The Beginning Of The End
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Housing Armageddon: 12 Facts Which Show That We Are In The Midst Of The Worst Housing Collapse In U.S. History

We are officially in the middle of the worst housing collapse in U.S. history - and unfortunately it is going to get even worse.  Already, U.S. housing prices have fallen further during this economic downturn (26 percent), then they did during the Great Depression (25.9 percent).  Approximately 11 percent of all homes in the United States are currently standing empty.  In fact, there are many new housing developments across the U.S. that resemble little more than ghost towns because foreclosures have wiped them out.  Mortgage delinquencies and foreclosures reached new highs in 2010, and it is being projected that banks and financial institutions will repossess at least a million more U.S. homes during 2011.  Meanwhile, unemployment is absolutely rampant and wage levels are going down at a time when mortgage lending standards have been significantly tightened.  That means that there are very few qualified buyers running around out there and that is going to continue to be the case for quite some time to come.  When you add all of those factors up, it leads to one inescapable conclusion.  The "housing Armageddon" that we have been experiencing since 2007 is going to get even worse in 2011.

Right now there is a gigantic mountain of unsold homes in the United States.  It is estimated that banks and financial institutions will repossess at least a million more homes this year and this will make the supply of unsold properties even worse.  At the same time, millions of American families have been scared out of the market by this recent crisis and millions of others cannot qualify for a home loan any longer.  That means that the demand for unsold homes is at extremely low levels.

So what happens when supply is really high and demand is really low?

That's right - prices go down.

Hopefully housing prices don't have too much farther to go down.  Ben Bernanke and the boys over at the Federal Reserve are doing their best to flood the system with new dollars in order to prop up asset values, but you just can't create qualified home buyers out of thin air.

Many analysts are projecting that U.S. housing prices will decline another ten or twenty percent before they hit bottom.  In fact, quite a few economists believe that the total price decline from the peak of the market in 2006 will end up being somewhere in the neighborhood of 40 percent.

But whether prices go down any further or not, the truth is that the housing crash that we have already witnessed is absolutely unprecedented.

The following are 12 facts which show that we are in the midst of the worst housing collapse in U.S. history....

#1 Approximately 11 percent of all homes in the United States are currently standing empty.

#2 The rate of home ownership in the United States has dropped like a rock.  At this point it has fallen all the way back to 1998 levels.

#3 According to the S&P/Case-Shiller index, U.S. home prices fell 1.3 percent in October and another 1 percent in November.  In fact, November represented the fourth monthly decline in a row for U.S. housing prices.  Many economists are now openly using the term "double-dip" to describe what is happening to the housing market.

#4 The number of homes that were actually repossessed reached the 1 million mark for the first time ever during 2010.

#5 According to RealtyTrac, a total of 3 million homes were repossessed by mortgage lenders between January 2007 and August 2010.  This represents a huge amount of additional inventory that somehow must be sold.

#6 72 percent of the major metropolitan areas in the United States had more foreclosures in 2010 than they did in 2009.

#7 According to the Mortgage Bankers Association, at least 8 million Americans are at least one month behind on their mortgage payments.

#8 It is estimated that there are about 5 million homeowners in the United States that are at least two months behind on their mortgages, and it is being projected that over a million American families will be booted out of their homes this year alone.

#9 Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011.

#10 Some formerly great industrial cities are rapidly turning into ghost towns.  For example, in Dayton, Ohio today 18.9 percent of all houses are now standing empty.  21.5 percent of all houses in New Orleans, Louisiana are standing vacant.

#11 According to Zillow, U.S. home prices have already fallen further during this economic downturn (26 percent) than they did during the Great Depression (25.9 percent).

#12 There are very few signs that the employment situation in the United States is going to improve any time soon.  4.2 million Americans have been unemployed for one year or longer at this point.  While there has been some nominal improvement in the government unemployment numbers recently, other organizations are reporting that things are getting even worse.  According to Gallup, the unemployment rate actually rose to 9.6% at the end of December.  This was a significant increase from 9.3% in mid-December and 8.8% at the end of November.

But even many Americans that do have jobs are finding out that it has become very, very hard to qualify for a home loan.

In an attempt to avoid the mistakes of the past, banks and financial institutions have become very stingy with home loans.  While it was certainly wise for them to make some changes, the truth is that perhaps the pendulum has swung too far at this point.  The U.S. housing industry will never fully recover if they can't get their customers approved for mortgages.

Congress is talking about passing even more laws that will make it even more difficult to get home loans.  Even though they give speeches about how they want to help the U.S. housing industry, the truth is that Republicans and Democrats are both backing proposals that would make home mortgages much more expensive and much more difficult to obtain as a Bloomberg article recently explained....

Government officials and lawmakers want to make the market less vulnerable to another credit crisis, and all the options lead the same general direction: Borrowers will need larger down payments than in the bubble years, have higher credit scores, and pay extra fees to cover risks and premiums for federal guarantees on government-backed mortgage bonds.

While all that may sound reasonable, the truth is that the U.S. middle class has become so cash poor that the vast majority of them cannot afford homes without the kind of mortgages that were available in the past.

Not that we should go back and repeat the mistakes of the past 20 years.  It is just that nobody should expect the U.S. housing market to "bounce back" in an environment that has fundamentally changed.

The housing market is not like other financial markets.  It is difficult to artificially pump it up with funny money.  If the U.S. housing market is going to rebound, it is going to take lots of average American families getting qualified for loans and going out and buying houses.  But they can't do this if they do not have good jobs.  Today, only 47 percent of working-age Americans have a full-time job at this point.  Without a jobs recovery there never will be a housing recovery.

In fact, there are all kinds of warning signs that seem to indicate that the U.S. economy could get even worse in 2011.  Many economists are now openly using the word "stagflation" for the first time since the 1970s.  Back in the 70s we had both high unemployment and high inflation at the same time.

Well, we have already had very high unemployment, and thanks to the relentless money printing of the Federal Reserve, it looks like we are going to have high inflation as well.

Middle class American families are going to be spending even more of their resources just trying to survive, and this is going to make it more difficult for them to purchase homes.

In fact, in recent years average Americans have been getting significantly poorer.  Over the past two years, U.S. consumers have withdrawn $311 billion more from savings and investment accounts than they have put into them.  That is very troubling news.

Now the price of food is soaring and the price of oil is about to cross $100 a barrel again.  So what is going to happen if we have another major financial crisis and we witness another huge spike in the unemployment rate?

The Federal Reserve is trying to smooth all of our problems over with a flood of paper money, but it isn't going to work.  Yes, increasing the money supply will produce some false highs on the stock market and some false economic growth statistics for a while, but the tremendous damage that will be done to the economy is just not worth it.

In any event, let us all hope that we see some really great real estate deals over the next couple of years, because in the times ahead land will be something very good to own.  In fact, down the road it will be much better to own land than to have your money sitting in the bank where it will continuously decline in value.

Use your paper money wisely.  It will never have more value than it does today.

So what do all of you think?  Is the "housing Armageddon" almost over, or do housing prices still need to decline a bit more?  Feel free to leave a comment with your opinion below....

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  • JLouise

    Just remember this: any property ownership requires property TAXES, and they raise property tax rates during economic depressions.

  • mondobeyondo

    Economics 101 refresher course time!!

    Supply vs. Demand dictates the price.

    Demand goes up, supply goes down – prices go up.
    You have a commodity which others want.

    Supply goes up, demand goes down – prices fall, or maybe crash. Especially if you are a homeowner in Las Vegas.

    There may be a few variables here and there, but that’s basically how it works.

    There’s currently a glut of housing available, especially in Las Vegas, Phoenix, Miami, Orlando and cities in the Sun Belt states. Add that to the many people who foreclosed on existing homes. Lots of empty houses out there. Ditto for commercial real estate. Oh, I’m showing my age. A ditto machine was a… oh, never mind. It means “the same as”. And the obvious solution is… let’s build more houses and buildings!!!

    The leaders of these cities insist that housing is bouncing back, or will bounce back soon. Maybe by 2015. Nope. It won’t, if present trends continue. It goes back to the economy.

    People take out mortgages to buy houses. People need jobs to pay those mortgages. People are still losing jobs (despite what the MSM says), or gaining jobs which don’t pay enough. Out of a job, or get laid off, income flow is cut, dip into savings or unemployment, until those run out.

    No money to pay the mortgage, bye bye house. Another foreclosure or short sale. Value of surrounding real estate goes down.

    Yeah, this is gonna be a very fun ride…

  • Ed

    Houses today cost far more per percentage of income than they did twenty years ago.Houses arent supposed to go up twenty percent in value a year.So until homes come down enough so that a person making 50k a year can afford to buy a decent house prices will just keep dropping.

  • Davidm

    Houses were extremely overpriced, I hope prices fall to the 1970s level.

  • http://moneycrisisgameplan.com David

    I think that the ‘eye of the storm’ lulled people to sleep and we’re about to be hit with the backside of the hurricane.

    People definitely need to take steps to increase their cashflow, because the rising prices of food and gas are going to put more people at risk of foreclosure.

    David
    International Silver Network

  • Depression Version 2.0

    There are some subdivisions locally that have only the model home built and all other lots vacant. Probably 4-6 vacancies in this neighborhood with a couple that have bank owned signs on the front door.

  • Tyler

    Not really sure how this is a ‘bad’ thing. For instance, I want a very nice home and I have $125k to buy one. I don’t want to pay $200-400k then have to mortgage the rest over 15-30years. And I don’t want a piece of junk, decrepit home at $125k either. I want a very nice home at my price point. So prices drop..and drop.. and drop.. and people are forced to eventually sell at the price I want to pay.. MY price. They lose and suffer perhaps– so what? Houses are Too expensive and this dramatic adjustment has been needed for quite some time to allow people to own homes without dependence on mortgages to acquire property.

  • michelle
  • http://mortgageresistanceofamerica.com FrankyFreelance

    As our productive capacity is being sold off to the third world I find it a longshot to believe that REAL GAINFUL employment will bounce back any time soon.

    If most of the employed are working service jobs and living paycheck to paycheck they won’t be able to qualify for home loans (especially with the new restrictive legislation.

    This may be a permanent bottoming out of the housing market.

    JOIN THE RESISTANCE!
    http://www.mortgageresistanceofamerica.com

  • http://www.LasVegasRealEsateHome.com Las Vegas Real Estate Agent

    Fascinating collection of dire reports that I’ve already seen… but never collected and put all in one blog post to make it seem as if armageddon is still coming.

    My opinion of truly dire reports were actually back in 2006 when home values were artificially blown up beyond affordability with lax and exotic loan products and twisted stories making people believe that 20%+ appreciation rates year in and year out were truly sustainable.

    Formerly licensed in two states… I now only practice in one state/city that has over corrected so much that it is often ranked as the most undervalued real estate in the U.S.

    We don’t have a shortage of buyers, just a shortage of nice homes that are priced right. Plenty of beat up foreclosures and who knows if it will ever close short sales… but certainly a shortage of well priced homes to buy without all of the dealing with the banks headaches. That will eventually end with the enormous amount of distressed properties that have already turned over to new owners with very reasonable mortgages cheaper then property taxes in some cities.

    For the former city I used to practice real estate in and for many cities that I have friends and contacts in that are in real estate related businesses, I don’t see good things taking place anytime soon.

    My opinion… Government program after program has only delayed the inevitable and kicked the can down the road.

  • john

    I bought my house in 2005. Today, it is worth $100,000 less than I paid for it. In my area they are predicting a 14% drop in value this year. There are 14 foreclosures in my area.Why would anyone buy a house today, when it will be cheaper to buy next year?

  • Matt

    Not over. It will be over when people stop talking about it because they will have given up all hope and not even want to broach the subject. It will be over when there are no articles or blogs about it. No one talks about “when will tech stocks bottom” or “when will tech stocks come back” anymore. So this article is proof-positive that its not over, that we have more downside ahead of us. I predict another 30% to go.

  • http://www.pontoonhouseboatodyssey.com/ Bamby

    It’s all about profits, banks, and bankers bonuses.

    So now the Fed prints or creates fresh “new money” and hands it out “essentially free of charge” to their banker friends to front run the commodities market and drive up consumer prices.

    Essentially they’ve generated a huge consumer tax on the world’s population in general. The unrests and suffering in the poorer countries of the world are already reflecting the costs imposed upon the poorer and working class citizens.

    In essence it’s another angle at their popular front running schemes where they can extract essentially “free profits” on everything necessary for human day to day living, food, clothing, and oil, heat and transportation.

    The so called war on terror is in essence a joke. The real terrorists are alive and well and often respected Wall Street Bankers and Bookies……

    Extracting terrorism on your pocketbook……

  • http://imissmyfreedom.blogspot.com chris

    I believe we have barely scratched the surface of dropping housing prices. Certainly, the nominal price may have reached a bottom. However, $300,000 for a house today when milk is about $4/gallon means little if the same house is still $300,000 when a gallon of milk is $20.

    The inflationary actions of the Federal Reserve may keep the psychological price of houses near there current range, but only the brain dead sheeple will fall for it. The rest of us will bide our time while we wait for the pendulum to reach it’s opposite from 2006. Some really good buy opportunities will present during the next 2 years I think.

    Just my $0.50 worth ($0.02 worth adjusted for inflation) ;-)

  • flubadub

    Look for the new sitcom called 25 IS ENOUGH coming to a cable channel near you. A zany madcap story highlighting the new reality of the extended Crampfield family and their suburban existence. Grandma and Grandpa live in the attic happily devising new ways to stretch their social security payments. Mom and Dad stay on the main floor. Mom works at Walmart and dad has a part time job at JiffyLube. They’re always finding novel ways to make do with the pittance they exist on and somehow always manage to make the monthly payment on their $40,000 Toyota Prius. Dad’s sister and her brood have been assigned one of the 3 bedrooms and Sis, a divorced ex-machine operator, happily shares her food stamps and welfare payments. Brother Harry, who lost his fortune to identity theft, and the twins share the third bedroom. Crazy Uncle Charley, the laid off real estate agent, and his girlfriend pop in from time to time and then return to their cots in the backyard garden shed. The 4 kids along with their 7 illegitimate children occupy the basement and, oh, the funny things that go on down there! Don’t miss it!

  • Patriot One

    The government can spin it any way they want, but the fact is you can only judge the stock market using government numbers, not the economy.

    The government and Wall St. are now looking like the Wizard of Oz and the Citizens are starting to notice.

    I sending your article to a Realtor friend of mine which I think will absolutely stun him. 2 years ago when I told him I thought 48% of US home owners would be underwater by 2011 they all thought I was nuts.

    America is in a death spiral with a tail spin added. Without Housing and Jobs the Depression will only get wider and deeper.

    If we can not start to produce our way out soon you can roll back housing prices to 1968 pricing and not have enough buyers.

    What America needs is enough buyers to clear the inventory and create demand so we can go back into production. Lets face it, Housing is one of the only items still “Made in America”.

  • Silver Bean

    I “used my paper money wisely” and recently paid cash for a house. Believing that the dollar is becoming worthless, I figured I might as well spend the money and have an asset that may retain some value. Like investments in precious metals, energy, food, and debt elimination, it’ll make the pain a little more tolerable. “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.” Grandma said don’t put all of your eggs in one basket.

  • Alydar

    “Use your paper money wisely. It will never have more value than it does today.”

    In a purely economic analysis, this would be true. However, as the empire collapses and world war breaks out (fomented to protect the empire and its corrupt politicians), the value of the dollar will depend upon the outcomes of that war.

  • alice

    The real estate market is going to get a lot better very soon. If you buy my 2 houses now before the next real estate boom, you’ll make a fortune! I’ll even owner finance them for you, so hurry, before it too late for you!

  • Tom Lowe

    I’m keeping up by working 18 hours a day, but everyone else around me as far as I can see does nothing, attempts to do nothing, and fully expects to be taken care of by someone else during the duration of their self-awarded, full time permanent vacation. People are very lazy and they have lots more well-deserved misery coming.

  • Tom Lowe

    The secret is that I work for myself after being downsized out of the corporate world 20+ years ago. The rest of you should follow my example and stop expecting handouts, welfare jobs and everything else handed to you.

  • mark

    One important stat is needed to compare the price drop of real estate during the 1930′s to the price drop today. That would be how much did the price increase during the boom years of the 1920′s? During the bubble years of this cycle prices doubled or more in some markets. To be afordable in the starter home market, prices need to decline or wages need to rise. I do not see wages rising so the decline continues.

  • HomeSkillz

    First time poster – Long time reader.

    You nail’d it right there…the purchasing power of the dollar is dropping with every passing moment

    I have been a homeowner for a little less than a year (28 yrs old) – in an area that is pretty well insulated from the housing crash due to it’s location. I will never make the mistakes I have seen friends of mine make – i.e. using your home equity as an ATM to do all kinds of ridiculous home upgrades and buy boats, Beamers, Summer Homes, Office Space with money that they dont really have. I have seen a lot of people FACE PLANT after making this huge mistake.

    But all Barry and Benji Bernanke want to do is SPEND SPEND SPEND….oh whooops….thats right – they want to “invest”. Will the torture ever stop? I doubt it.

  • El Pollo de Oro

    The foreclosure crisis in this Third World house of horrors called The Banana Republic of America (formerly the USA) is a two-headed beast. The first head of the foreclosure beast is mortgage-based foreclosures; the “homeowner” falls behind in his/her mortgage, and the bank says, “Say goodbye to your house, cabrón. Adios!” But the foreclosure beast has another head that we aren’t hearing as much about: property tax-based foreclosures; people who have fallen on hard times can no longer afford their property taxes, and the local government says, “Say goodbye to your house, cabrón. Adios!” Even “homeowners” who have long since paid off their mortgages are getting booted out of their homes because their property taxes are too high—and all over The Banana Republic of America (BRA), local governments are raising property taxes through the roof in an effort to cope with their budgetary woes.

    Gerald Celente often points out that the little guy is being financially raped on so many levels in the BRA, and he is absolutely right. The bailed-out White Shoe Boys (as Celente calls them) who destroyed the BRA’s economy believe that cleaning up their mess is for the “little people.” Of course, there are millions of “homeowners” all over the BRA who desperately need a bailout, but they won’t be getting one because bailouts are only for the corporate thugs, goons, neo-feudalists and criminals who control this Third World nightmare that used to be the United States.

    Welcome to the oligarchy. Welcome to neo-feudalism. Welcome to misery and suffering that will only get worse.

    Welcome to the fall of the Roman Empire. Welcome to The Banana Republic of America. Que dios ayude la pobrecita República Banana de América, donde esperanza ya no existe para nosotros.

  • Elocutionist

    Home prices are, despite the wholesale collapse in aggregate values, still regional in nature. The U.S. (if not the world) is seeing a shift in buying patterns from interest in urban, upscale living in close proximity to modern conveniences to locations that afford more ‘elbow-room’ and greater aesthetic advantages. So, while I expect urban, suburban and ex-urban prices to continue plummeting in value (with urban areas seeing the worst of losses), countryside living in rural areas (generally 3-4 hours from major metropolitan areas) are likely to hold steady and begin to creep up in value in the near-term. The long-term argues for continued appreciation in rural property as taxes and population density are lower and as people exit cities to achieve higher degrees of self-sufficiency.

  • HomeSkillz

    ^^^^
    I’ve got to disagree with you on this one Elocutionist. Those rural areas are BONE DRY when it comes to employment – so a rise in housing prices cannot be justified if the people that live “out there” only bring in 20K a year on average (if they are lucky).

    I would love to move back around my hometown in the mountains, but there are just no jobs whatsoever…It was bad 10 years ago, but its just insane now. Where I live now there is a major army base realignment going on a few miles away and over 50K people are expected to relocate into my area. This will mean a lot more people with good jobs, a lot more infrastructure being built, more demand for land/housing and an increase in the value of my home. It is also located within reasonable commuting distance from 2 major cities and a state capital…these are the types of places that will experience an insulation from the rest of these housing woes, and see increases in housing $$$ in the next decade.

  • Economist

    “Hopefully housing prices don’t have too much farther to go down.” Uh, that’s the only way to clear the inventory. Prices NOT going down more is worse. If wages are going down, prices not going down also will lead to more buildup.

  • Gary2

    Tax the rich and spread the wealth. More shared prosperity in this country. Look at Egypt-the rich will willingly share or will be forced. I can’t wait! These rich parasites need to go down. The rich should be afraid, very afraid. People can only take so much exploitation. Even in Davos some agreed. No more multiple homes while there are so many homeless. No one needs 5 homes. When the rich are done being taxed HARD they will not be able to afford 5 homes.

  • Economist

    Good report otherwise. Should also give U a thumbs up on putting all this in 1 article.

  • mondobeyondo

    And when you DO pay off the mortgage and “own” your own home, you still have to pay property tax.

    It’s to help your local hooligans, er, public school students, get a better education and more material resources at their high schools.

    In most places, except for Alaska, Florida and maybe a few other area, you have to pay homeowner’s property tax. What’s that, you ask? Well it’s taxes that you pay to the city or county where you live, to pay for schools, police, fire and so forth.

    What happens if you don’t pay? Well, the county or state takes out a lien on your property, they’ll sue you for back payments/taxes, and you’ll be evicted if you don’t pay up.

    You may think you own your property free and clear. The reality is, you don’t really own a damn thing, even when you pay off the mortgage.

  • David

    The United State of America is in very serious trouble now; Economically and politically!Those who can survive from the coming storm of this century,may rebuild whatever will be left off of The United States of America! So may God help the people!

  • flubadub

    Y’all should read the letter from the future that michelle’s comment links to. Great little piece of science non-fiction.

  • john

    “#2 The rate of home ownership in the United States has dropped like a rock. At this point it has fallen all the way back to 1998 levels.”

    Oh man. I hope it doesn’t end up being like 1998 again. those were hard times. what with the fear of Y2K and. whatever else. I dunno, I stopped reading this article after a bit, but i doubt it mentions that these homes were probably bought by people that didn’t have the income for them anyway, because of government stimulus.

    ” 21.5 percent of all houses in New Orleans, Louisiana are standing vacant.”

    astounding. but it must be the economy, not that fact that a large part of NO was destroyed by a hurricane.

    i’m sorry, I can’t take this article seriously.

  • CatNap

    Quoting:
    The U.S. housing industry will never fully recover if they can’t get their customers approved for mortgages.

    Congress is talking about passing even more laws that will make it even more difficult to get home loans. Even though they give speeches about how they want to help the U.S. housing industry, the truth is that Republicans and Democrats are both backing proposals that would make home mortgages much more expensive and much more difficult to obtain…

    ***
    A solution to all this would be for the government to nationalize all the “unwanted” homes and rent them out to people on a “rent to own” plan. It would cost billions to set up, but like any other “rent to own” plan, the renter will end up paying way more than the home is worth in the end, so the ROI (Return On Investment)may make this do-able.

  • Mylegacy

    And to add to the doom and gloom – the GDP grows and makes fewer and fewer jobs.

    One of many examples – supermarkets with self scan take out sections. As productivity increases and technology makes more and more workers redundant it becomes apparent to me that the only SANE opportunity for people to have any chance of a non pathetic retirement in this 100% pure final stage of Capitalism future is to become KNOWLEDGEABLE and ENGAGED with the stock market(s) – leaning when to invest – when to withdraw – etc. You have to start from the time you’re 14 and get your first job – shining shoes at the local Casino – until after 50 years of work you retire from your two jobs (4 hours a day at McDonalds and 5 hours a day at Walmart as a greeter). Keep this up and you too may be able to survive long enough to last until you actually need any medical service at which point you either off yourself or die in pain.

    My solution – move to a disgusting, freedom hating, godless, disgusting, gun free, socialist, sewer like Canada and live a fairly normal happy life here on the West Coast looking out at the Pacific ocean from my Nanaimo, BC, 14th floor harbor side condo – with health care, vacations and pensions (that are still actually fully funded) in this bag of piss over regulated hell hole that tries to pass itself off as a “real” country.

    But what the heck – why should I want to have any social safety nets – remember – I’m ‘Merican – and damn proud of it!

  • http://thecivillibertarian.blogspot.com/ Frankenstein Government

    I don’t need any additional “facts.” Strolling my vacated neighborhood and those everywhere I go, tells the story…of housing armageddon.

  • Jane Quatam

    I concur with your analysis of the situation. Housing is going to be a major problem for the rest of the decade.

    One major factor omitted from your data is the demographics of aging as the baby boomers retire and/or die – thereby reducing the need for additional housing at a time when the housing surplus is already at a record high.

    Most markets have a 23 month supply of homes available, nearly 2 years before we need to build a single house in the entire nation and yet far fewer people can afford homes. For those who feel your article paints too negative a view of the American economy, I would argue otherwise, if anything you have been too rosy in your scenario of the future.

    The American economy began to collapse due to a number of factors, like fraud, endless wars and deficits and the inevitable peaking of cheap oil among others, but the trigger that brought the entire house of cards down, was heavily leveraged multipled speculation by Wall Street and the big banks and trading firms. Mortgaged backed securities were the favorite drug of Wall Street and the SEC was as effective in regulating the quality of securities as the DEA is in winning the war on drugs, or the FDA is in keeping our food and drug supplies clean, safe and efficacious.

    Congress had hearings, the President wrung his hands and speechified, bankers shuffled their feet and nodded their heads, but nothing has changed and everything that allowed and contributed to the 1st economic collapse of 2008, is still in place and continuing – no one is regulating, no one is enforcing, everyone is gambling and hoping the Federal Reserve can keep the dead patient stock market alive with a printing press and a compliant media.

    This means there is a high probability the stock market and financial system will collapse once again and panic will be lose in the world, already weakened by the first wave of fraud that has collapsed the fortunes of so many and destroyed the livlihoods and jobs across the nation. Mainstream pays for Wall Streets sins and when the next tab comes due the price will be so dear it will have made the 1st bailouts look cheap indeed.

    .

    We are not in recovery, we are merely watching the tsunami recede before the bigger wave arrives.

    Poverty is the real problem facing too many Americans and poverty will be the political fire that burns the complacent corrupt corporate fraud laden government to the ground. Egypt is not just a sandy place with a lot of poor people and denial is not just a river.

    We either join together, rich and poor, old and young, black and white and change this nation for the better, or watch it wither and die. The trajectory is apparent, our path is easily ascertained, either we change the path or we walk into the fire.

    When 42 million Americans are on food stamps and 1 out of every 10 workers is unemployed and 1 in 5 are working part time, when you have to have a 2 year degree to be a waiter, we are in trouble. Sometimes it doesn’t take a weatherman to know which way the wind is blowing.

    These are troubled times, to deny and pretend otherwise is a formula for failure, we need action and change, for though we might not succeed, to do otherwise is certain failure.

  • C

    I owned a home for 8 years, sold it last year. It was bigger than I needed, it was a good lesson on home ownership for me. I did not lose really much on the deal because it was a cheaper unit, and I can’t afford much anyway! Everything that had to do with the house was going up in price except for the interest rate on the mortgage, my income was going stagnate, I decided I’d be better off saving for retirement vs. spending another dime on home ownership.

  • http://www.osixs.org morpheus

    This is much more than a housing crash (… ). The bad news is, this is nothing compared to what’s coming. You don’t need a crystal ball to see the future if just you open your da?n eyes. Most people don’t get it because we Are too busy drinking our own Kool-Aid with this non-sense about American exceptionalism. We’ve been kicking a ton of problems down the road for more than thirty
    years while Democrats and Republicans pretended to govern. But the people in this country are even worse. We pretended to be great and deserving of the fruits greatness. This doesn’t look like great fruit to me. It looks and smells like Rotten apples and sour grapes.

    <<>>

    “WAKE UP AMERICA” – we are about to become un-great. We are about to unravel
    Like a dead ancient mUmmy in gauze. Then we will just disappear
    Back into the dust we came from.

    It’s very simple. We can’t be a great country unless we do and achieve great things. Talk is easy and lazy. Nothing much comes from either.

    “JOIN THE REVOLUTION”
    Read “Common Sense 3.1” at ( http://www.revolution2.osixs.org )

    We don’t have to live like this any more. “Spread the News”

    If you’re not mad yet then something’s wrong with you. Go see a doctor then
    Come and join us.

    —— Let me hum a song while contemplate your future.

    Time keeps on slipping, slipping, slipping ….. into the future…..

  • TruckerMark

    Right now if you had $125K and wanted to buy a really nice house, might I recommend suburban Detroit? I was just looking at Realtor.com and I found lakefront properties in desirable suburbs for less than $125K there, in fact, I was thinking of buying one just for a Summer place myself. I found a really nice 3 BR/2BA ranch with a finished basement for an asking price of $72K in West Bloomfield, 500 feet away from the subdivision boat dock and private beach on a 300-acre lake. But I’ll admit that home prices in my old hometown are down by 70% in the suburbs and by 90% inside Detroit’s city limits too, and metro Detroit does have over 20% unemployment if you throw-in the post 99-week crowd too. Right near where I used to live, Pontiac, MI used to have 7 different car and truck plants that paid decent wages at one time, and how many are still open today? Zero!!! I know at least 40 people that used to work at car plants around Pontiac in fact, and hardly any of them are doing very well these days either.

    Here around suburban Denver, where I have lived since the 1982 and 1990 recessions wiped me out at home, house prices were down by 20% in most of the nicer suburbs, and down by 30-40% in the inner neighborhoods and the city. This past year there has even been some price recovery in Denver’s nicer suburbs, in fact, I just sold the golf course patio home that I bought brand-new in 2002 for $33K more than I paid for it this last Fall, enabling me to put $139K down on my new place that I just had built for $330K. My builder was so desperate that he even gave me $65K off of list if I would just buy a new house from him. At least there are jobs available in Denver for experienced workers in some fields, and truck driving is one of those fields. Even though I am recently retired, I was able to get a 3.75% 15-year fixed-rate on my new house too, which made my payments less than they were on my old house.

    In Fargo, ND, the unemployment rate is under 4%, but who would want to try to get used to snowmobiling on frozen lakes at -30F for fun?

    America has become a very interesting study in inequality lately, as more and more of the middle class are driven away from their jobs and homes, and as the top 1% in income just keep fighting and scratching and clawing all over each other to see who can make it to the top of the heap and try to stay there. I must say that the heap is getting pretty steep these days, as if you fall off it is likely going to be a long drop, and I sure would hate to see it topple right over too. I am likely one of the luckier former blue-collar workers I guess, as right now my retirement income is paying my mortgage and bills, and as long as we don’t get into hyper-inflation I’ll be OK. I feel bad for a lot of people that I know though, in fact some of my friends from Detroit have lost everything that they have owned five times now since 1979, and probably 15 people that I grew-up with there became so tired of it that they are no longer with us too.

    Obviously this can’t continue, or sooner or later the US is going to end-up like some of the African countries, with half of the population living in giant slums while 1% lives like kings. That was what was wrong in Egypt and Tunisia, where a tremendous lack of hope finally drove the average citizen over the edge. The same thing could happen here too, and my guess is that our police and army wouldn’t be nearly as restrained as Egypt’s has been either. It is hard to believe how the slogan “freedom and justice for all” has so quickly become just words devoid of any meaning. I have hope that we can get Humpty-Dumpty back up on the wall, but right now it doesn’t look too good in an awful lot of America, and it will take an awful lot of hard work and luck to get the lion’s share of us back to 1998 economically too. God help us if the Dollar is replaced as the world reserve trading currency, that’s why I am stockpiling precious metals, ammunition, and non-perishable food, TP, liquor, and cigarette lighters too. Now I just need some rural mountain land, a windmill and a generator, and a camper or cabin kit too, somewhere to get away to, way away from everyone else.

    Even though the ending was pretty poor, might I recommend the movie The Road for a preview of what our society will likely be like if worst comes to worst here. Try getting ready for that if you want to live very long.

  • http://www.pathtoasia.com rhea

    The banks stop lending, the builders stop building, people have to live somewhere, rents go to the moon, property is valued on it’s income generation, only the rich own residential properties, we become a nation of renters and surfs just like the dark ages, we start over to build a capitalistic free market economy. Thanks for the health care bill too………………….

    We help Americans find jobs and prosperity in Asia. For details, visit http://www.pathtoasia.com/jobs/

  • impeachRonPaul

    The middle class is being eliminated. Republicans will cater to the rich. Tax cuts for billionaires was pushed through while we are told there is no money for social security.

    The middle class will be renters now. Thank you GOP for ending the middle class.

  • Guywthclss

    I agree with several of the responders. I LOVE this housing crash. I’m an engineer by trade but also have a degree in economics.

    The housing crisis was due to several factors but on inescapable fact is that in the lust and greed for profit, many people used the loose loans to turn what was once the American dream, to own a home, into a revolving profit machine. I make a good income. I want a nice home to live in. Not to flip and buy another and flip and buy another. I just want a nice home to live in. I have a nice condo but am saving $$$ to move up to a beautiful home in the next 18-24 months. I thank the housing crash for allowing me to do this!

  • Piglet

    “Well, we have already had very high unemployment, and thanks to the relentless money printing of the Federal Reserve, it looks like we are going to have high inflation as well.” Relentless money printing IS inflation, as in “to inflate the money supply” – hence the term “inflation.” Rising costs for goods and services are the symptom, not the cause, of inflation.

  • A Dodgy Bloke

    Add the $4.00 a gallon gas, and a rise in people just walking away from under water homes to the mix some folks in the suburbs are simply going to be destroyed. Some subdivisions are going have to be abandoned, or bulldozed. If want a really sick feeling go to Reality Trac and pop in your zip code, and see how many bank owned properties come up, and stuff that is in pre foreclosure, or foreclosure.

  • http://www.butlerlibertylaw.com Bill Butler

    Absolutely correct. The sad part is that the banks holding securitized notes are not holders in due course and therefore do not have the right to steal peoples homes. I am an attorney and am putting together groups of people who are suing the banks and demanding a “lien strip” (removal of the mortgage). To understand this, see http://www.buterlibertylaw.com and go to the “foreclosure fraud” tab.

  • Robert Kares

    Housing prices have to go down like Peter Schiff always said that if the Govt. would quit propping up home prices they would go down where they should be so people could afford them again.In normal times a home will double in price every ten years,when I sold my home in 2006 it had more then doubled when I sold it,which was all built in inflation thanks to Uncle Allen Greenspan,I laughed all the way to the bank,enough said.

  • mondobeyondo

    The housing market will not return to its 2005-2006 levels anytime soon… if ever.

    That was a market built on greed and excessive money supply, given to the lenders (banks). In other words, a bubble. Bubbles tend to make normally sane people delusional. Sure, you can buy a house with no money down and no job! You’re a NINJA! (No Income, No Job, no Assets)

    That bubble popped, and will not be re-inflated. If the housing market ever fully recovers, the job market has to rebound first. A true, industry based job market, not one based on fast food and Wal-Mart. You have to be able to afford a house before you can buy a house!!

    So if you expect to retire and live off your home equity, think again. “Flip This House” has become “Flop This Dead Fish”. It’ll rebound a little bit, in some of the hard-hit sun belt states — maybe. But don’t hold your breath, you might suffocate.

  • Caley Unger

    Now, to get really pessimistic – like John Steinbeck’s story of the Great Depression, when they were burning oranges in front of starving people to drive the market price up – will arson, legal or illegal, become the “new wave” of 2011?

    Every empty and inhabitable home depresses the housing price. Just like the 1930′s, though, it will be hard to convince homeless people that SFH destruction is “beneficial,” like burning the oranges in front of starving people in the ’30′s.

    That’s gonna bring Cairo right here to River City.

  • Sven

    Long term however I think housing will go up.
    The reason is that the US Census Bureau estimated in 1999 that the US would have a population of ONE BILLION in the 21st century. I see no reason that they are wrong in that projection. Less land, less housing per capita = higher prices.

    Is this going to be a “more vibrant America” as NBC said a few years back on the demographic change?

    VERY VIBRANT, see Brazil, Mexico, Phillipines, Argentina and ….

  • Mark Medinnus

    Prices will drop another 50%.

  • Mark Medinnus

    at least

  • ksh

    I have been checking out the housing prices in the Ozarks and Branson MO areas just for fun, because to find a good full time job and an affordable house in the area is a miracle, but the prices of houses in some areas are 20 percent the original price when put on the market, according to the history

  • http://www.cidnsa.com Ernie

    Great piece, good analysis. Hinge is employment. Real numbers are higher than even Gallup projection. Many (myself included) seeing minimal part time revenue, yet considered employed. Gov and dependents only stable area, yet adds no real wealth. If house prices stabilize, it is still decreasing, remember our very substantial inflation! Added to this is MORE new home construction federally paid for through grants and bank economic development loans (gov guaranteed) to add to a glutted inventory. The shit is only starting to hit the fan!

  • BCarter

    I’m a mortgage originator, and I forecast another drop in values. Interest rates are still artificially low, but they can’t stay that way for much longer. The higher the interest rates go, the smaller the pool of qualified buyers at current prices. So, as interest rates rise there will be less and less demand for houses until the prices fall. The falling prices will make up for the higher interest rates and will make monthly payments on that 4 bedroom home affordable for the average prospective buyer. Buyer wins, seller loses his shirt(maybe). Moral of the story: If you’re a buyer, you’ll soon have the best opportunity of your lifetime to buy a home – Just don’t wait too long. If you’re a seller, prepare for some disappointment when selling, but if you’re selling to buy another home, it’s really a wash since the house you buy will be at a reduced price, too.

  • Dave

    “The housing market is not like other financial markets. It is difficult to artificially pump it up with funny money.”

    It’s difficult to pump it up now, but the housing market is not fundamentally different from other financial markets. In fact, the housing bubble was artificially pumped up with funny money.

    Making loans more difficult, and tightening the money supply will serve to force housing prices lower. Good!

  • tomdawg

    Street scum will live in the left-over shells of McMansions, but the lights will not turn on.

  • charleydan

    With government going to default on their bonds. Will surely drive up interest rates for all sectors. With interest going up, prices of homes (deflation) have to go down to balance the scale. All things of credit will go down or deflate.

    All the money pumped into this economy will come back in the form of non-credit items. As people pay for the required items of existence. Food, clothing, gas will be the essentials to survive or get along.

    Deflation stealing people’s wealth and inflation robbing them of hope and future.

  • bill

    Buying a home anytime soon is probably a dumb idea. Mobility to find work is key. Owning farm land you can cultivate may be a different story. Jim Rogers may be right: perhaps the farmers will be the ones to drive Maseratis. Of course, having the mobility to leave the country, if one chooses, is another option. Home ownership makes that very difficult right now.

  • John1

    It’s a buyers market!

  • http://claysamerica.com NetRanger

    Employment is the real problem. While there seems to be no shotage of “jobs” there is a shortage of decent paying jobs. There are min wage jobs EVERYWHERE but just try to find something making a living wage. In my area thats listed ast 35K and is about $17 an hour for one person and about $10 an hour for two. Just try to find one. There gone! GONE! …and they aren’t coming back. Face it people. We are on the downward slope. I pulling 70K and I know that when this gig is up, I’ll simply go back to private computer repair. There just aren’t any jobs anymore.

    I liken America to a retired couple. We’ve had and raised all our kids. We build our home and paid for it (and then equity loaned it to death…). We’re not interested in doing anything anymore. America is in her “Golden” years that aren’t so golden. Golden because they are the sunset years. Harsh reality. It sucks.

  • h5mind

    History is replete with stories of entire populations that refused to leave when their economy began to crumble because they were emotionally and financially tied to property, relatives, or a particular zip code. Such a mindset is a killer in times of economic crash.

    Look at the blighted, bombed-out city centers of any major American city for examples of what happens when people refuse to leave when the getting is good, and ride the long, slow wave down into crime, insecurity, and abject poverty. The same can obviously be said for holders of the US dollar and any of its paper equivalents– stocks, bonds, annuities, etc.

    In short, I don’t care how cheap a house is if the place and/or country it’s located in is dodgy. Why wrap an albatross around your neck and those of your family? Cash out, lighten your load of possessions, and be ready to move out if and when you need to.

    You do have a current passport, I hope? And no, they don’t accept American Express, so better bring some gold and silver.

  • PaulF

    impeachRonPaul, you are really a complete moron.

  • eyeswideopen

    Net Ranger, just be happy you have skills that you can market.

    It’s very hard to remain flexible when older and you have parents that are in their 90′s. When you yourself are having to deal with the aging process, even though healthy in your 60′s and 70′s….

  • http://www.economicnewsarticles.blogspot.com Economic Articles

    I don’t care how cheap a house is if the place and/or country it’s located in is dodgy. Why wrap an albatross around your neck and those of your family?

  • Richard

    Americans will never be able to recover from this housing catastrophe in their life time. Not possible.

  • Jack
  • Karen W W Poore

    I suspect other countries are buying up all the US property!!!!

  • Steve

    But the lower 99% of brainwashed Americans DON’T feel they are ‘entitled’ to anything at all and are not worthy of decent jobs, owning a home, edible food, infrastructure, education, etc. Therefore, this is exactly what the vast majority of Americans actually desire and dream of – poverty, enslavement and a strong desire to give everything away to the upper 1%. This is clear from how involved they are and how they vote. As long as they have their religion, sports and reality tv, you can do anything to the lower 99%, even taking their kids and sending them home in body bags. Hell, all I need is a US lapel pin to show I’m a true American patriot and I’ll give it all up. Right everyone?

  • http://islamghar.blogspot.com/ islamghar

    Great piece, good analysis. Hinge is employment. Real numbers are higher than even Gallup projection the housing market is not fundamentally different from other financial markets. In fact, the housing bubble was artificially pumped up with funny money

  • Lee

    Jobs and more specfically job growth used to be the key to long term home price appreciation for an area. Although that is still true to a large degree, I believe the new overwelming factor is becoming salary depreciation. The higher paid employees are being replaced with lower wage employees and raises are low, if any. This is a significant trend taking place in USA, especially high wage states like California. Labor cost at all levels of private enterprise jobs will be constantly dropping for the foreseeable future. Mostly because there are too few jobs being created and too much competition from low wage countries. The owners of those $600k to $1.5 million tract homes in SoCal are going to be challenged to find qualified buyers in the high numbers needed over the next 10 years. There are 100s of thousands if not a million homes in Cal where the buyers will have to make $250k or more per year to qualify for a loan. Jobs that pay that much are disappearing quickly at the time that the baby boomer home sellers need them in ever increasing quantities.

  • http://itbooster.blogspot.com/ ITBooster

    good analysis.

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