The Housing Market Still Sucks

From Crooks and Liars: The Black Hole at the Pit of the Economy | Crooks and Liars

1. The percentage of homeowners with underwater mortgages — where the value of a mortgage exceeds the value of the property — has now climbed to 28.4 percent. It has been at around a quarter of all (single-family) home mortgages, but is continuing to climb, edging closer to a third. This is a truly stunning number, especially when you consider how many homeowners are in their second or even third decade of paying off their mortgage.

2. Housing prices continue their decline, in fact scoring their biggest quarterly drop since the crash months in 2008. Home values have declined a net 29.5 percent since their peak in 2006, and after a modest increase after the 2008 crash, started declining again last fall and are now at their lowest level, making them equal to the bottom point of the crash. And analysts expect them to continue to fall for another year at least.

3. A new report out by National People’s Action shows that one out of ten homes in Cleveland, Columbus, and Cinncinnati will have received a foreclosure notice since the housing crisis began. Those are depression-level numbers, and I expect they parallel other hard hit states like MI, FL, and NV. Where the housing crisis is at its worst, we are seeing economic devastation on a massive scale.

All of this adds up to terrible news not just in the housing sector but in the rest of our economy as well. Homes represent the No. 1 source of wealth and equity for middle-class Americans, and their best chance for having some kind of decent retirement. Being secure in your home equity makes people far more likely to start a small business, and far more likely to have the confidence to buy the other consumer items that make the economy hum. And home prices are cyclical, in the sense that bad news for your neighbor in terms of a foreclosure usually means bad news for your home value.