Tuesday, May 10, 2011

U.S. housing price decline accelerating

According to Zillow.com, in Q1 2011 housing prices experienced their biggest quarterly decline since 2008:
Home values posted the largest decline in the first quarter since late 2008, prompting many economists to push back their estimates of when the housing market will hit a bottom.

Home values fell 3% in the first quarter from the previous quarter and 1.1% in March from the previous month, pushed down by an abundance of foreclosed homes on the market, according to data to be released Monday by real-estate website Zillow.com. Prices have now fallen for 57 consecutive months, according to Zillow.

Last year, the housing market showed signs of improving as price depreciation slowed in some markets and stabilized in others. In response, a number of economists began forecasting that housing would hit a bottom in late 2011, then begin to recover. But the improvements, spurred by federal programs that gave buyers up to $8,000 in tax credits, proved fleeting. Sales collapsed when the credits expired last summer, and prices in many markets have been falling ever since.

While most economists expected sales to decline after tax credits expired, the drag on the market has been greater than many anticipated. "We expected December and January to be bad" as the market reeled from the after-effects of the tax credit, said Stan Humphries, Zillow's chief economist. But monthly declines for February and March were "really staggering," he said. They indicate "a reflection of the true underlying demand, which is now apparent because most of the tax credit is out of the system, and it's being completely overwhelmed by supply." ...

Prices are decelerating in large part because the many foreclosed properties that often sell at a discount force other sellers to lower their prices.
Personally, I think that if the federal government hadn't tried to artificially prop up housing prices in 2009-2010, the market would already have hit bottom and we'd be seeing recovering housing prices now. The desire to avoid housing pain in 2009 simply delayed the pain until 2011.


  1. April 2011 MRIS report is out. Median prices in Northern Virginia are up +8.93% YOY


    Its funny to think that for so long angry anon would come here to scream "its just a blip", and how we were "nowhere close to the bottom"!!!

    Yet, that blip is now entering year 3 of its existence.

  2. Looks like 8.93 is MOM, but at +6.67 for YOY, your point still holds. But I see transactions are down 25%...to me that suggests skewing toward higher priced properties...

  3. Totally agree with you. If they hadn't attempted to prop it up the ship would have righted itself. But the banking industry controls the purse strings of many in the powers of position.

  4. I am not convinced that we would have bottomed had the government not intervened. Essentially the market dynamic is that a lot of people are content to wait for prices to drop, and a lack of buyers is forcing the sellers to cut prices even further., which reinforces the belief of the buyers that if they wait some more that they can save even more. How then do you break this price spiral?

  5. Oh, by the way Partisan, I left out this little quote from the article:

    "According to the Zillow index, a handful of California markets and
    Washington, D.C., saw price appreciation last year, but that has since

    Sorry about that.
    I know you want more DC coverage.

  6. Ahh, but rents haven't dropped (although they have flattened). Thus, if real estate prices kept falling it would have become easy for anyone with good credit and a job to buy real estate and rent it out for a guaranteed profit. Even if prices kept falling, as long as you didn't sell you would have positive cash flow for the rest of your life.

    The ability to rent out real estate effectively puts a floor under prices if they begin to overshoot.

  7. Dude you're an idiot. The entire country is hurting and DC and California are nothing special. You're in serious denial to think it'll continue.

  8. I agree it wont continue. 6.67% YOY gains are too high to be sustainable. Still does nothing to dispute the fact that the bottom was in March 2009 and we are still far above it.

  9. Thanks James. I actually do appreciate the info - im being serious here. I am bullish now, but I want to know all the facts about DC so my position can change along with them.