How I Missed the `Housing Recovery’ of 2010

January 3, 2011 05:59

What housing recovery? If there is, or was, one, it is nowhere to be found in the data.

By Caroline Baum at


Homebuilder sentiment, new home sales and single-family housing starts, which, in that order, lead the complex of residential real estate indicators, are bumping along the bottom. There was no recovery to stall.

There was a brief incentive-driven pick-up in sales in 2009 and the first half of 2010 that faded the minute the home purchase tax credit expired.

As it turns out, the “recovery” referred to in the headline was in house prices, which rebounded modestly when sales improved. The “stall” was their renewed slide, based on the S&P Case-Shiller Home Price Index. Prices fell in all 20 metropolitan statistical areas in October compared with September, according to the Case-Shiller report.

The inventory of existing homes stood at 3.71 million in November, about where it was four years ago, according to the National Association of Realtors. Add to it the 197,000 new homes for sale and anemic demand, and the unavoidable conclusion is that home prices need to fall further to attract buyers.

“Previously when the months’ supply was that high, home prices were falling at a 10 to 15 percent annual rate,” said Sam Khater, senior economist at CoreLogic. “If it remains that high, that’s where prices are headed.”

If the visible supply is depressing current prices, the shadow inventory, or properties that are seriously delinquent, in foreclosure or owned by lenders, will be a drag on future prices, Khater said in a telephone interview. The shadow supply, which was eight months in October, is being constrained by foreclosure moratoriums in various parts of the country while the government investigates shoddy paperwork by lenders.


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