Tag Archives: negative equity

U.S. housing crash worse than we were told

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.

Homes under water

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.

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New Housing Construction Down 10.6%

The U.S. housing market continues to tank.
The Dept of Housing and Urban Development (HUD) released the dismal news that privately-owned housing starts last month, April, were 10.6% below March, and 23.9% below the same time last year, April 2010.

Homes under water, the new American Gothic.

The decline in new housing construction is due to so many homes being underwater and in foreclosure.
Supply and demand.
According to data from the real estate information company Zillow, as many as 1 of every 4 homes in America have negative equity, that is, the mortgage owed on the house is more than what the house is worth.
All of which has a depressing effect on home prices: Average home prices in the U.S. are down 8% from a year ago and are falling at about 1% every month.

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Housing Crash Is Getting Worse, Not Better

Homes under water, the new American Gothic

“Every day the economy is getting better and better.”
That’s what the Obama administration would have you think. But the reality is very different.
The US housing market is getting worse, not better.
That corrupt government-subsidized institution Fannie Mae today reported a net loss of $6.5 billion in the first quarter of 2011, and is requesting $8.5 billion of funds from the US Treasury to eliminate the company’s net worth deficit.
New data released by Zillow, the real-estate information company, show house prices are falling at their fastest rate since the burst of the real estate bubble.
Brett Arends of MarketWatch reports today, May 9, 2011:

  • Average home prices are down 8% from a year ago, 3% over the quarter, and are falling at about 1% every month.
  • Prices fell in all but four U.S. metro areas.
  • The percentage of homeowners in negative-equity positions — with a home worth less than its mortgage — has rocketed to 28%, numbering 16.3 million families, a new crisis high. That means more than 1 of every 4 homes in America are under water! For many, their homes — for which they are hemorrhaging cash on monthly payments — may never be worth as much as their mortgage.
  • Zillow predicts prices will fall about 8% this year and says it no longer expects the market to bottom before 2012.

Mark Calabria, economist at the conservative Cato Institute, laments the $22 billion tax breaks for home buyers between 2008 and 2010 as “a giant waste of money” — a brief suckers’ rally that ended last summer.  “None of these things really turned the housing market around. They just put off the adjustment for awhile.”

Arends points out that falling real-estate prices mean spiraling hidden losses throughout the economy, from banks to homeowners. He concludes: “Recovery? What recovery? This looks a bit like a depression to me.”
Read the rest of Arends’ article HERE.

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27% of US Homes Under Water

Due to declining home prices, more than a quarter of all homes in the United States are under water, i.e., the homeowners owe more on their mortgages than what their homes are worth.
John Gittlesohn of Bloomberg reports on February 8, 2011, that about 15.7 million homeowners had negative equity at the end of the year, up from 13.9 million in the previous three months, the real estate information company Zillow said in a report. The total represented 27% of mortgaged single-family homes.
Tom Lawler, a real estate economist and former risk policy veep at Fannie Mae, issued a warning of a 300% increase in foreclosures “coming soon.” (H/t Joseph)
Here’s a list of counties with the highest percentage of mortgages under water as of September 30, 2010. Leading the nation is Clark County (Las Vegas) in Nevada, where 71.1% of homes are under water. 7 of the worst 20 counties are in Florida; 6 of the worst 20 counties are in California. (source: USA Today):

Rank County State
Mortgages under water
1 Clark Nev.
2 Osceola Fla.
3 Merced Calif.
4 St Lucie Fla.
5 San Joaquin Calif.
6 Stanislaus Calif.
7 Clayton Ga.
8 Orange Fla.
9 Solano Calif.
10 Maricopa Ariz.
11 Washoe Nev.
12 Pinal Ariz.
13 Flagler Fla.
14 Pasco Fla.
15 Riverside Calif.
16 Kern Calif.
17 Broward Fla.
18 Lee Fla.
19 Canyon Idaho
20 Henry Ga.
21 Polk Fla.
22 Hillsborough Fla.
23 Dade Fla.
24 Sacramento Calif.
25 Paulding Ga.
26 Prince William Va.
27 San Bernardino Calif.
28 Brevard Fla.
29 Wayne Mich.
30 Hernando Fla.
Source: CoreLogic


U.S. counties with the lowest percentage of homeowners whose mortgages were under water as of Sept. 30:
Rank County State
Mortgages under water
357 Shawnee Kan.
358 Washington R.I.
359 Buncombe N.C.
360 Boulder Colo.
361 Bucks Pa.
362 Boone Ky.
363 Tulsa Okla.
364 Staten Island (Richmond) N.Y.
365 Linn Iowa
366 Hennepin Minn.
367 Chester Pa.
368 Montgomery Pa.
369 Berkshire County Mass.
370 El Paso Texas
371 Nueces Texas
372 Monroe N.Y.
373 Hampshire County Mass.
374 Sangamon Ill.
375 Oklahoma Okla.
376 Lancaster Pa.
377 Yellowstone Mont.
378 Allegheny Pa.
379 Madison Ala.
380 Benton Wash.
381 Cleveland Okla.
382 Cumberland N.C.
383 Erie N.Y.
384 Manhattan N.Y.
385 Suffolk N.Y.
386 Orange N.Y.
Source: CoreLogic


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