Well, it looks like the Case-Shiller Index along with the mainstream media are finally going to have to take a sip of the reality sauce and accept that that housing is entering a double-dip.
The Case-Shiller National Index hit a new recession low as the 2011Q1 reports show a 5.1% year over year decline. Cities like Minneapolis and Las Vegas posted double digit y-o-y declines, even after prices in those areas have already fallen very far. One issue that is plaguing both of these cities is the level of REO saturation reaching more than 50% in both areas. Take a minute and think about that…More than HALF of all houses that are going on sale in these areas are foreclosures.
(Food for thought, Las Vegas has declined 58% since its peak.)
Here is the Case-Shiller Index reported up until the end of Q1.
It is clear that the blip in the Case-Shiller Index seen in 2009 and 2010 was entirely based on the first-time homebuyers credit. If you look at the chart and exclude those months of first-time homebuyers where prices began to rebound, you can get an idea of where we are in this housing recovery… a free fall towards the bottom.
The first quarter of 2011 has started off really, really, badly for home prices. The index fell 4.2% over the last 4 months, bringing the annual total decline to 5.1% below its 2010Q1 level.
One of my first posts, written on February 3rd, pointed to the great possibility of the double-dip due to the continued downward pressure on several markets as soon as the first-time homebuyer tax credits expired. I followed up recently; with an outline of why there is so much trouble in the future for housing.
Right now, the most important issue that faces housing is the seemingly unending amount of REO supply that continues to drag down prices.
According to Calculated Risk, we have around 6.7 MILLION delinquent loans, 1.96 Million of which are 90+ days delinquent, which all but guarantees they will end up in the foreclosure process. (Even if it takes 2 years of non-payments…)
However, that is not the only issue the housing market has to deal with… In fact, many of the issues I outlined in a previous article still pose a threat to housing prices. The fed has not raised the federal funds rates rate. Median home prices are still too high based on household income levels. Also, perhaps most importantly, inflation is still creeping into our monetary base due to the fed’s printing spree.
Even though it is not shocking that housing is double dipping, just a few months ago, I was seeing many positive articles in regards to the housing recovery… then, came the articles similar to “Don’t bet the farm on the housing recovery,” written by Shiller himself, and now the mainstream media is putting out, “Home prices worse than feared.”
In all seriousness, there was never any real data to suggest there was a sustainable housing recovery in the works. Yes, the first-time homebuyers tax credit may have fooled some people, but it shouldn’t have fooled you. If you were to look at income levels, or rising down payment requirements, or gas prices, all pointed towards further downward pressure on national housing. Until the real systemic issues are resolved, including the never-ending amount of REO saturation and shadow inventory, national prices will continue their decline.
- Hunter Thompson
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