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While the National Association of Realtors says the real estate
trend for 2012 will be
one of “continued slow growth” as we saw in 2011, the
reality is that there is no growth.
It’s so bad, in fact, that 2011 was the
worst year on record for home sales. You read that right. The worst year
since records have been kept – a trend we warned of back in 2009 when
green shoots were reportedly popping up all over the country.
Fewer
people bought new homes in December, making 2011 the worst sales year on
record.
The
Commerce Department said Thursday new-home sales fell last month to a
seasonally adjusted annual pace of 307,000. The pace is less than half the
700,000 that economists say must be sold in a healthy economy.
About
302,000 homes were sold last year. That’s less than the 323,000 sold in
2010, making 2011 the worst year on records dating back to 1963.
The median
sales prices for new homes dropped in December to $210,300. Builders
continued to slash price to stay competitive.
Still,
sales of new homes rose in the final quarter of 2011, supporting other signs
of a slow turnaround afoot in the depressed housing market.
Source: San
Francisco Chronicle
Millions of homes remain in the shadow inventory,
prices continue to drop even with interest rates at historic lows, and jobs
– the real driver behind the ability to purchase a home –
don’t seem to be coming back, despite an unemployment rate that is
officially on the decline.
No matter how bad it gets, however, the corporate
media’s cheerleaders will continue to try and convince us otherwise.
Homebuilders are slightly more hopeful because more
people are saying they might consider buying this year. And home
construction picked up in the final quarter of last year.
“Although this decline was unexpected, it
does not change the story that housing has likely bottomed,” said
Jennifer H. Lee, senior economist at BMO Capital Markets.
Ian Shepherdson, chief economist at High Frequency
Economics, said easier lending requirements, historically low mortgage rates
and improved hiring all point to consistent, albeit slow, rises in sales in the
coming months.
“A sustained rise in new home sales is
imminent,” he said. “Homebuilders say so too, and they should
know.”
People may be saying they might consider
buying this year, but there is a difference between someone wanting to buy a
home and having the ability to do so.
Housing, as we have vehemently maintained since the
onset of this real estate crisis, is not going to bottom any time
soon. We are looking at a decade’s long, perhaps longer, collapse of
the U.S. real estate market.
Variable mortgage rates are going to continue to
adjust upwards for those buyers who took them on in the midst of the boom,
which means they will be paying more in monthly payments at the end of this
year than they are today, putting even more strain on consumers who are quickly
running out of savings and losing purchasing power for essential goods to monetary inflation.
On top of that, there are literally millions of
homes in shadow inventories – homes that have been foreclosed on that,
for all intents and purposes, aren’t even counted as being in
existence.
Home builders are, naturally, going to say that a
sustained rise in home sales is imminent. Does anyone really expect them to
come out and say, “Hey, we’ve got a great house for you, but it
may lose 20% in the next 18 months.” They will
say whatever they have to say to make a sale.
Since the initial meltdown in sub-prime real estate
the financial pundits, economists and industry insiders have been telling us
things would get better, that we’re just about to turn the corner.
These are the same people who argued that the sub-prime fiasco was isolated
to just that sector of the market.
We now know that the problems were much, much bigger
than that, yet the most influential media outlets, like the Wall Street
Journal who last year penned Why 2011 May
Be the End of the Housing Crash, continue to ignore (probably by design)
what’s really going on.
Going forward, we may seem some positive real estate
numbers, because prices don’t drop in a straight line. The long-term
trend, however, is very negative for home values.
To get an idea of how bad it can get, just look to
Japan. From peak to trough, their real estate bubble saw a collapse of 75%
over the ten years following the burst in 1990. They have still not fully
recovered.
We’re not immune to such a collapse. Expect
the worst, because there is a strong chance this is exactly what’s
coming.
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