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Is it the right time to buy a house? Or invest in
housing? Should you wait because prices are
still going down? Or have prices bottomed and
it's a good time to buy?

We’ve been hearing a lot of bad news about the
housing market lately. Of course, we’ve heard a lot of
bad news about the housing market for five years.
However, over the past year some experts have
expected the market to start improving. But as the
data has begun to roll in recently, one has to wonder if
an expectation of  “we have further decline to go” is
seriously in order.  

Lets take a look at where the US housing market is
today vs. a year ago and five years ago. We’ll look at
a few other important factors that influence the market
the most. Then we can take a stab at where housing
prices will be in one year and beyond.

First, let’s take a look at housing sales as of last
month, Feb ’11, vs. last year, and all of 2010 sales vs.
five years ago:

Feb 2011 New home sales: 250K (annual rate).
This is 28% below Feb 2010 and 9.1% below last
month - January 2011.

Feb 2011 Existing home sales: 4,880K (annual rate).
This is 2.8% below Feb 2010 and 9.6% below last
month - January 2011

Keep in mind that there is a time lag factor in the
existing sales statistics in that a sale is recorded as of
the closing which is typically a few months after an
offer is accepted. Given this, February’s results may
have been unduly affected by the poor weather in
much of the country in December.  

All 2010 New home sales: 321K
All 2005 New home sales: 1,283K

All 2010 Existing home sales: 4,908K
All 2005 Existing home sales: 7,076K

So Existing home sales are down 30.6% from 2005
to 2010.  New home sales are down 75% in five
years. That is quite a statistic. 75% down. That
speaks volumes to an industry whose main indicator
of growth activity is at a virtual standstill. Of course,
the larger piece of economic activity is the existing
sales figure, and that is down only 30%. However, this
is also a serious decline in activity, and even more so
when compared with what the current number would
be five years on given a normal growth rate.

Let’s take a look at Housing Prices (median) over the
past five years:

Feb 2011 New Home median price was $202K.
This is 14.0% below one year prior, Feb 2010.   
Feb 2011 Existing home median price was $156.1K.
This was 5.2% below one year prior, Feb 2010.

All 2010 New home sale median price: $221,900
All 2005 New home sale median price: $240,900
This is a 7.9% decline since 2005.

All 2010 Existing home sale median price: $173,000
All 2005 Existing home sale median price: $219,600

Existing home sale prices are down 21.2% from 2005
to 2010. One should also consider that these are
nominal prices. If we consider inflation-adjusted
figures the decline in prices would be over 30%.  So
in one year existing prices are down by 5%. And in
five years prices are down 21%.  Prices had actually
started recover in many places in the country during
2010, so the 5% decline is a more recent return to the
prior years poor performance.

Unlike the New home sales activity figure, the existing
home sales price figure is the better measure of
performance of the market because it lessens the
effect of differences in the quality of the housing stock
in the comparison. New homes may well not be an
apples-to-apples comparison due to improvements,
standards, etc.


Let’s take a look at Foreclosure related activity over
the past five years:

Percentage of Mortgages with a Past Due payment:

For All loan types:
All of 2010:   10.0% of mortgage loans
All of 2005:  5.0% of mortgage loans

By types of loans:
Subprime ARM loans:
All of 2010:   30.0% of mortgage loans
All of 2005:  10.0% of mortgage loans

FHA loans:
All of 2010:   13.0% of mortgage loans
All of 2005:  12.0% of mortgage loans

Prime loans:
All of 2010:   6.0% of mortgage loans
All of 2005:  3.0% of mortgage loans

We can see that current levels of Past Due activity is
roughly twice as high today as five years ago,
measured across all loan types. The monthly peak of
these numbers was in late 2010. It remains to be seen
if they will spike up again over the next few months.
This might be consistent with some of the recent sales
activity data.  

Click here to go to
Housing Decline in 2011 - Part
Two.


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_________________________________________
Housing Decline in 2011? Where is the
Housing Market going in 2011 and
Beyond?
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Latest Articles:

Housing Decline in 2011? Part Two - Here is a look at
some of the key statistics.

Housing Decline in 2011? The Evidence. Predictions
and
Conclusion.    

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