The Housing Drag
Here are the closing statistics from Friday for our key indicators (02/04/12):
FINCON = 2
DJ30 – 12,801 down 89
US Treasury 10 Year Bond – 1.97% down 0.08%
USDEUR - 1.3188
Gold – $1725 down $16
Oil – $99.05 down $0.79
Stocks were down a little this week – is this the beginning of the correction? Bonds were level – as was the Euro. Gold was level this week, and has tested $1750 3 times, and will break through soon – but could test lower levels again. Oil was sideways too.
The US Housing Market…..
Ben Bernanke, Chairman of the Federal Reserve, said declines in home prices have forced many Americans to cut back sharply on spending and warned that the trend could continue to weigh on the U.S. economy for years. He went on to say that between $200B to $375B less is being spent by households because of this fall in value.
Housing values continue to decline in the US, and the recent agreement by most of the state governments with the big banks to pay home owners for past transgressions in the foreclosure process, only makes matters worse in the future. Why? Well, the banks are being forgiven for their illegal “robo-signing” and this will free them up to complete the foreclosure process on the large amount of delinquent mortgage payers in the US.
Here is a great graph that visually shows the problem that US house prices are having. Note the “normal” situation for US housing back before 2007, and look at it today. The vast majority of houses for sale are foreclosures and bank owned properties – all every one of these pushes down the prices in the neighborhood.
Also note the “current, but underwater” homeowner size today – as these might be on the market if people walk away from their mortgages.
How long will it be before the US housing market gets back to “normal” – well, it looks like at least 5 years to me – or even longer. I would predict that prices will continue to fall in 2012 and 2013 – and may stabilize in 2014.
