This page has been archived and commenting is disabled.
Housing Armageddon: 12 Facts Which Show That We Are In The Midst Of The Worst Housing Collapse In U.S. History
Michael argues that housing prices are not done going down, and neither is the value of the dollar. - Ilene
Housing Armageddon: 12 Facts Which Show That We Are In The Midst Of The Worst Housing Collapse In U.S. History
Courtesy of Michael Snyder of Economic Collapse
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), than 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 furtherduring 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.
So what do all of you think? Is the "housing Armageddon" almost over, or do housing prices still need to decline a bit more? Feel free to leave a comment with your opinion below....
»
- ilene's blog
- 14260 reads
- Printer-friendly version
- Send to friend
- advertisements -
only idiot could have said..
#Many analysts are projecting that U.S. housing prices will decline another ten or twenty percent before they hit bottom.
price is not just a line,, price is conjunction of demand and supply..
supply is enormouse... 25% houses under water, so potentially on market..
and real disaster is demand AKA PERSONAL INCOME, AKA paid SALARIES
personal income stagnated in real terms last 30 years.. so how prices are up, if people cant afford to buy.. ??
barring new SUB-SUBPRIME BUBBLE housing will bw down for next 10-20 years.. its my forecast until jobs got back China/India/MExica
alx
From this renter's perspective, let housing fall. I refuse to enter into a mortgage, or "slave loan" as I like to call it. Granted, I am allergic to any form of debt or contract.
Houses should be priced to where people can afford them, and then they would be free to spend that much more on whatever consumption they fancy.
As a young man making around 30K a year, I am saving a prodigious amount in the dream of someday purchasing a home outright, but until prices are under 100K, I stand aloof.
One hope is that the coming pandemonium of stagflation and/or hyperinflation will vault me into a position to leverage myself from my sage positioning in stocks and silver.
"at a time when mortgage lending standards have been significantly tightened"
LOL "significantly tightened" from no standards at all to "we verify that you are a person that actually exists".
I still see ads on Yahoo which aint cheap that advertise "no social Security number needed" which means no verification of your identity or your right to remain in the country long enough to pay off the loan.
Condos most dangerous here. Rising tax and insurance rates create huge HOA fees. Senior condo living will be most affected. Gubermint needs to take LTV off the table when buying or refinancing. 30 year ammo at 2% with ten (10) year call. Good job? You get a house, no money down. Moratorium on new construction for five (5) years. Stop building, now. Force projects to fill up to protect previous owners. Either that or take a flame thrower to this place!
--Al
National builders have come to Seattle and are buying all the finished lots up. There are still people who want new homes as the economy here is doing well outside of construction and real estate. Commercial construction is not dead but is of course slower than the mania years
FHA just lowered the credit score requirement to 580, so i have been told just today..
Not yet confirmed.
Lenders and Servicers are so overwhelmed in certain markets that they're choosing not to foreclosure on borrowers in hyper-defualt (i.e., 1 year + without making payments).
Housing bottom ... before or after the states default on their debts, and pension obligations are renegotiated? Of course hyperinflation suggests that the bottom could be sooner, but liquidity and leverage will be tight and many cities are likely to pass rent control, so the mortgage might be repaid in depreciated dollars but the return will be minimal. Definitely a strategy to preserve something from Zibabwe$$ effects, but not a cure all. Few know that the California's PERS and STRS contracts have a purchasing power clause in the event of a new currency which maintains purchasing power (as I recall) at 70% and 65%. I was informed of this in answer to my question to a highly regarded, well known, citizen pension reform advocate.
Without production value there is no housing rebound, lets face it the banks are setting on the repo units in order to offset lose's due to mucho negligence. Possible outcome would be the banks will become the biggest slum lord in the world and probably qualify for HUD subsidies-section 8.
As for the number of new homes built I would like to see the pictures of the new home construction going on -here in KC not a single basement anywhere-total bullshit everywhere -500k what a joke -more like 20k.
just wait til we go into hyperinflation. in hyperinflation real estate goes to a 75% loss. when people are paying every cent for food they're not worried about a 3-car garage, lake front, Corian counter-topped home ! ........... remember JAPAN .......... 80% loss from the peak in 1990 to today.
The best thing to do before your upside down on your house is to torch it. Get the max out of the insurance and if you get caught....hell its a roof over your head and three squares meals and all the love you can handle. Two words to live by in 2011 Food & Ammo.
Just out of curiosity, when I came to ZH today, IE gave me a message I have not ever seen before.
It was: This web site has content from other sources not in it's control. Do you wish to continue?
When did this come about? Anyone know?
One of the ads probably just had an IFRAME in it or something.
Speed reading, thought you said ..just out of custody.
Regarding your message, suggest you panic ;)
'Is the "housing Armageddon" almost over'
Martin Armstrong's cycle work suggests 2032 as the bottom of the current downturn in real estate
John Templeton said in an interview that housing in the US could drop as much as 70% in the current downturn
no mention of demographics in the article - the Boomers will be downsizing into coffins and urns for the next 20 years - this will make more housing available and add to the glut
'there are many new housing developments across the U.S. that resemble little more than ghost towns because foreclosures have wiped them out'
what about all of the condo developments that are yet to be completed / sold? most major cities have a glut of condos that will never be sold at the prices that were projected by the builders - Boulder, CO has 390 units just at the Pelloton on Arapahoe - San Diego has literally thousands of units in high rise buildings downtown
'what happens when supply is really high and demand is really low? That's right - prices go down'
anything over 8 months of supply typically means that pricing pressure is downward - there are literally years of supply available
'banks and financial institutions have become very stingy with home loans'
it would be more appropriate to say that banks have stopped making mortgage loans - over 95% of all new mortgages are being originated by Fannie and Freddie (ie, the govt)
'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'
a rebound in the housing market would require that we return to the days of NINJA loans - no income, no job or assets - just fog a mirror and borrow half-a-mil - and that isn't likely to happen
I don't believe that Fannie and Freddie do mortgage originations.
"I don't believe that Fannie and Freddie do mortgage originations"
I stand corrected - I should have said that the banks are only originating loans that Fannie and Freddie will buy - the 95%+ is not an error
Point #1 seemed outrageous to me when I first read it a few days ago. Since then, I believe that this claim has been debunked and that the true rate is a more reasonable 3%
you don't go to the foreclosure auctions, do you.
cite your sources, cuz 11% might be low.
don't forget that FASB changed the reporting rules, letting the banks not-have-to declare their defaults.
how many folks in your neigborhood have admitted that they havent made a payment in 2 years... and still no letter.
this is not an attack. if you live it, you know it.
great pseudonym, btw.
"Use your paper money wisely. It will never have more value than it does today."
I was just having lunch w/ a friend who's back from Argentina where inflation is once again running rampant. He said that in Buenos Aires all you see is people running around w/ full shopping bags. Everyone is in a buying frenzy as that iDevice or Flat Screen they want will be double in Pesos within a month or two. Maybe that's what spurred the US increase in consumer spending.
And BTW he told me that the Argentinians think Americans are pussies with their bleating about hard times coming... We haven't seen anything according to them. And they are probably right.
It's extremely hard to qualify for a mortgage right now. The current underwriting standards eliminate alot of first time home buyers.
hello everyone, can we stop posting bad news and some good news so that the market can go down. thank you..
Affordability in relation to income is the key that most news stories seldom discuss:
In view of regional housing costs, the one important consideration is the income that one would need to afford any housing unit in the US.
Assuming that a resonalble 35% income to loan value - What income does one need in order to purchase a primary home these days? How can a family earning minimum wage to even $15 per hour ($31200 per annum) afford a home, including our current low interest rates?
In the end, barring a black swan event, this tug of war with home prices and inflation and commodities and employment et al., could go on for a very long time. How many of you thought in 08 that they could pull this off and be where we're at in 11? As long as the rest of the world plays along by allowing the US to continue to have the world reserve currency, we can play games for a very long time. When, or even if at this point, the US loses it's reserve status, that's when I'll worry. Until then, I believe this game goes on for a lot longer than most here would hope or believe.
How many of you thought in 08 that they could pull this off and be where we're at in 11?
You are right. Credit where credit is due. These banksters sure have managed to rig about everything. Lets see, we have;
0 The MSM check
o The politicos check
o The cops(SEC,et. al.) check
o The judges check
Who'd want to catch a falling knife?
Precisely! That's why when prices start falling they keep falling faster and further than anyone predicts. Keep your hands in your pockets for at least the next 4-5 years
fact #13. We are at the endgame when it comes to rates. They can't get lower. When rates do rise, prices fall.
The Genocidal Benron thinks the solution is the stock market... he is creating the Greatest Depression in the US history and still saying inflation is low, like he said sub prime was contained...
I cannot believe that this is happening in real life it is so much of a nightmare unreality it cannot be true.. but it is and real people are now dead because of his blindness
Not only the pipeline is a problem, but when rates rise, housing prices go down again.
very good article - massive inflation except in the housing market....once wages catch on fire, then housing will "recover" if stagflation can bring such things.
and this is all the handiwork of our very "qualified" leaders. morons and imbeciles of the first rank....
Wages won't be "catching on fire" anytime soon with a glut of labor supply in the US -- not to mention in the rest of the world.
In my neck of the woods, anything under $200-225K is garbage.
Housing is still vastly overvalued....
One other factor that the article didn't mention was the baked in loss that comes from buying a house when interest rates are very low.
I put together the following page to illustrate the profit and loss impact that is due solely to changes in interest rates.
www.wimer.org/econ/interest-rate-impact.py
Very interesting calculator. I put together a statistical analysis of real home prices with the rates.
http://www.economypolitics.com/2010/07/correlation-of-mortgage-rates-with-real.html
In the old days before you got on the housing ladder you had to save quicker than real estate inflation , now you have to save quicker than you can eat.
One things for sure , theres no way Bernanke is pumping up real estate. He's going to need to go full scale Zimbabwe-Mugabe to do that.
Well no, not really.
What there is, is a mountain of overpriced houses out there.
"What there is, is a mountain of overpriced houses out there."
Exactly. And many delusional people.
The delusion didn't start with the housing bubble. Most of these folks didn't know what hit 'em -- and still don't. They were delusional from the start and will remain so whatever happens.
These same folks will catch the last gasps of the gold/silver market as it finally becomes a bubble and will still be wondering what became of their money. That should be years from now, so the sting of the housing bubble will have worn off and they'll be good to go.
++ RR
indeed.
Exactly! Try to buy a repo. from the bank. They would rather sit on it another year then take a loss.
UNSOLD where I live. Commuter town 37 miles outside of Reno, NV. People have left town. Permanently. Even the investors have stopped buying/rehabbing. New developments started in '05-'06 were abandoned by the developers mid-construction, and I don't think anyone will be snapping up those properties anytime soon.
Gee, I'm tired of all the negative vibes. Time to be Panglossian and accept that these are the best of times and that our wise masters will see that all will be well.
Ommmmmm, dammit!
It's really simple math folks. Median household income is just short of $50k, and falling. Median home price is $170K. Reverting to the time honored (before 1990) metric that you can afford a house at 2.5 times gross income, then the median home price must fall to $125k; or another 30% (approx) from today's median value.
I don't care what the economists say, median household income isn't telling the whole story, especially not for those under 30. Median individual income is around $26k.
That level of income, combined with the demise of SS, virtually guarantees violence and anarchy. Inflation, gas prices, and the rest are merely a bonus.
home price should be annual income of a skilled worker. 75k
This is why ben must keep printing. The average person may get through this re balancing of the cost of housing with the cost of everything else if we meet in the middle somewhere versus letting housing price declines be the sole agent of rebalancing. Everything else goes up a little. Housing comes down a little, and we meet somewhere between hyperinflation and depression. Shhh. Everybody be quiet. Ben is trying to drive. Dont distract him now!
Old news for Nevada residents (AZ,FL, CA too). Our market peaked in July 2005 - 5 years of a nearly 50% downdraft in median values.
Should have posted 3 years ago in 2007
Should have sold 5 years ago.
Old news for Nevada residents (AZ,FL, CA too). Our market peaked in July 2005 - 5 years of a nearly 50% downdraft in median values.
Should have posted 3 years ago in 2007
i live in nv. closed on my house in july of 2005 was worth 400K, now worth 175K