Housing Pain To Continue?

Posted In: Bubbles, Credit, Economy, Employment, Foreclosures, Home Prices, Housing, Recession, Unemployment

Even though there’s more talk of a bottom in the U.S. housing market these days, I’m still not sold. I just haven’t seen any evidence out there which indicates a turnaround. However, I’m not the only one that sees further deterioration in the residential real estate market. Diana Olick, CNBC’s real estate reporter, made some good points yesterday regarding the continued weakness in homes sales. She wrote on her Realty Check blog:

The trouble is that there are a lot of factors working against sales right now — factors that are deteriorating, not improving. Number one is house prices. Sales may be bumping, but prices continue their slide down, and most of the “experts” I talk to think prices have a lot further to go, because foreclosures are mounting, as are inventories.

Then there’s the whole economy thing: We’ve said throughout this housing downturn that it’s unique because usually we see housing recessions in times of economic recession, and this housing downturn came before recession — and may have actually caused one.

Last year, we were still seeing job growth as housing faltered, but now we’ve seen 300,000 private-sector jobs lost in just the past four months. Add that to the credit crunch, and it doesn’t spell recovery for home sales…

In other words, I think we have a ways more to go.

Photo by Rene Asmussen, stock.xchng

On the topic of U.S. home prices, on Tuesday Yale University economist Robert Shiller said there’s a good chance prices will fall further than the 30% drop experienced during the Great Depression of the 1930s. During a speech at the New Haven Lawn Club yesterday, the founder of the Standard & Poor’s/Case-Shiller home-price index said, “I think there’s a good chance we’ll exceed that this time,” according to the Hartford Courant’s Eric Gershon. Home prices in the largest metropolitan areas across the nation have already dropped 15% since their peak in 2006. But, Shiller noted that real estate cycles typically take years to correct. Talk of the bursting of the housing bubble and subsequent turmoil it has produced led Shiller to warn: