11.18.2009 Policy Points

Housing Market Update

Highlights from the latest issue of the Center for Economic and Policy Research’s Housing Market Monitor:

There appeared to be a sharp falloff in the housing market in October, as the November 30th expiration date for the first-time homebuyers tax credit approached. As expected, this credit pulled home purchases forward, leading to a substantial increase in sales in the late summer and early fall.

The underlying glut in housing means that it is only a matter of time before house prices begin to fall again. Delinquencies hit another record in the third quarter of 2009. The 6.25 percent 60-day delinquency rate was 58 percent above the level for the third quarter of 2008. Even with a higher percentage of delinquent homeowners now benefiting from mortgage modifications, the foreclosure rate is still running at near record levels. With unemployment virtually certain to remain high well into next year, there is little prospect for any sizable drop in foreclosures.

As a result, foreclosures will be putting homes on the market at an annual rate of close to a 2 million. This is guaranteed to depress prices in a market with total demand of close to 5 million. In short, house prices will almost certainly resume their decline. The only questions are how soon and how fast.

Print Friendly, PDF & Email

Comments are closed.