WORLD> America
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WORLD> America
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When US economy bottoms out, how will we know?
(Agencies)
Updated: 2009-03-08 11:39 Housing HOW BAD IS IT?: The median price of a home sold in the United States fell to $170,300 in January, down 26 percent from a year and a half earlier, according to the National Association of Realtors.
But that figure masks the complexity of the market. Price drops have been far steeper around Phoenix and Las Vegas, where new homes sprouted everywhere during the housing boom, than, say, in Detroit, where economic problems predate the recession. And even within a single metro area, price declines vary sharply. Faraway suburbs, where many buyers stretched to qualify for mortgages, have been hit harder than city centers. This housing crash has spread pain more widely than any before it. Home prices fell about 30 percent during the Great Depression, according to calculations by Yale University economist Robert Shiller. But the nation was less concentrated in urban centers then. And a much smaller proportion of adults owned homes. Other housing downturns in recent decades have been regional. This one is truly national. Prices in the fourth quarter of 2008 fell in nearly 90 percent of the top 150 metro areas, according to the Realtors group. And 5.4 million homeowners, about 12 percent, were in foreclosure or behind on mortgage payments at the end of last year. HOW MUCH WORSE COULD IT GET?: The Federal Reserve estimates home prices could fall 18 to 29 percent more by the end of 2010. Declines will probably be less severe in cities with healthier economies that don't have a glut of unsold homes, like Tulsa, Okla., and Wichita, Kan. The nation's overall economic health is vital to the health of housing. "History tells us that as long as we're losing jobs, that's not good news for the housing market," said Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies. WHERE'S THE BOTTOM?: Susan Wachter, a professor of real estate at the University of Pennsylvania, is watching the backlog of unsold homes. At January's sales pace, it would take about 9 1/2 months to rid the market of all those properties. A more normal pace would be six months. Once foreclosures level off and the backlog is cleared, Wachter says, the housing market can begin to recover. But even with the Obama administration directing $75 billion in bailout money to stave off foreclosures, most economists don't expect home prices to bottom out before the first quarter of 2010. And don't expect an explosive rebound: Price increases will probably be modest when they come. |
