What You Need To Know About The U.S. Housing Market

Home prices fell in January in most US cities - National Business - MiamiHerald.com: ". . . . prices fell in 17 of the 20 cities in January compared to the same month in 2011. The group's nationwide index of prices has fallen 34 percent since the housing bust and is now at 2002 levels. The continued drop in prices suggests the housing market remains weak, even after the best winter for home sales in five years and steady improvement in the job market. . . The biggest reason why prices are still falling is foreclosures, which are still high across the country. Foreclosures and short sales - when a lender accepts less for a home than what is owed on a mortgage - are selling at an average discount of 20 percent. Foreclosure activity surged in February across half of U.S. states.. . . ."

Prices are down, mortgage rates are low--it might be a good time to buy a house if you have a compelling reason to do so--but read this first--"Why Entrepreneurs Should NOT Buy Homes."

The reality today is that most working people (exluding those working in government jobs) by necessity are "entrepreneurs"--lifetime employment for one employer in one location is a dying, if not already dead, concept. Which is why Robert Bridges, professor of clinical finance and business economics at the University of Southern California's Marshall School of Business, wrote last year in the Wall Street Journal that "today's young people would be foolish to imitate their parents and view ownership as the cornerstone of personal finance"--

A Home Is a Lousy Investment
“. . . . the average single family house has never been a particularly stellar investment. In a society increasingly concerned with providing for retirement security and housing affordability, this finding has large implications. It means that we have put excessive emphasis on owner-occupied housing for social objectives, mistakenly relied on homebuilding for economic stimulus, and fostered misconceptions about homeownership and financial independence. We've diverted capital from more productive investments and misallocated scarce public resources. . . .
. . . a dollar used to purchase a median-price, single-family California home in 1980 would have grown to $5.63 in 2007, and to $2.98 in 2010. The same dollar invested in the Dow Jones Industrial Index would have been worth $14.41 in 2007, and $11.49 in 2010”
“. . . . A nation of house buyers becomes captive to the economic cyclicality caused by bursts of construction activity, and it is not lifted or sustained by the limited levels of service employment related to existing housing. By contrast, a nation of business startups and investors supports our capital markets and creates long-term employment, income, exports and the myriad technological advancements desperately needed by an expanding American society.”

I cited the above in a post last year and then posed the following (still relevant) question: I wonder if anyone in Washington D.C. gets it?

 Follow @johnmpoole

Home prices continue to drop - turnaround in 2015?

Forget the election year hype, the truth is in the data, and it shows U.S. housing is still in decline and no real turnaround is projected until 2015.  This unfortunate situation will favor Republicans who stay on message (Romney). The only way out is to revive the economy (i.e., increase private sector employment)--see last sentence in excerpt below. Issue #1 come November, 2012, voters will ask: "Who will do a better job reviving the economy in the next 4 years, Obama or Romney?"

Home prices dropped in November in most US cities - National Business - MiamiHerald.com: "WASHINGTON -- U.S. home prices fell for a third straight month in nearly all cities tracked by a major index. . . . Prices dropped in November from October in 19 of the 20 cities tracked, according to the Standard & Poor's/Case-Shiller home-price index released Tuesday. The steepest declines were in Atlanta, Chicago and Detroit. Phoenix was the only city to show an increase. . . Still, prices fell in 18 of the 20 cities in November compared to the same month in 2010. Only Washington and Detroit posted year-over-year increases. Prices in Atlanta, Las Vegas, Seattle and Tampa fell to their lowest points since the housing crisis began. And prices have fallen 33 percent nationwide since the housing bust, to 2003 levels. "The trend is down and there are few, if any, signs in the numbers that a turning point is close at hand," said David M. Blitzer, chairman of the S&P's index committee. . . . The November data are the latest available.. . .a large number of vacant homes are sitting idle on the market, which means prices will likely stay unchanged for several years, said Paul Dales, senior U.S. economist at Capital Economics. "The most likely scenario in the U.S. is that in 2012 prices will bob around a bit, with one month's gain being reversed the next month," Dales said. "But in general, over the next couple of years, house prices will do nothing more than remain broadly stable." Dales said prices might not rise consistently until 2015. He said lower unemployment and better pay raises are essential to a full housing rebound. . . ."

Read more here: http://www.miamiherald.com/2012/01/31/2616876/home-prices-dropped-in-november.html

Tweet    Follow @johnmpoole