The latest data for the S&P/Case-Shiller Home Price Index were released today. The home price index for April is still down considerably from the July 2006 peak:
As of April 2010, average home prices across the United States are at similar levels to where they were in late summer/early autumn of 2003. From their peak in June/July of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%. The peak-to-date figures through April 2010 are -30.5% and -30.0%, respectively.
To paraphrase Donald Rumsfeld from a different context, it is close to impossible now to deny that the housing markets are in for a long, hard slog. Well, the places that have hit bottom are in for a slog. Some places, such as Las Vegas, are still on their way down. Comparing year over year, Las Vegas home prices actually fell 8.5 percent. April of 2009 was a disastrous month for home prices, but Vegas is now below even that.
This all assumes an owner’s perspective, of course. It’s a nice buyers’ market out there right now for some people.
This is April data, so it doesn’t compare directly to the May data I commented on here a few days ago, but the data continues to drive home the fact that home prices simply aren’t going to bounce back. Thanks to bad public policy and perennial but unwarranted bullishness about real estate, lenders assumed that prices were going to bounce back. Consequently, mortgage servicers and investors have been dragging their feet on approving short sales and the liquidation of foreclosed properties.
Nevertheless, the holders of REO properties (foreclosed properties returned to the bank) are going to have to do something with them sooner or later. And worse yet, almost half of those REOs are held by the government:
Based on Radar Logic’s analysis, the federal government’s REO inventory — including homes owned by Fannie Mae, Freddie Mac, HUD, and the Department of Veterans Affairs (VA) — has increased steadily for over 24 months and now accounts for approximately 46 percent of the nation’s total REO supply.
Looking at information from the GSEs and HUD, Radar Logic says the government currently owns 209,500 homes as a result of foreclosure, and the company estimates there could be an additional 9,560 homes held by the VA, for a total of 219,060 government-owned foreclosed homes.
This will create additional downward pressure on prices for the foreseeable future.
In a larger context, the protracted growth of non-performing loans will likely continue to have a deflationary effect as lender portfolios contract with the value of residential real estate.
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There is definitely one man who knows the US is screwed. I mean, look at the guy. Nobody could listen to Ron Paul’s lessons on simple logic and arithmetic for that long and not start to have an inkling that something is wrong.
The other idiot is babbling like a more than slightly mentally-challenged graduate of grade three special Ed about “pushing the pace of economic growth”. Who writes this crap for him? I’m sure that the speeches of the last child-puppet emperors of the western Roman Empire sounded very much like an Obama exhortation. See Romulus Augustulus.
Wow. Bernanke appeared to be clueless. Interesting how Obama kept glancing at Bernanke while talking, and Bernanke never acknowledged him.
I dunno, he looks more smug to me – like a guy driving a bus off a cliff who knows that he has the only parachute.
Is this where the missing inflation is going?
Standard Austrian, in fact any economic lingo, suggests printing money the way the Fed has been should go Mugabe on us. But since most of the money has been invested in such a rapidly declining sector (which no sane person would normally touch), the result isn’t inflation, but property prices deflating more slowly than they otherwise would.
Home prices need to come down until the median buyer can afford the median house.
“It’s a nice buyers’ market out there right now for some people.” NOT REALLY! When interest rates go up prices will come down….always have done, always will!
The Fed is not the government!
Most people don’t seem to know this.
This is a distinction without a difference.
Of course, the government owning all the foreclosed properties, as well as an even higher percentage of the outstanding mortgages in this country, simply means that housing will increasingly become a political entitlement to be doled out to whichever special interest group is in favor. Soon to come, principal reductions paid for by uncle sam (a.k.a. you and I). Savers and the prudent get punished over and over again.
Just learning about government foreclosed homes, so this was an eye-opening article. Thanks!
But Hey….. lets blame all the issues on the bank…. let’s not forget who backed all these failed mortgages. The housing market will recover, but the government can’t fix it. They can’t fix the mess they made. We can’t expect them to.
Home Buyers need to be more responsibile when purchasing a home. Common sense should tell people they don’t make enough money to purchase a 1/2 million dollar home when they work at WalMart.
The late-2000s financial crisis is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s.[1] It was triggered by a liquidity shortfall in the United States banking system[2] and has resulted in the collapse of large financial institutions, the bailout of banks by national governments,
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