Tuesday, March 30, 2010

Double Dip Recession in U.S. Residential Housing Market Coming

The latest home price data came out today from S&P and despite small increases in housing prices overall the news was, as the report says, "mixed."


I have been saying a double dip recession is likely here in this blog for months. In fact this blog post quotes Mr. Obama agreeing with me. The current "economic recovery" is really nothing but a sick and damaged economy being supercharged by trillions of dollars in hot government spending.

It's like taking the proverbial 90-pound weakling from the old Charles Atlas ads and pumping a liter of pure adrenaline into his veins and then turning him loose on the community. He may look active but he sure isn't healthy.

Just think about all the Federal spending since the housing bubble burst.

TARP I and TARP II
Cash for Clunkers
First Time Homebuyer Tax Credit
Bailouts for Fannie, Freddie, AIG, Citibank, and all the rest
Mr. Obama's $737 billion economic stimulus bill


The economic fundamentals for the U.S. residential housing market are terrible. Look at supply and demand and answer one question for me.

"What catalysts lift housing prices higher?"

Sorry, there aren't any in the short term. Not until at least 2013 at the earliest, and maybe not even then.

Robert J. Abalos, Esq.

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U.S. Home Prices Inch Up, but Worries Remain


Housing prices edged upward in January, according to data released Tuesday.

The Standard & Poor’s Case-Shiller Index rose 0.3 percent in January from December, seasonally adjusted, its eighth consecutive monthly increase.

But the apparent good news in the widely watched measure masked underlying troubles. David M. Blitzer, chairman of the index committee at Standard & Poor’s, called the report “mixed.”

“While we continue to see improvements in the year-over-year data for all 20 cities, the rebound in housing prices seen last fall is fading,” Mr. Blitzer said.

The seasonal adjustment of the data lifts the numbers in the soft winter months. On an unadjusted basis, the index fell 0.4 percent in January from December, extending a pattern of decline.

House sales rose in the fall as buyers and sellers eagerly did deals before the government’s $8,000 tax credit was scheduled to end Nov. 30. Congress then extended the credit until April 30, but the momentum was lost. Sales volume immediately plunged.

Other housing indexes, which use different sets of data from different communities, show that the expected ending of the credit was also hard on prices.

The First American CoreLogic Home Price Index dropped 1.9 percent in January, double its decline in December. The Federal Housing Finance Agency’s index dropped 0.6 percent in January after falling a revised 2 percent in December.

Analysts said that Case-Shiller would eventually slide as well.

“It is only a matter of time before the index records a double-dip in prices,” Paul Dales of Capital Economics said.

The housing market bottomed last winter. On an annual basis, the Case-Shiller index is now down less than 1 percent. Prices are down about 30 percent from the peak in the summer of 2006.

Twelve of the cities in the index went up in January from December. Los Angeles was the biggest gainer, up 1.7 percent. Chicago was the biggest loser, dropping 0.8 percent.

With the January 2010 data now published, it is possible to track the best and worst cities to have owned real estate over the century’s first decade.

The three best cities are no surprise: Los Angeles, New York and Washington. All are more than 70 percent above their level in January 2000.

Anyone who bought in Las Vegas would have lost a few dollars after paying their agent’s commission. But the worst-performing city in the index was Detroit, which ended the decade 28 percent below where it began.