According to Radar Logic’s RPX Monthly Housing Market Report for January 2011, home prices in January hit the lowest levels since the collapse of the housing market in 2007. The RPX Composite Price (which is a measure of home prices in 25 metropolitan areas) was down 3.8 percent month-over-month, and 3.4 percent year-over-year. The report warns:
“While seasonal factors played a role in the month-over-month decline in the RPX Composite price, the year-on-year decline was driven by market fundamentals. The supply of homes for sale and potentially for sale is very large relative to demand, and it continues to be fed by high rates of mortgage defaults and foreclosures (notwithstanding recent declines in foreclosure filings as the mortgage servicing industry responds to allegations of improper procedures). At the same time, demand for homes is constrained by tight lending standards. Unfortunately, declining home prices are likely to exacerbate these challenges to the housing market.”
The report says that these number suggest that the housing market has yet to bottom out, a sentiment with which I wholeheartedly agree. As noted above, there is a massive overhang of unsold homes in this country. Figures vary due to different measuring techniques as well as the difficulty in measuring shadow inventory, but there are millions of unsold homes in this country. At the same time, demand for these homes is low because unemployment remains high. The recent declines in the unemployment rate are largely due to people running out of jobless benefits and/or the declining labor force participation rate, which is at 25 year lows. We are no longer losing jobs, but the number of jobs being created is only about enough to keep up with population growth. Declines in the unemployment rate are largely illusory. Until the employment picture improves, it is unlikely we will see significant recovery in the housing market.
While some housing markets are doing better than others, 24 of the 25 cities tracked in this report saw year-over-year price declines, lead by Atlanta, Jacksonville, and Milwaukee. Additionally, 22 of the 25 metro regions saw month-over-month declines.
Long story short: the housing market has yet to hit bottom, and it may be some time before it actually does.
Loading ...
RSS feed for comments on this post.
Leave a comment