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12 Reasons Why The U.S. Housing Crash Is Far From Over

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Over the past several months, many in the mainstream media have hailed the slight improvement in the U.S. real estate market as a “housing recovery”.  But the truth is that the small improvement in the numbers was primarily due to a significant number of Americans attempting to squeeze their home purchases in before the huge home buyer tax credit expired at the end of April.  Now that there is no more giant tax incentive, real estate professionals all over the United States are fearing the worst.  Mortgage defaults and foreclosures are still at record levels, and a giant “second wave” of adjustable rate mortgages is scheduled to reset in 2011 and 2012.  In addition, there are numerous indications that the U.S. economy as a whole is going to experience a dramatic downturn shortly, and if that happens it is going to be really bad news for the housing industry.  So are we about to see “Housing Crash Part 2”?

The reality is that it has taken unprecedented U.S. government intervention to even stabilize the U.S. housing market.  Now that the tax credit has expired, and as the U.S. economy continues to worsen, there is simply no way (except if we see hyperinflation at some point) that housing prices are going to return to the levels that we saw during the height of the housing bubble.

Banks and other lending institutions all across the U.S. have seriously tightened their lending standards and so it is now much more difficult to get approved for a mortgage.  That means that there are going to be less home buyers in the marketplace.

In addition, while mortgage rates are at record lows right now, the truth is that they will not stay there indefinitely.  When interest rates do start to rise that is going to suck even more home buyers out of the market.

Truthfully, the housing market is not going to be as good as it was during the first several months of 2010 for quite some time.  The entire U.S. economy is on the verge of collapse, and when it does the real estate industry is going to be one of the first to feel the pain.

The following are 12 reasons why the U.S. housing crash is far from over….

#1) Now that the huge home buyer tax credit (government bribe to purchase homes) has expired, the real estate industry is bracing for the worst.  The truth is that a significant percentage of those Americans that planned to buy a home in 2010 really tried to squeeze their purchases in before the April 30th deadline in order to take advantage of the tax incentive.  According to mortgage consultant Mark Hanson, “buyers were bidding on everything and sellers were accepting anything and everything before 4/30.”  Now that the tax credit is over, things could get really slow for the U.S. real estate market.

#2) A massive “second wave” of adjustable rate mortgages is scheduled to reset in 2011 and 2012.  In fact, there are many analysts that are openly speculating that this second wave could be even more brutal than the first wave that we experienced in 2007 and 2008.

#3) The number of home sale closings in May was down more than 5% compared to April.

#4) Newly signed home sale contracts dropped more than 10% in May.

#5) There has been an even more dramatic decline in mortgage applications.  In fact, home purchase applications are now almost 40 percent below the level of just four weeks ago.

#6) Internet searches on real estate websites are down 20 percent compared to this same time period in 2009.

#7) From all indications, a record number of foreclosures is going to continue to flood the market.  The Mortgage Bankers Association recently announced that more than 10 percent of all U.S. homeowners with a mortgage had missed at least one payment during the January to March time period.  That was a record high and up from 9.1 percent a year ago.

#8) U.S. banks repossessed nearly 258,000 homes nationwide in the first quarter of 2010, a whopping 35 percent increase from the first quarter of 2009.

#9) A staggering 24% of all homes with mortgages in the United States were underwater as of the end of 2009.

#10) People can’t buy houses if they are flat broke.  For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.

#11) The truth is that American consumers are stretched to the limit and are increasingly finding it very difficult to pay their bills.  During the first quarter of 2010, the total number of loans that are at least three months past due in the United States increased for the 16th consecutive quarter.

#12) The overall U.S. economy is in really bad shape and is rapidly getting worse.  If American workers cannot find good jobs and if they keep going bankrupt in record numbers they simply are not going to be able to buy homes in 2010 or any year thereafter.

Those who are projecting a robust housing recovery are living in some kind of fantasy world.  It is just not going to happen.  Let’s just hope that things don’t get as bad as the numbers seem to indicate that they might.  Another devastating housing crash would just suck the life right out of the U.S. economy.  So let us hope for the best but also let us be prepared for the worst.

The Beginning Of The End

  • Paul

    I am so glad that I decided not to buy a house in southern California, while all my friends were purchasing homes at the peak of the market in ’06. I have been following the market and renting for the last few years and have been spending lots of time thinking when will it be the right time to buy? I can honestly say, I fear that there will be a complete collapse of the economy at a local, state, and national level. I currently am a resident of the state of California, and I don’t see any hope for things getting better in the future. Are there any indicators out there that the economy may improve? Will there ever be a good time to purchase a home in this state????

  • Dan

    I like to look at thing that are tangile to me and when I look at the UK housing market and then look at the current generation who are the only future buyers for property and then see that this generation has no money… well house prices will have to collapse in a big way.

  • bob

    Back in 2002 before I quit real estate, I told my broker, house prices cant continue to rise, income levels just werent there. So, here come the undocumented loans, sub prime. Beginning of the end. NAFTA didnt help, with all the jobs being shipped overseas. Income levels can only go down, not up, duh. No factory jobs only service sector jobs, like medical techs. Now our economy is going to be based on service sector jobs, hmmm how many pay over $10 an hour not many. Oh, and lets let the employer continue to short the worker in hours so, he can get medicaid, and food stamps. Yes, lets have the govt pick up that tab. The best one I saw the other day, was a seminar on how to hire illegals legally. Put an ad inthe paper, take the applications, deny all of them, then, get the illegal and get a green card because you cant find anyone qualified to work that position. Well, looks like the govt will be the big boy now. Serfdom here we come.

  • Caitanya dasa

    I read many different economic websites, and I must say, that I think your site is the best, that your articles are the best written in terms of being easy to read, as well as very accurate and full of facts and statistics.

    You are clearly a very talented writer, and can capture the theme or meaning of something very well. Please keep on writing such dynamite articles about the collapse of modern society, and I will continue posting them to my Facebook profile. Thank you very much.

    Please add me on Facebook if you have it, my name on there is “Corey Cananza” and my profile pic is of George Harrison.

    • Michael

      Thank you very much for the compliments!

      Sometimes economic and financial issues can be very difficult for the average person to grasp. One of the goals of this site is to break these issues down in terms that are simple enough for people to understand.

      Hopefully together we can wake large numbers of people up. I very much appreciate you posting these articles to Facebook. That is what is going to get these articles in front of the eyeballs of those who need to really read them.

      And hopefully I can pull together enough energy to post a quality article tonight. I am feeling a bit tired.



    Paul, I live in California too and I’m glad I didn’t buy houses here. Way overpriced and built with cheap China made drywall.

    I kept telling my friends and co-workers this housing upturn cannot last. People are not going to pay 1 million dollars for a 1 bedroom condo.

    I see a LOT of empty houses in my area and I know there are some squatters in the region. I honestly can’t blame them.

    That’s why I’m moving out of CA to a smaller town where I can buy a dirt cheap house and live off of the grid.

  • Use to be your home was the best thing to invest in. Tax wise an money wise it always went up because of inflation push. Now the u.s. gov vertual controls all the loans 95%. An if you can get a loan you dont get the house. If most people cant aford a house the price has to fall along with it. So people will buy. An another thing interest rates so low now the prices of homes difentily has to fall so people can aford them.

  • leland

    Michael this was a really well reasoned post that brought me up-to-date on the housing crisis going on in America these days.

    Information like this is why I am so glad that I can rely on blogs for information instead of the mainstream media. 🙂

  • we better be prepared. I advise you listen to as **** will hit the fan in a few month.

  • Caitanya dasa

    Hello Michael:

    “Sometimes economic and financial issues can be very difficult for the average person to grasp. One of the goals of this site is to break these issues down in terms that are simple enough for people to understand.

    Hopefully together we can wake large numbers of people up. I very much appreciate you posting these articles to Facebook. That is what is going to get these articles in front of the eyeballs of those who need to really read them.

    And hopefully I can pull together enough energy to post a quality article tonight. I am feeling a bit tired.”

    Yes, your site is VERY successful in reaching out to the common man. I have found you to be the best writer out there, because you explain things so simply and concisely. You also have a tone of compassion, and of religiousness, spirituality, and morality.

    And yes, I read your latest article, about the starving children in America. Very, very powerful article that will hits the facts home in a very personal way, which will affect those who read it to hopefully feel compassion.

    Anyway, keep up the very good work, you are doing a very valuable job.

  • Phil

    I am from Canada and was clear to me in 2005 that real estate was toast in the US and maybe here. Its easier to see what is going on there when you not engulfed in a bubble and propaganda. I tried to warn family but the didn’t listen and lost their homes 🙁 I think there is a total collapse coming for the financial system and the crooks (gov. & Big business) running everything. Get food, cash, Gold / silver. This is a normal ugly cycle. We are all going to get it….good luck too all.

  • Happycamper

    Prices will decline until the average income can support the carrying charges of the mortgage and we ain’t there yet.

  • Jim Lunsford

    And this article doesn’t even include factors like the ARMS that are cyclical and easily forecastable. I believe we have three more waves of those on the horizon. Each of them about as devastating as the first housing bubble. And of course, the commercial real estate bubble is only beginning. This isn’t taking into account the fact we have a smaller tax base to suck the life out of, a less viable currency after the last “stimulus” round, a less vibrant world economy after the last stimulus, and so on. I am an anarchist, which is not the violent state of chaos the state claims. To me, all of this was brought upon us by the very nature of government interference with the people in laws and taxes. Government is making things worse as we speak. It ain’t gonna be a pretty sight.

  • HappyCamper2

    But if you liked the housing bubble, you’ll love the Student Loan collapse. The kids that are graduating have no jobs, a debt load they cannot discharge and a very bleak income future. The same loans are sliced and diced, just like the CDO, CDS and other derivatives.

  • Completely agree with the US housing market.

    Will take years for things to work itself out.

    But, there are a lot of markets outside the states.

    If you are looking south – what about Panama, still has a great market.

    What about parts of Brazil, like Fortaleza?

    Uruguay is looking good.

    Open up your search.

  • Cory

    ARMs adjusting can be a bad thing if the underlying indexes are high. Most ARM loans from the past 2 to 5 years are based on the 1 year LIBOR, and to a smaller extent, the 1 year treasury index. As of today, the 1 year LIBOR index is at 1.2% while the 1 year Treasury is at .37%. The average ARM margin, excluding subprime loans, is about 2.50%. That means the average ARM rate will adjust to roughly 3.7% on LIBOR based indexes or 2.87% on TBill based indexes. Average loan rates from 2005 to 2007 were 5.50% to 6.00%. Homeowners will see their rates drop substantially and actually realize a savings of roughly $300 per month on a $300,000 loan. Even subprime loans, where average margins are closer to 6%, will likely see their rates not change AT ALL, with no net impact when they adjust. Blanket statements like ‘ARM rates set to adjust’ mean nothing in terms of real economic impact when the person writing the article offers no underlying numerical data to back up what the adjustment truly means.

  • Joe in JT

    HappyCamper above makes an excellent point about the coming student loan collapse. I know…I’ve been through it. In 1977 I took out a tiny college loan for $400. The college went bankrupt and sent everyone home so I didn’t pay the loan. Thirty years later they still hounded me for the cash until finally they “stole it” from my income tax refund check. The treasury department didn’t rob me sooner because I was in the military and they can’t bother you if your in the service. But they wait, like a lion in the bush, until the time comes when they steal the money from you.

    The point I’m making to all you young college grads is this. If you owe 100 grand or so you’re screwed. The interest alone will make it nearly impossible to repay and the U.S. Treasury will never go away. If you ask for a reprieve they set traps for you to make you go further and further into debt. I think what these loan sharks really want is for you to earn a good living, and make $800 payments to them forever. Knowing full well you’ll never get out of debt.

  • Mr. M

    I tried to buy a house at the beginning of 2005-06 but could not afford the price as it continued to soar with no end in sight. Good thing I didn’t because in 2007 I was forced out of a my 60k a year job because of outsourcing to a third world nation who barely speaks English. Are you kidding me? With no heath coverage I then bizarrely if on cue, had cronic heatlh problems and almost died. And wouldn’t you know, I didn’t use one cent of my heath coverage from my previous employer?! Amazing. At the time of my “oursourcement”, I was offered Cobra but could not afford the freakishly expensive $350 dollar monthly payment. Now three years later and heatlthy again, I don’t even clear 30k. That’s a whopping 50% slash in income. In fact, I don’t even get healthcare benefits. And this is someone with over 10 years of experience in my field. My 401k has been slashed in half and my IRA has all been emptied. Thank God I have a great family to help me, or I’d be totally screwed.

    If there is an economic recovery I just don’t see it. I just see the economy acting in a side ways motion going neither up or down. Things are stagnant at the very best. I just cringe to think what lurks ahead around the curve.

    I’m not waiting around for the economy to stall and tailspin. As far as I’m concerned this economic depression started in 3rd quarter of 2007 for me…

    I’m preparing for the next disaster BEFORE it bites me in the ass. Been there done that. Are you?

  • Dorque

    We’ve all been living the Baby Boomers’ shared hallucination, but their LSD is wearing off fast.

  • Jim Lunsford

    Cory, one can make a blanket statement on the ARMS because we they represent a known in the foreclosure rate. These were mortgages that were primarily re-financed because they couldn’t pay the previous mortgage. The foreclosure rate is already pre-determined and there are two to three more waves of them. Then adding the commercial real estate collapse, we have far more than enough to finish off the economy. Of course, there is that student loan collapse discussed, not to mention the destruction of the small business with the forced health care payments, the possible passings of the food safety and crap and rape bills, not to mention that this is already a very weak economy. Those new jobs? Government, and almost all of them temporary census workers. In fact, government jobs pay more than private sector jobs. Since it is the private sector that finances the public, it doesn’t take a rocket scientist to know that ain’t a good thing. The situation in Greece, Iceland, Hungary, Rumania, Spain, Portugal, and Japan ain’t pretty either. Let’s also factor in the complete destruction of an already decimated state, Florida. It’s income is dependent upon the oil, fishing, and tourism. None of those will be there for a very long time, and that state is already one of the hardest hit. Nope, we’ve taken the country with the most abundant resources, spit on them, chewed up the productivity of our people, and then expect that things will be just hunky dory. We are now a third world country in the making.

  • jim98624

    The only way the U.S.A. will make it out of the great depression of 2010 will be FULL time jobs. Corporate America put us in the current boat by only offering part time jobs. as people could no longer buy things the economy slowed. the big unemployment snowball started down the hill. more corporations sent jobs overseas for more return to their pockets. the same products that were made in U.S.A. are now made cheaper else where BUT they don’t cut the retail price in half do they. Now we can’t buy the products and the corporations are looking for new consumers in foreign countries and to hell with you and me.

  • I sold my house in September 2007 and have been renting ever since. The housing market is collapsing at a slower pace in Douglas County, Colorado (south Denver), but I believe it will accelerate this year and next.


  • why doesnt anyone, anywhere, explain, WHY? and what path this will take?
    please refer to jenkins, money the worlds greatest hoax, and the great cookie jar, and the const. wounded in the house of its guardians-roger sherman,and for you chrsitian, john 8 40 to 50, READ EACH WORD, KNOW IT,,

  • Hans

    Hi Dan,

    Great trail. What we are experiencing globally is a natural cycle. Similar economic changes happened for example in the final years of the Roman Empire. Hyperinflation, a rush into gold and silver, a period of chaos and war and finally an establishment of a new order or hierarchy. It seems allmost a sort of Jungian subconscious herd instint. Ans if we all start ‘doing the recession thing’ , yest then we will all go for it. Hopefully this new information era can change this proces, we shall see. What I do not understand, however, is where this American Panic comes from. Have you guys sold fort Knox?

Finca Bayano

Panama Relocation Tours



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