Tuesday, September 23, 2008

Housing Woes Grows

At the core of the Wall Street crisis lies unresolved issues with the housing market in the US. This is the rot at the core of investment banks' holdings. Unfortunately, the data still does not paint a pretty picture about the housing market. The inventory of unsold, previously owned homes stands at a high approaching 12 months. This means there is a pipeline of 12 month's worth of sales in currnt back inventory of unsold homes. Since large numbers of people are probably postponing their home sales if they can, due to the lousy housing market, this backlog is probably a dam behind which lie many more months of unsold inventory just waiting for a sign of improvement before it gets dumped onto the market, depressing housing prices once again.

There was a brief uptick in the median price of homes in the first quarter of '08, but the trend resumed its downward course in the second quarter of '08. Meanwhile, the delinquency rate shot up in the second quarter of '08, now above 5 percent on first mortgages, and the default rate on first mortgages approached 2% in the second quarter of '08.

None of this reflects added woes that may come from the loss of jobs on a related to the Wall Street melt down. For example, economist James Hughes, dean of Rutgers' Edward J. Bloustein School of of Planning and Public Policy, said that he expects New Jersey to suffer economic difficulties and job losses well in excess of the 16,000 that the state has already lost since the beginning of the year. In a worst case scenario, 100,000 jobs could be lost, he fears.

Inventory of Unsold Homes; Median Home Sales Price Trend; Delinquencies & Defaults Trend

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