Commentary: Home prices stumble badly
Scripps Howard News Service
Unemployment is typically the last economic indicator to recover from a recession, but even at 9 percent the jobless rate is positively brisk compared to another badly lagging sector ó housing.
The rate of decline in home prices had been improving since it seemed to bottom out in 2009. But that upswing has come to an abrupt end.
The real estate research firm Zillow says home prices dropped 3 percent in the first quarter of this year and fell 8.2 percent year-over-year. Prices have not fallen for 57 straight months, according to Zillow, and 28.4 percent of homeowners are underwater on their mortgages, meaning they owe more than their house is worth.
Economists who had forecast the housing market would bottom out this year are now saying it will be sometime in 2012.
Acting as a drag on any recovery is the vast number of foreclosed homes selling ó when they sell ó at huge discounts. Fannie Mae and Freddie Mac sold 94,000 foreclosed homes in the first quarter, but the mortgages giants have an inventory of 218,000 homes, up 33 percent from a year ago.
And all of this is getting expensive. Bailing out Fannie Mae and Freddie Mac from defaulted mortgages has cost $259 billion and Fannie Mae has just asked the government another $8.5 billion.
There is not much the government can do except wince and write the checks until the market stabilizes and lenders recover their confidence. Mortgage rates are really low ó if you can get one. Lenders who were burned by their overconfidence during the boom are now, according to anecdotal evidence, too cautious about making loans, even to buyers who meet all the usual standards of credit worthiness.
What the government should not do is act to artificially re-inflate the housing bubble. The $9,000 homebuyerís tax credit that expired last year bought a reprieve in the slide in home prices but it was both temporary and expensive.
We can only hope that once the unemployed find jobs theyíll want to buy a house. There are plenty available.