Remember that housing/mortgage/fraud crisis? Well, it’s still here and now getting worse.
Home Prices Falling Fast, Eroding American Wealth And Threatening Recovery
Plunging home prices hammered household finances in the third quarter, eroding homeowners’ wealth and making them more vulnerable to foreclosure. As prices are expected to continue falling, the economic recovery could face a major stall.
Millions of homeowners saw their most valuable asset decay between July and September, according to recently released data from the Federal Reserve, as they lost a portion of the stake they can claim in their homes. A series of new reports reflects home prices are continuing to decline, increasing the pressure on America’s tepid housing market. Until the market finds a bottom, the foreclosure epidemic will feed upon itself, analysts say, as foreclosed properties drive home values down. With the unemployment rate hovering near 10 percent, and with companies showing historic reluctance to hire, the housing drag poses a significant impediment to an economic recovery.
Today Dan Froomkin wrote this at the Watchdog Blog:
Time For Real-Estate Watchdogs To Start Howling Again
You might not know it from reading the news, but the nation’s housing prices are in free fall again.
For the many Americans who have (or had) most of their wealth tied up in their homes, the consequences of this will be profound. The effect on nationwide consumption will inevitably be severe. In fact, there are some not inconceivable scenarios in which the housing market could just take the economy down with it again. . . . .
Despite the fact that the nation is officially in a period of economic recovery, the latest data show that home prices are diving. One recent survey pegged the decline at 0.7 percent per month; another found prices down 5.8 percent between August and October.
One analysis found home values will likely drop more than $1.7 trillion this year, on top of the $1.05 trillion drop in 2009. That would bring the loss in wealth to $9 trillion since the June 2006 market peak, when the housing stock was valued at about $24 trillion.
And many market analysts expect prices to drop 10 percent or more in 2011.
The sudden decline starting this past summer is traced in part to the end of the home-buyer’s tax credit, in April. But the real problem is the huge downward pressure caused by the the record number of homes being foreclosed.
Foreclosures depress prices directly – foreclosed homes are currently selling at a percent discount. They also depress prices indirectly, by creating urban (and in some cases suburban) blight.
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