More bad news out of the housing market today as Zillow, a leading online real estate marketplace, released their third quarter report and it largely echos what we saw in yesterday’s Clear Capital report – the housing market is double dipping. Home values fell an average -4.3% in the third quarter. Stan Humphries, the Chief Economist at Zillow says the housing market decline is likely to surpass the Great Depression’s decline and that prices are unlikely to recover before next summer:
“While not unexpected, the unceasing declines in home values signal that we’re in for a long, bleak winter of continued troubles for the housing market. The length and depth of the current housing recession is rivaling the Great Depression’s real estate downturn, and, with encouraging signs fading, will easily eclipse it in the coming months.”
Humphries also said the number of foreclosures reached a new all-time high and that the number of homeowners under water on their loan has now reached 23% – a high this year. Humphries is not optimistic”
“The high percentage of homeowners in negative equity continues to be troubling, in that it represents a huge number of people who are not only more vulnerable to foreclosure, but who are essentially trapped in their current homes and are prevented from selling and buying a new home. This has profound implications for future demand and will be a millstone around the neck of the housing market.”
The housing market is playing out almost exactly as I’ve expected in recent years. This still remains a simple supply and demand story. The overhang of inventory is crushing meager demand and the mortgage mess isn’t helping matters as shadow inventory is pushed further into the future. If you thought the housing crisis in the USA was behind us you might want to think again. Housing was the domino that set the credit crisis in motion in 2007 and it could pose a very serious risk in 2011.