My outlook for housing remains largely unchanged in recent months. Earlier this year I said the housing market was likely to come under renewed pressures in the second half of 2010 as government intervention ended and the market was allowed to begin clearing:
“As I said above, the most likely scenario is the “work-out”. Government stimulus continues to bolster the private sector in the back half of 2010, but the lack of direct aid in housing begins to weigh on the housing market in the second half of 2010. Negative seasonal trends make for a very difficult H2 in housing and a tough start in 2011. The economy appears fairly strong into the latter portion of 2010, but the dwindling stimulus ultimately pressures the private sector. Demand for housing remains tepid as job growth is weak, the unemployment rate remains above 8% into 2011 and the negative inventory trends prove too much for the real estate market to overcome. Ultimately, prices decline 7%-15% over the course of the coming 2.5 years.”
We’ve seen clear evidence in recent weeks that the housing double dip is in process. Price declines have varied depending on different reports with the prices of new homes reported as low as -13% year over year. The problems in housing remain entirely intact and as I’ve repeatedly stated over the course of the housing crisis it remains a problem of supply and demand.
If you’re attempting to visualize the problems in the housing market look no further than the following three charts (via Mortgage News Daily):
With supply near its all-time highs and demand near its all-time lows it’s safe to assume that prices have only one direction to move and that’s lower.