The bursting of the U.S. housing bubble began the Great Recession of 2007 — a recession that continues to this day, despite the ever-obliging media’s trumpeting of a small improvement in unemployment numbers, an improvement that will turn out to be seasonal from Christmas retail hires. Now comes news that the housing crash is actually much worse than what we’ve been led to believe.
Reuters reports Dec. 13, 2011, that data on sales of previously owned U.S. homes from 2007 through October 2011 will be revised down because of double counting, indicating a much weaker housing market than previously thought.
The National Association of Realtors (NAR) spokesman Walter Malony told Reuters, “All the sales and inventory data that have been reported since January 2007 are being downwardly revised. Sales were weaker than people thought. We’re capturing some new home data that should have been filtered out and we also discovered that some properties were being listed in more than one list.”
California-based real estate analysis firm CoreLogic says sales could have been overstated by as much as 20%.
On December 23, 2011, the Wall Street Journal reports that the NAR said that, due to shifts in the housing market that weren’t detected until this year, it had over-estimated home sales by 14.3% between 2007 and 2010, meaning that 2.9 million fewer homes sold during those years than thought earlier. But the NAR insists that there are fresh signs that housing is improving.
Alas, four days later on Dec. 27, 2011, Julie Schmit of USA Today reports that U.S. home prices continue to fall. Home prices were down 3.4% in October from the same time last year, according to the Standard & Poor’s Case-Shiller home price index of 20 leading U.S. cities. Prices were also down from September, on a non-seasonally adjusted basis, in 19 of the 20 cities the index covers.
And those prices are expected to continue to fall. A Zillow survey of 109 top housing experts indicates that U.S. home prices will decline until late next year or early 2013.
Economists have identified at least two factors hampering home prices:
- Negative equity. About 22% of homeowners with a mortgage owe more on their homes than they are worth. Those people are not likely to move and buy another home, says Christopher Thornberg of Beacon Economics.
- Foreclosures. Nationwide, more than 6 million homeowners were late on their home mortgage payment or were already in foreclosure at the end of the third quarter. As more people lose their homes, the distressed sales will put downward pressure on home prices, Newport says. James Saccacio, the co-founder of foreclosure tracker RealtyTrac, expects a “new set of incoming foreclosure waves,” which may roll into the market early next year.
The S&P data shows Atlanta faring the worst among major metropolitan areas with prices off almost 12% year over year, likely caused by foreclosures. Of the 20 cities, only Detroit and Washington posted positive annual returns of 2.5% and 1.3% respectively.
An oversupply of unsold homes on the market continues to stifle the housing sector. Until the housing market improves, America’s economic recovery will remain a chimera.