U.S. home prices will resume price decline after year of banking and government intermission. Multiple signs point to another year of slow home price growth and U.S. home values over priced by 20 percent.
Home sales follow very seasonal patterns. Yet much of this natural mechanism was stunted by banks delaying foreclosures and the government artificially stimulating home sales. Now that much of the stimulus has been exhausted, it is clear that home prices are correcting once again. It is hard for many to imagine that home prices can go lower especially after a vicious correction. Yet we have become conditioned to the notion of expensive home values by years of targeted propaganda. Home prices in many regions like California are still inflated even after significant price corrections. The upcoming decade will prove to be a weak one for home prices yet economists are once again making absurd long-term predictions regarding prices.
Take a look at a recent survey of 100 economists:
Falling off the American Dream treadmill – Real median U.S. household income falls under $50,000. Poverty rate has grown exponentially since 2000, during the housing bubble.
The U.S. Census Bureau recently released troubling data on the status of American families. The first disturbing point was that 43.6 million Americans now fall under the poverty category. This works out to 1 out of 7 Americans. The growth has come from many people falling off the middle class treadmill. While the echoes of recovery blast through Wall Street the grim reality for most people is that there is a greater and greater divide occurring. The top 1 percent still has significant control over financial resources and wealth disparity is as high as it was during the 1920s. While many American families wait in lines outside of Wal-Marts so their food assistance debit cards refill to buy food, those calling a recovery are usually those who have been protected via bailouts since the recession started.
The persistent and sticky unemployment of the American worker – To get back to 5 percent unemployment we would need to add 285,000 jobs per month for 5 consecutive years.
The biggest problem facing many working and middle class families is the structural changes in our employment base. By this point in any “recovery†the private sector would be adding a tremendous amount of jobs. Yet there really is very little recovery for the typical American. The stock market is performing “well†for the moment but it is back to levels from a decade ago. Without a job however, there is little consolation that stock values are soaring on thin trading by a few large banks. Without a recovery in jobs there really is no economic recovery. Of course much of the media has a hard time even understanding how tough times are for most Americans. To put this into perspective, we would need to add 285,000 jobs per month for 5 consecutive years just to get to a healthy unemployment rate of 5 percent. The last time the private sector added that many jobs in one month was back in March of 2006 at the height of the housing bubble.
California MLS inventory up 25 percent since April. MLS public data at 144,000 but 742,000 mortgages in California are in foreclosure or one payment behind.
MLS inventory for California has increased by 25 percent since April of this year. Part of this has to do with more foreclosures and short sales trickling their way onto the market. It also has to do with sales declining because of tax credit expiration fatigue. But what is the real inventory if banks were honest with their distressed properties? That is a hard question to answer but is definitely worth the examination. As we know banks have purposely kept off the books large amounts of housing supply. Basic economics tells you that with more limited supply, prices will go up or remain sticky on their way down. The problem of course is that home prices being too high is the core of the problem. The bailouts have focused on keeping banks alive by allowing them to pretend that bad mortgage debt is actually good (or will turn good on the taxpayer dime). Even with that, the MLS inventory for California has jumped 25 percent from April to September.