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» Housing Continues To Collapse:

Housing Continues To Collapse

Posted by on June 6, 2010 at 8:10 pm.

It looks like home prices are getting ready to take another nosedive. Let’s take a look at the facts: Housing prices fell 3.2 percent in the first quarter of 2010 when compared to the last quarter of 2009: http://blog.taragana.com/business/2010/05/26/home-prices-fall-05-percent-from-february-to-march-raising-fears-of-a-new-bottom-64920/    The supply of houses for sale rose in April: http://www.totalmortgage.com/blog/fha/housing-supply-increases-115-percent-in-april/3748 With the end of government tax credits for homebuyers, residential real estate prices have continued their collapse causing  total mortgage debt to exceed home equity: http://endoftheamericandream.com/archives/living-the-dream-what-do-you-own-really   The federal government has nearly become the only source for home loans: http://www.doctorhousingbubble.com/fha-insured-loans-fannie-mae-freddie-mac-loan-market-dominated-by-fha/   95 percent of all new mortgages are backed by FHA, Freddie or Fannie. The oversupply of residential real estate is so bad that some have gone so far as to suggest that we intentionally destroy perfectly good homes: http://voices.washingtonpost.com/local-address/2010/06/is_bulldozer_best_option_for_s.html Yes, Douglas Duncan the chief economist for taxpayer supported and taxpayer  bailed out Fannie Mae suggests that we tear down perfectly livable homes.  I guess Mr Duncan figures taxpayer paid destuction of housing would be a great economic model for the residential real estate market. Douglas goes on to say that temporary  tax credits have hurt current demand: “Temporary tax credits change behavior temporarily. It’s simply shifted demand forward. … It actually created some price appreciation that’s not supportable long term.” [said Douglas Duncan, Fannie Mae chief economist]  Who would have guessed? Maybe the federal government should get out of the real estate business. The worst is yet to come. Take a look at the chart above.   Hundreds of billions of dollars worth of AltA and Option ARMS are going to reset in the next 2 years. Many of these homeowners will be underwater on their loans, you have to wonder exactly how many will decide on a  strategic default: http://www.calculatedriskblog.com/2010/05/60-minutes-on-walking-away.html     With 1 in 7 homeowners  in foreclosure or behind on payments, an inventory of 4 million unsold homes and hundreds of billions in loan resets coming soon, I doubt home prices are going anywhere but down.

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