The Nadir of the Housing Slump?
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According to reports released today, the housing slide will continue indefinitely. Robert Shiller had pointed out a couple weeks ago that he felt home prices would drop greater than 30 per cent in value from their peak in June, 2006, before rising again. If Shiller's prediction is correct, we will surpass housing depreciation numbers from the Depression Era.
S&P spokesman David M. Blitzer said, "There is no sign of a bottom in numbers [. . .] Prices of single family homes continue to drop across the nation," (CNNMoney.com 4/29/08). And it appears that the drop in home prices is accelerating. At this rate, according to Baker, as much as $6 trillion in home values could be wiped out from the zenith of the housing market from June, 2006, through the end of this year.
Arizona, California, Florida and Nevada have been hit the hardest with home prices dropping close to 20 per cent (from 2006) in all four states. These numbers were released earlier today along with RealtyTrac's statistics on foreclosures from the first quarter of this year. So far a 155,000 homes have been lost and with extra inventory that wasn't a factor a year ago, it's causing homes to depreciate further.
However, all of these depressing numbers have not surprised any industry-insiders. The mortgage crisis and the housing slump are ostensibly, if not obviously, related and if any alleviation is to occur anytime soon, it'll have to come in the form of either the government interjecting itself into the mortgage mess and coming up with an appropriate way of rewriting loans or through foreign investors doing the same, but only after buying the abundance of underwater mortgages from the lenders and restructuring the new terms of the loans themselves.