Home Wreckers

Our house, was our castle and our keep
Our house, in the middle of our street
--Madness

This piece employs various data to argue that housing markets are likely to remain soft for some time. An increased percentage of homes sold constitutes properties that have been foreclosed or where borrowers are in 'distressed' condition w.r.t. to mortgage payment. Zillow data show that nearly 30% of all homes listed in its website have been sold for a loss over the past couple of months.

Data also suggest that, despite soft conditions, only 25% of sellers have been willing to lower their asking price. We don't know whether this might reflect optimism about future conditions, the 'need' for a certain selling price in order to avoid bringing money to the table for closing, or what. There is also evidence to suggest that, of those sellers in major metro areas that have lowered their asking price in the last 18 months, at least 40% of those properties are still on the market.

Finally, home sellers must increasingly compete with rental properties. Over the past 40 yrs, supply of rental units has nearly doubled, and vacancy rates are at record 10%+ levels. Moreover, supply of rental properties is likely under stated because some home owners are renting out their distressed properties in order to pull in some income.

These data certainly jibe with my observations. I routinely monitor three local markets here in Cincy. These areas and the price ranges I track would represent mid-to-upper level markets. Over the past yr, homes for sale have increased by at least 1/3. I would guess that about 1 in 4 lowers price within 3 months. And based on what does sell, those that are rigid on price seem to be dreaming given current market conditions. I should also note that there are more rental properties for sale in these markets than previously.

Should this continue for a few more months, I'd place the chances of more government stimulus for the housing markets by yr end as pretty good.