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Title: Housing Armageddon: 12 Facts Which Show That We Are In The Midst Of The Worst Housing Collapse In U.S. History
Source:
http://theeconomiccollapseblog.com/archives/housing-armagedd
URL Source: [None]
Published: Feb 1, 2011
Author: the economic collapse blog
Post Date: 2011-02-01 17:33:32 by Capitalist Eric
Keywords: None
Views: 8119
Comments: 12
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.
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.
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#1. To: Capitalist Eric (#0)
Some of the markets (like Seattle) which faired far better than the rest of the country over the last few years saw huge downturns in the fall. It happened even though the Seattle economy is doing relatively well. It tells me that there may be a fundamental shift going on with people abandoning home ownership. Owning a home makes you very inflexible in the job market, because you can't just pick up and move across country to take a job in a down market when you can't sell your home. I think that the post WWII model of the American dream (owning a home) will never be the same.
I'm curious about how Portland is doing with all those high priced, geared to the young yuppie element condos they built downtown. They displaced many businesses with them, and thee jobs many of them have are volatile and those large buildings can be a real boondoggle if they become mostly empty if this population starts going elsewhere because of a change in the economic wind blowing these people elsewhere like so many maple tree seeds in the wind.
I don't know. I really dislike Portland. The whole place is inhabited by lunatics. At one point, they were fining Intel $1,000 for every new job they created because they didn't want to grow that much. So, Intel started investing elsewhere. They are nuts.
I work building up grant, geek, and store boxes out of donated older computers at Free Geek when I am living up there (Freegeek.org) and I like the political climate. Of course I go to restaurants like the anarchist cooperative the Red and black and travel by bicycle as it is easier to do that there than it is in most U.S. cities. It's nickname is 'Little Beirut' since the days of extreme anti Bush demonstrations that always were more bombastic and energetic than in most other U.S. cities. Many companies like Nike build their headquarters in Beaverton nearby because of the climate you cite. However, because of th economic downturn, I do believe this attitude of that city is evolving away from the sort of policies you cite an example of.
I don't know about the rest you but my home and others in the nearby area originally was sold at $179,000 back in 1992. At its peak value (2007) was over $600,000 and other homes were selling near that price. According to Zillow, today it is valued at $325,000. I don't know how to compare collapse in price to the depression but it looks to me as though it has declined near 50%.
Eskimo probably has the cheapest home of all of us, unless Mad Dog is living in a premade mutt mansion his owners got for him for behaving when they took him in to get the neutering done.
I was in Portland two weeks ago Friday for a few hour meeting. I was in an area of the city that was surprisingly run down. South of Old Town. I've never been in that part of the downtown area. I'm hard pressed to think of an area in downtown Seattle that looks like that. Years ago there were some bad areas in downtown Seattle, but they are gone. Microsoft was a godsend to Seattle. I've been in Seattle for 22 years. Prior to Microsoft, Seattle was a sleepy little backwater that suffered through harsh boom and bust cycles due to the businesses Boeing and Weyerhauser (lumber) are in. I got here right when that was all ending. In 1989, you couldn't find a good restaurant in Seattle. The entire media was dominated by the center-left to the hard left -- no diversity at all. Microsoft changed everything. They created an entrepreneurial culture that gave us Amazon, Costco, Starbucks, and hundreds of other companies. More diverse people with more diverse views, from around the world, flooded into the area. The whole area has been completely transformed in 25 years. Completely. I grew up in Detroit which has stagnant companies, stagnant unions, and stagnant politics. I've lived them both. I know which one is best.
In many areas of the country, housing prices have gone down 40% to 50%. Nevada, Arizona and Florida have been hardest hit. Some areas of the country (like Seattle) have done better, but still not good.
Both are too big for me. I moved back to Eugene, OR a few years ago because I just don't like living in cities that are too big a metro area. I am from the East coast, but I lived in a wooded part of Clinton, CT and we had trees surrounding our house and no sidewalk withing five miles of us. I like Seattle and Portland, but I'm one of those folks that just can't take too much of too many living around me.
I've never been in Eugene but I drove down to Bend last August. Bend is a really nice little town. I really like that part of Oregon.
Bend's name came from the old label of 'Farewell Bend' it had, as people wagon training here either continued on to the Willamette Valley or turned south to California from there. I used to live there when I was a bicycle racer and turned wrenches at Century Cycles and enjoyed training in the clean, high elevation climate in the summer, and by doing cross country skiing there in the Winter. It is a small city with a very metro environment. There is lots of money there right now as may rich folks have second homes in Central Oregon. They are attracted by the beauty, the extremely clean and pleasant water, and the recreation opportunities all around that area. I like Bend, but moved after I stopped racing. It's nice, but I like being here in Oregon a lot because I grew up in cold and snow in Connecticut. There is a wee bit too much of that in the Bend area for me. I'm back where I have to cut the grass in the winter and have a temperate palm tree in my front yard.
I should say that I like central Oregon and central Washington in the summer. In the winter it's a different story! I don't like the cold and snow either. My ex-wife didn't like the hot weather, so Seattle was perfect for us. I really do like the hot whether, as does my current wife, so at some point we're going to go somewhere else. I love San Diego and would go there in a heartbeat, but it's crazy expensive. We'll see.
Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery. -- Winston Churchill
#2. To: jwpegler (#1)
#3. To: Ferret Mike (#2)
Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery. -- Winston Churchill
#4. To: jwpegler (#3)
#5. To: Capitalist Eric (#0)
#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).
#6. To: buckeroo, Eskimo (#5)
#7. To: Ferret Mike (#4)
(Edited)
Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery. -- Winston Churchill
#8. To: buckeroo (#5)
I don't know how to compare collapse in price to the depression but it looks to me as though it has declined near 50%.
Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery. -- Winston Churchill
#9. To: jwpegler (#7)
#10. To: Ferret Mike (#9)
Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery. -- Winston Churchill
#11. To: jwpegler (#10)
#12. To: Ferret Mike (#11)
(Edited)
Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery. -- Winston Churchill
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