Mark my words - until housing pulls out of its nose dive, don't expect any real improvements in the larger economy. The downward ripple effect will continue to drag more segments of the economy down as employment relating to housing continues to decline and then spread out into other market segments. Along with the drop in home prices expect average consumers to cut back even further on spending. It truly is a downward spiral situation at the moment. While banks and lenders have received huge bailouts, they are not passing it along in the form of continued rational lending- something that in my view should have been part of a quid pro quo in the bailouts. Obviously, as this trend continues, more and more new home buyers who bought within the last few years will be finding themselves owing far more on their mortgages than their homes are now worth. This in turn will only further increase the number of foreclosures which will create added downward pressure on prices. Here are some highlights from Yahoo News:*
NEW YORK - Home prices tumbled by the steepest rate ever in May, according to a closely watched housing index released Tuesday, as the housing slump deepened nationwide. The Standard & Poor's/Case-Shiller 20-city index dropped by 15.8 percent in May compared with a year ago, a record decline since its inception in 2000. The 10-city index plunged 16.9 percent, its biggest decline in its 21-year history.
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Home values have fallen 18.4 percent since the 20-city index's peak in July 2006. Nine metropolitan cities — Las Vegas, Miami, Phoenix, Los Angeles, San Diego, San Francisco, Seattle, Wash., Portland, Ore., and Washington, D.C. — posted record declines in May. And the value of housing in Detroit is now lower than it was in 2000. But a possible bright spot in an otherwise dismal report, seven metros — Tampa, Fla., Boston, Detroit, Minneapolis, New York, Dallas and Atlanta — showed smaller annual declines.
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Las Vegas recorded the worst drop, with prices plunging 28.4 percent in the month. Miami came in a close second, with prices down 28.3 percent. Charlotte, N.C., posted the smallest drop at 0.2 percent. Until April, the North Carolina city had been the last metro still showing price gains.
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A good analysis of how we got to be in the current mess can be found here.
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