A graph at this link shows housing prices bottomed sometime in early 2009 and recovered some since that time. Now housing prices have turned down again but they are still above the early 2009 low.
TRUCKEE, Calif. – Oct. 22, 2010 – Clear Capital (www.clearcapital.com), is issuing this special alert on a dramatic change observed in U.S. home prices.
“Clear Capital’s latest data shows even more pronounced price declines than our most recent HDI market report released two weeks ago,” said Dr. Alex Villacorta, senior statistician, Clear Capital. “At the national level, home prices are clearly experiencing a dramatic drop from the tax credit-induced highs, effectively wiping out all of the gains obtained during the flurry of activity just preceding the tax credit expiration.”
A 5.9% drop in 2 months is a very sharp decline.
This special Clear Capital Home Data Index (HDI) alert shows that national home prices have declined 5.9% in just two months and are now at the same level as in mid April 2010, two weeks prior to the expiration of the recent federal homebuyer tax credit. This significant drop in prices, in advance of the typical winter housing market slowdowns, paints an ominous picture that will likely show up in other home data indices in the coming months.
Calculated Risk expects the CoreLogic and Case-Shiller housing price indexes to also show declines. This makes sense. Housing prices are still too high. Plenty more mortgages are going to default any potential buyers are afraid to buy and then see prices drop. The expectation of always rising housing prices is dead.
The economic conditions are ugly. A recent Gallup poll found the unemployment rate back above 10% for September and industrial production unexpectedly fell in September.
Historically, recoveries from recessions have been very strong with GDP growth running well above the historical average. This makes sense intuitively. The economy has to grow at an above-average rate some of the time to make up for periods of declining and stagnant economic activity. But the National Association of Business Economists projects only an average economic growth rate in 2011 with unemployment at 9.2% at the end of 2011.
The NABE Outlook panel cut its growth predictions for 2010 and 2011. Real gross domestic product (GDP) is now expected to advance 2.6 percent in 2010, down from the panel’s May prediction of 3.2 percent. While some of this reduction relates to historical data revisions, most of the markdown reflects worse-than-expected summer results and a dimmed outlook. Next year’s 2.6 percent gain shows the lack of a typical cyclical rebound and only matches the long-term growth trend previously expected by the NABE panel.
What I'd like to see: a measure of recessions by percentage unemployed per month above a baseline over some months. Translate the recession's total labor lost into cumulative percent of a year's total labor. So, for example, an extra 5% unemployed over 2 years is 10% of a year's labor. By that measure this recession would likely stand far beyond any other recession since WWII in terms of labor lost.
Even this projection might turn out to be excessively optimistic. We might be in the early stage of an extended period of low economic growth. Worse yet, oil price surges will at various points in the next 10 years choke off all economic growth. Once world oil production comes off its production plateau and enters permanent decline I expect a long period of economic contraction year after year.
I see lingering effects of the real estate bubble, the financial crisis, the coming oil production decline, globalization, and worsening demographic conditions in America (and other Western nations as well) all combining to make the next 10-20 years economically worse than the 1990s. The last 10 years will come to be seen as the transition period from the previous era of long term economic growth to a new era of austerity and declining living standards.
|Share |||By Randall Parker at 2010 October 24 11:37 AM Economics Housing|