Friday, August 15, 2008

We're Nowhere Near A Bottom in Housing

Consider the news from this week.

From Zillow:

Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to, an Internet provider of home valuations.

So -- 33% of the homes purchased in the last years are underwater -- as in there is negative equity in the homes. I did some simple back of the envelope calculations on this number and came to $1 trillion. Assuming I'm in the ballpark that's a huge number (BTW: recently PIMCO said their estimate of US mortgage related losses was $1 trillion, so I fell pretty confident the number is close).

Foreclosures are increasing:

Property foreclosure filings for July rose 8% from June and 55% from a year earlier, as credit woes and tumbling home values continue to hit homeowners.

Foreclosure-listing service RealtyTrac said there were foreclosure filings on 272,171 properties last month, or one for every 464 households. Bank repossessions, or real-estate-owned properties (REOs), continued to be the fastest-growing segment, said Chief Executive James J. Saccacio. The number of REOs nearly tripled from July 2007, while default notices jumped 53% and auction notices rose 11%.

The combination of slow sales and bank repossessions has created a "bloated inventory of bank-owned properties," he said, with RealtyTrac now having more than 750,000 properties in its active REO database, or about 17% of the inventory of existing homes for sale reported in June by the National Association of Realtors.

Home prices are still dropping hard:

Nearly one in four metropolitan areas in the U.S. saw home prices rise in the second quarter, according to data released Thursday by the National Association of Realtors, though the group's president said foreclosures are distorting data.

NAR's results, which come from its survey of 150 metropolitan statistical areas -- saw 35 areas with higher median existing single-family home prices than a year earlier. That sounds a bit better than what's been said elsewhere in the market in recent months, though it also means 115 -- or 77% -- of the areas studied saw price declines.

NAR also said the median existing single-family home price fell 7.6% nationally in the second quarter. It blamed foreclosures and short sales -- which accounted for a third of transactions -- with pulling prices down.

Breaking the country down into four regions, the West logged the biggest drop, 17.4%, while prices in the Northeast declined 9.6%, dipped 0.9% in the Midwest and fell 4.1% in the South. Prices fell the most in parts of California and Florida, with several areas reporting declines of more than 30%.

Notice how the writer tried to spin this into happy news -- 1/4 of urban areas saw increases! Yeah!

Of course, that means 3/4 saw declines. Also notice that all regions saw price declines as well. In other words -- the happy talk isn't cutting it.