The burst of the housing bubble will last a long time
California Housing Crash, Florida Housing Crash, The Economy, Real Estate May 27th, 2008
This from CNBC:
“This is going to be another difficult spring,” said Mark Zandi, chief economist at Moody’s Economy.com. “I think we are at the beginning of the end of the housing downturn, but it is going to be a long and painful end.”
The devastation is certainly a far cry from the boom years from 2001 to 2005 when sales of new and existing homes were setting records for five straight years. During that time, home prices were soaring, luring thousands of investors into the market, hoping to buy homes and flip them for quick profit.
But since 2006, the country has been mired in a housing bust which, in many ways, is the worst since World War II. Construction is expected to drop to the slowest pace since the 1940s and prices are expected to decline by the largest amount since the Great Depression.
Hardest hit are the states where sales boomed the most: California, Florida, Nevada, Arizona and parts of the Northeast. In the Midwest, the problem is shrinking jobs in the auto industry, making homes hard to sell.
But virtually all of the country has felt the aftershocks of the housing slump, either through weaker home sales or the massive drag housing has imposed on the overall economy.
The price decline nationally was 7.7 percent in the first quarter, with the biggest plunge a 29.2 percent decline in the Sacramento, Calif., area. As the spring sales season got under way, the slump was continuing.
The Realtors reported Friday that existing home sales fell 1 percent in April, the eighth drop in the past nine months, with the median home price falling 8 percent compared with a year ago, the second-biggest drop on record.
Adding to the foreclosure problem is the weak economy, which has resulted in four straight months of job layoffs, an indication to some analysts that the country has already fallen into a recession.
Rising job layoffs and higher gasoline and food prices have sent consumer confidence plunging — not a great environment to mount a rebound in housing.
And then there is the problem of the huge overhang of unsold homes generating further declines in prices, which seem to be keeping more prospective buyers on the fence.
“Right now a lot of people are staying away because they don’t want to buy an asset that might lose value right away,” said Patrick Newport, an economist at Global Insight.
