Out of Control Policy Blog

Housing Market in Total Freefall

Housing numbers released in the past few days are almost all at their lowest level on record. Whether it is new or existing home sales, building permits, or prices, the housing market simply sucks. And this is despite years of federal attempts to force growth in the housing market—HAMP, first-time homebuyers credit, Fed quantitative easing, TARP, etc. (Click here for a larger version of the graph on the right.)

Frankly, we have more than warned about this here at Reason over the past several years:

Here, here, here, here, here, here, here, here, here, here, here, and... well, you get the point.

The question is, are we at the bottom of the housing market? Maybe, but I doubt it. At the very least, we have another several years of struggle. A big reason for that is that there still a very large shadow inventory that has somewhere between 3 and 4 years of supply. Here's how the shadow inventory breaks down by state according to a recent analysis from the National Association of Realtors.

Housing price data also suggests a very long slugfest. In a MacroMarket's report today, Robert Shiller said, "Overall, the sentiment among our expert panel regarding the U.S. housing market outlook continues to deteriorate. Now they are expecting only a weak recovery, and even that is not until 2013.  This uninspiring view must be influenced by the persistently weak market fundamentals - high unemployment, supply overhang, an unabated foreclosure crisis, and constrained mortgage credit.”

The report cited MacroMarkets managing director Terry Loebs as saying "Overall, the March expectations data are the most pessimistic collected to date, and added that after weak performance in the last quarter of 2010, actual home prices at the national level are now less than 1% away from establishing a new post-crash low." And since that isn't cheery enough he added, "Many more experts are now projecting a double-dip after witnessing the double-dead cat bounce that came in the wake of expired government stimulus programs."

And here is a scary chart from the MacroMarket folks that you can find in their report today.

Last month we highlighted the issue of housing prices, noting it isn't an exact science. But the analysis from MacroMarkets echos much of what the analyst world is saying right now.  

For more, see this interview I did last night with RT on where the housing market is going and if we've seen the end of the American Dream. 

Also, here is an almost identical interview six months ago, with the same network, same host, just different colored chairs. Back in August I noted that most of the growth from the federal programs juicing the market was going away. Sadly, this was like predicting a fish would die if left out of water.

Anthony Randazzo is Director of Economic Research


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