years ago (making the mortgage payments impossible anyway). There is giant sucking sound here in northern NJ of taxpayers and decent jobs leaving for greener pastures; housing is in terrible shape here.
I agree with the concept, but the reality is that whole sections of the country (northeast & California in particular) would be de-populated very quickly, and many of those who lost their homes (there would be millions of them) would be voting socialist for generations to come.
Banks are supposed to mark-to-market. The only problem is that if they actually did, every major bank in the country would become instantly insolvent.
I also think that a lot of those refinancing offers and home equity loans that are heavily advertised on the radio had a lot to do with our current housing situation. I say that because appraisers were writing appraisals to meet the customers needs and not reality. Lots of folks took out second mortgages and many of them risky ones like ARMs or interest only loans. Granted, dipshits like Barney Frank didn’t help the situation at all by forcing banks to make loans to unqualified people. There is enough blame to pass all the way around the table here, yet many tax payers who played by the rules and paid their mortgage are going to be on the hook for those who did not.
There is no credit. There is hardly any inventory out there because the banks sit on them or rent them rather than realize a huge accounting loss by selling them.
But hey, look on the bright side, there are a multitude of idiots who are proclaiming that the economy is getting better...now. /s =.=
The price of homes will continue to fall until the average family can afford the average home and that is a long way off yet.
But at the bottom was governmental interference - Clinton, Greenspan, etc. They clearly encouraged - mandated even - banks to take the risks they did.
Ping.
bttt
Does your state have a system to where you can have the assessor do a market revision? Even here in Commiefornia, it’s a real easy process. Our county assessor has done downward revisions automatically the last couple of years.
It would be a lot cheaper than TARP...
Unforunately, the got have turned it into a pinata and big fat bullseye as well t keep taxing and regulating people.
Unforunately, the govt have turned it into a pinata and big fat bullseye as well t keep taxing and regulating people.
BBBIIINNNGGGOOOOOO
End of Thread.
We are financing our purchase. There is plenty of credit.
There is hardly any inventory out
There is plenty of inventory out there.
there because the banks sit on them or rent them rather than realize a huge accounting loss by selling them.
While we were waiting on our short sale approval, we saw lots of houses move from regular sale to REO. Our house was originally scheduled to go to foreclosure four months after it was originally listed. Banks are moving the properties from default to short sale/foreclosure/REO.
It'll be the House Republicans fault here pretty soon.
At some point people are going to have to start fighting back. Demand that public officials can no longer drive people into grinding poverty.
If public officials continue to tax and tax. start a recall. Get them out of office and replace with people that swear to cut spending and taxes.
I lived in a town in CA. (80’s), that found in the first meeting of the City Council taxes were to be raised. Two weeks later everyone of them were recalled. The special election ended that s*** immediately.
I realize it was a small town, but it can be done.
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