The Housing Market

http://online.wsj.com/article/SB10001424052748704810504576309532810406782.html?mod=WSJ_hp_LEFTTopStories#printMode

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"Adversity causes some men to break, others to break records." (William Arthur Ward)

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So, the forces of Nouriel Roubini are seeing their perspective reinforced this morning with the Wall Street Journal's article on where housing stands right now. Basically, the "Roubinis" have said quite consistently that a double dip situation could be caused by housing (or the combination of housing and state/local government budgets tanking).

I'm not sure which of the many numbers is worse for housing but I'll go with the 57 consecutive months that prices have dropped!

The data from Zillow.com show median U.S. home values down 8.2% from one year earlier. According to Stan Humphries, Zillow's chief economist, monthly declines for Februaury and March were "... really staggering." Humphries now believes prices won't hit bottom before next year and expects they will fall by another 7% to 9%.

The situation is what it is. Since I hate people (not literally) who quote themselves, I will just mention in passing that our conclusion in one of our classes back in 2008 was that nothing will happen to right the U.S. economy until the housing situation resolves itself. Now that it's 2011, it's interesting to see that the "recovery" is bifurcated (that sounds like a word that an economist would use). It appears that those who want to call "this" a "recovery" are seeing the glass as half full (see our prior post) while those of us who watch the lagging indicators are still waiting for decent unemployment numbers.

Prices are decelerating for housing because of the many foreclosed properties that tend to sell at a discount. And, of course, we have the mortgage titans Fannie Mae and Freddie Mac that have sold more than 94,000 foreclosed properties during the first quarter, a new high that represented a 23% increase over the previous quarter! But wait, there's more: those two entities hold another 218,000 properties as of the end of March.

The widely followed Case-Shiller index shows prices approaching new lows: this is the index that tracks repeat sales of previously owned homes using a three-month moving average.

Markets like Dallas have posted the smallest price declines and the lowest levels of foreclosures. Perhaps markets like Dallas can lead a comeback in the housing sector.

Nationally, Zillow estimates that more than 28% of borrowers owe more than their homes are worth. Sadly, those numbers are much higher in hard-hit markets such as Phoenix, where more than two-thirds of borrowers owe more than their homes are worth.

So, we would like to suggest that those economists who are looking at a two year bull market as part of a "recovery" need to temper their enthusiasm until housing and unemployment catch up. But, how long do bull markets last? Good question.