New Jersey Real Estate Report

From CNBC:

US Housing Crisis Is Now Worse Than Great Depression

It’s official: The housing crisis that began in 2006 and has recently entered a double dip is now worse than the Great Depression.

Prices have fallen some 33 percent since the market began its collapse, greater than the 31 percent fall that began in the late 1920s and culminated in the early 1930s, according to Case-Shiller data.

The news comes as the Federal Reserve considers whether the economy has regained enough strength to stand on its own and as unemployment remains at a still-elevated 9.1 percent, throwing into question whether the recovery is real.

“The sharp fall in house prices in the first quarter provided further confirmation that this housing crash has been larger and faster than the one during the Great Depression,” Paul Dales, senior economist at Capital Economics in Toronto, wrote in research for clients.

According to Case-Shiller, which provides the most closely followed housing industry data, prices dropped 1.9 percent in the first quarter, a move that the firm interpreted as a clear double dip in prices.

Moreover, Dales said prices likely have not completed their downturn.

“The only comfort is that the latest monthly data show that towards the end of the first quarter prices started to fall at a more modest rate,” he said. “Nonetheless, prices are likely to fall by a further 3 percent this year, resulting in a 5 percent drop over the year as a whole.”

Prices continue to tumble despite affordability, which by most conventional metrics is near historic highs.

From the Record:

Home prices may drop another 25%, Shiller predicts

Home prices may drop as much as 25 percent, after inflation, over the next five years, economist Robert Shiller, co-founder of the Standard & Poor’s/Case-Shiller home price index, said Thursday.

“A 10 to 25 percent further decline in real home prices over the next five years would not surprise me at all,” Shiller said at a Standard & Poor’s housing summit in New York.

Shiller, a Yale professor, said it’s possible that the market will follow the grim path seen in Japan after a 1980s housing bubble. Property values there declined every year for about 15 years, dropping by two-thirds overall, he said.

But he cautioned that he was not making a forecast, saying that since the recent housing boom-and-bust cycle was the biggest in U.S. history, he can’t use previous housing patterns to figure out where this market is headed.

“It’s impossible for statisticians to forecast,” he said. “I honestly don’t know.”

Other housing analysts have recently predicted that prices will continue to drift lower this year and “bounce along the bottom” for a while, but the loss mentioned by Shiller is larger than most experts have forecast.

Shiller was joined Thursday by a number of housing experts, most of them also pessimistic about the housing market’s short-term prospects.

Keith Fox, president of McGraw-Hill Construction, which tracks the building industry, predicted that about 640,000 single- and multi-family units will be built in the U.S. this year. While that’s an improvement over the past few years, it’s well below the 2.2 million units produced in 2005.

“You can clearly see how depressed this market remains,” Fox said. And when residential construction dries up, other types of construction – including retail, schools, offices, and even roads – also slow down, because there are fewer new homeowners to use them, he said.

Fox said, however, that residential construction should post healthier gains in 2012 and 2013.

Other analysts said the high rate of homes in the foreclosure process will continue to weigh on the market. Diane Westerback, a managing director at Standard & Poor’s, said clearing the market of foreclosure properties will take longer in states such as New Jersey, where lenders must go through the courts to repossess homes. Foreclosure activity has slowed to a crawl in the state as lenders try to prove that they are following the correct legal procedures, after questions were raised last fall.

Christopher Mayer, a professor at Columbia University, said that homes on the market, plus those that will be dumped on the market because their owners can’t pay their mortgages, add up to about 1 1/2 years’ worth of housing inventory. Given those numbers, he said, “house prices are going to continue to fall.”

Thomas Gleason, a housing finance executive from Massachusetts, brought up the old adage, “May you live in interesting times.”

“As my kids would say, ‘Been there, done that,'” he said. “I’d like to live in a time where there’s a fully functioning housing market. That would be really interesting.”