Real Estate Market Bottom Drops
The deflationary cycle of housing prices is falling at the fastest rate since the Great Depression, according to the Housing Predictor index. Home prices are dropping at record rates, averaging a loss in the last 12 months of 13.2%, which is worse than the 10.5% drop of 1932, the lowest point of the Depression.
The Housing Predictor index is compiled from a cross section of more than 250 local housing markets researchers monitor regularly in all 50 states. The real estate crisis, which has been considered a housing depression in all but slightly more than two dozen markets, now ranks as the worst deflationary cycle in U.S. real estate history.
In real terms, home prices have dropped more than they did in the 1930’s when inflationary adjustments are added to the mix. Inflation coupled with the destabilization in housing now accounts for far more than the 13.2% loss in average values. The average home is now worth a quarter less than at the markets peak in 2005.
However, the average price of homes is just the average. In some areas of the country, including California, Florida, Michigan, Nevada, Ohio and other areas many markets have seen deflation topping 50%.
When equity losses are figured into the mix, home equity levels have now dropped at least 60% from the markets peak, also an all-time record.
Falling consumer confidence, rising unemployment levels and increasing white collar crime are all contributing to the fall in home prices. Inflation is increasing at a rapid pace judging from food and gasoline prices alone. This housing bust is easily projected to be much worse than the fall that lasted over five years through 1933.
A growing inventory of record all-time foreclosures is destabilizing the marketplace in all but a handful of markets throughout the country. Foreclosures, however, are projected to only increase as at least 1.2-million more adjustable rate mortgages reset through the remainder of this year and through the first four months of 2009. The majority of the mortgages on these homes are now unable to be refinanced since prices have fallen so much and the properties are unable to be re-appraised at high enough values for a new mortgage.
Government efforts to stem the epidemic of foreclosures have only helped slightly more than 500,000 homeowners, which is comparatively a small percentage of those under going the threat of foreclosure. Conventional rated mortgages now comprise a growing majority of homes defaulting on mortgage payments. For better or worse, Housing Predictor’s forecasts are hitting their numbers. The national economy has been destabilized as a result of the mortgage mess. A forecast 5.6-million properties will be foreclosed through 2011, the worst all time foreclosure number in the nation’s history.