May 31, 2011
The housing market continue to sink according to economic data released today. As the New York Times article by David Streitfeld put it:
Housing prices fell in March to their lowest point since the downturn began, erasing the last little bit of recovery from the depths plumbed two years ago, according to data released Tuesday.
The Standard & Poors Case-Shiller Home Price Index for 20 large cities fell 0.8 percent from February, the eighth drop in a row. Prices are now down 33.1 percent from the July 2006 peak.
Home prices continue on their downward spiral with no relief in sight, said David M. Blitzer, chairman of the S.& P. index committee.
The continuing slide in prices has created enough economic agony that fundamental home ownership patters may be changing. In 2004, the homeownership rate (share of occupied homes in the U.S. that are owner-occupied) peaked at 69.2%, the rate now stands at 66.4% in the first quarter of 2011. Apparently, that is an extremely rapid retrenchment given the illiquid and long-term nature of the housing market. Streifeld observes that this is an ownership rate that has fallen back to the level of 1998 with some experts believing that a decline to 1980s or earlier levels may be possible. Housing prices have now fallen to mid-2002 levels.
Many families are upside-down on their mortgages, and that fact prevents geographical mobility as homeowners cannot leave an area for better paying positions elsewhere. With large college loans outstanding and collapsing housing prices, it is not surprising that families in such circumstances are under tremendous economic pressure. It is hard to imagine that this will not have a great impact on the 2012 election in addition to the traditional economic variables like the unemployment rate.