Since the housing bubble burst in 2008, the United States (as well as nations all over the globe) has been struggling to right the ship after the storm. According to some experts, the storm has yet to clear. This leaves many homeowners and potential homebuyers wondering if the bottom has truly fallen out, or whether we’re in for another wave of plummeting house prices, massive foreclosures and government cleanups.
Millions of homeowners are waiting to see if they should hang on to their homes in the hopes of recovering values, or whether they should just cut their losses and be relieved of what they would consider to be dead financial weight. On the other side are the homebuyers, also waiting to see if now is the time to buy, or if they should wait for further decline in home values.
For those who have questions, there are answers. But the answers may not provide comfort. Here’s a recap of housing market statistics:
In the first three months of 2011, the fewest new homes were sold than any previous three-month period ever, since records began in 1962. The last five years have seen a steady decline and experts believe it will continue.
In February of this year, housing starts (new residential building construction) saw its biggest drop since 1984.
The national unemployment rate still hovers around nine percent—improved by 0.08 since last year. Although not a direct indicator, it provides the assumption that unemployed folks don’t buy houses.
The Case Shiller House Price Index, which calculates a composite of house prices in 20 major cities, shows the average house price in January of $140,710, which dropped to $137,630 in March, then rose in August (the latest data available) to $142,840. Averages from the previous year show a consistent decline with brief increases since January 2010, when the price was $145,310.
With all the above information, we can see that there is no significant improvement in any of the indices, which would indicate a rebound if one was on the horizon. We can therefore posit with a certain degree of safety that the housing crisis is nowhere near over. Some experts predict that we will have several years of continuing decline or stagnation in the housing market before things start turning around.
As to when the crisis will end, there is no clear-cut answer. Numerous factors contribute to the stability and growth of the housing market—not the least of which is the general state of the economy. The most compelling factor in this scenario is the homebuyers themselves. The housing market will not recover until people start buying houses and people aren’t likely to buy houses until the economy improves. But, the economy is going to take longer to improve unless people start buying.
This “Catch-22” situation has many potential homebuyers frozen in their collective tracks. The truth of the matter is that now could be a great time to buy homes. Of course, two months or two years from now, we may see a deeper drop in home prices. No one has a crystal ball. But, what is known is that the economy and the housing market will continue to flounder until and unless homebuyers get out there and start the ball rolling toward recovery.
This article is brought to you by the writers from JW Surety, a nationwide surety company who sell mortgage bonds for brokers.