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Part Two of a series on where the housing
market is going in 2011 and onward.

Lets continue to take a look at where the US housing
market is today vs. a year ago and five years ago.

Percentage of Mortgages with Actual Foreclosure
process started:

For All loan types:
All of 2010:   1.4% of mortgage loans
All of 2005:   0.4% of mortgage loans

By types of loans:
Subprime ARM loans:
All of 2010:   4.1% of mortgage loans
All of 2005:   1.5% of mortgage loans

FHA loans:
All of 2010:   1.3% of mortgage loans
All of 2005:  0.8% of mortgage loans

Prime loans:
All of 2010:   1.2% of mortgage loans
All of 2005:   0.2% of mortgage loans

Again, actual foreclosures are over three times what
they were five years ago. While the peak appears to
have been in late 2010, there is no doubt the overall
trend has been a significant worsening. Even if we do
not hit new peaks in this category, we are at a level of
foreclosure activity that has not been seen in
decades.   


Let’s take a look at Housing Starts over the past five
years and beyond:

Note: Keep in mind this is not directly comparable to
the New Home Sales Statistic as it includes Coops,
Condos and other that the new home statistic does
not. But it is a good forward looking statistic of its
own.   

Feb 2011 Housing Starts: 479K (annual rate). This is
a 23% decrease from January and a 21% decrease
from Feb 2010. The Feb YTD decline was 9%, as
January was not as bad.

All 2010 Housing Starts: 587K
All 2005 Housing Starts: 2,068K

Yes, that's 2 million housing starts in 2005, or almost
4 times the pace we are currently on. 2005 was the
highest on record and the peak of the last housing
boom. However the average of the last 20 years was
1,300k, so by any measure the current pace of
housing starts is anemic. It's current pace vs the
historical average tells the story more than the
relatively slight change from last year. We can see
from this that the housing industry is in deep trouble.


Part of this last year decline can be explained by the
end of the Obama housing tax credit program that
expired in the 2nd Qtr of 2010. So the monthly
comparisons in the first half of this year to last year will
fare poorly through June in part because of that. We
can explain it partially as the "hangover" from that
program. I suppose one can make a case that it could
have a 5 or 10% effect on the market year over year.
More than that is the “true” market itself. Based on
these figures one can conclude the market at best
would be flat if we eliminate this effect. More likely we
a seeing a real further decline of the market.

Housing starts from 2009 to 2010 went up by 6%,
once again this was accelerated by the Obama
program. This is apparent by the retreat we’ve seen
since the program terminated. We are still clearly
moving slowly somewhere along the bottom of the real
estate cycle. Housing starts are at the lowest level in
over 50 years. Even in 1959, the first year measured
by the Census, the first year measured housing starts
were at a three times faster pace than they are now.  

One more current/past statistic: Total housing
inventory is now 3.5 million, up 3.5% from last month,
and approximately an 8.6 month supply at current
prices, vs 7.5 month supply in January. This level of
inventory will take many months to sell off even when
demand eases significantly.

Conclusion:
Where is the housing market going now and over the
next year? Let’s take a look. It is a complex equation.
Let's take a look at the major factors. We can then
make a worthwhile prediction of the future re market
based on a prediction of those factors.

Here’s a look at some general economic activity as
measured by GDP:

GDP over the past three years:
Q4 ’10:  3.1%  (annualized)
Q3 ’10:  2.6%  (annualized)
All of 2010:   2.9%
All of 2009:   -2.6%  (GDP decreased)
All of 2008:  -1.9%

These are the figures since the housing collapse
picked up steam.  In 2005-07 nominal GDP was 5-7%
per year. It certainly looks like the financial crisis as
measured by GDP bottomed out in 2009 and has
been creeping back to respectability since then.
Similarly, the stock market has been in a two year
boom, having risen over 70%. Of course this is
tempered by the fact that the base is from the crash
level lows of 2009, and is still 12% lower than its late
2008 peak.

Click here to continue with
 Housing Decline in 2011 -
Part
Three - Conclusion.


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_________________________________________
Housing Decline in 2011? Here is a look
at some of the key statistics that are
driving the 2011 market and beyond.  
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