Why 2011 Won’t be Much Better for the Housing Market

Home prices have now fallen farther from their peak than happened during the Great Depression.

Sorting through the news this morning, we detect a common thread: IOUs gone bad and the inevitable response – a search for tangible wealth.

Since 2006, the average home price has fallen 26%, according to Zillow.com. That’s a greater percentage than the 25.9% drop registered from the plunge that helped kick off the Great Depression from 1928-1933.

And for the record, home prices have now fallen for 53 straight months. They fell 0.78% in November, the fastest pace since February 2009.

Still, that trend remains in the works. Look for a 20% increase in the number of foreclosure filings this year, says RealtyTrac.

The real estate forecasting firm says 2.87 million homes got a notice of default, auction or repossession last year – up only 2% from 2009. The foreclosure pace slowed briefly during Q4 2010 following the “robo-signing” scandal.

But the pace is already picking up again: Foreclosures grew 4% between November and December. “There are 5 million seriously delinquent loans not yet in foreclosure,” says RealtyTrac’s Rick Sharga. “They’ve got to eventually get in the pipeline unless the homeowners cure the defaults.”

That ultimate in paper promises, the US dollar, is taking a severe hit today. The dollar index has tumbled to 79.1, its lowest level so far in 2011.

Ordinarily, this would put some wind in the sails of gold, but not today. The spot price sits at $1,384. No doubt this will give cheer to the “gold-is-a-bubble” crowd…but overnight Byron King sent us a compelling pie graph that tells us how gold still pales in comparison to other assets:

That’s impressive enough… But when you look at it historically, it’s simply staggering. Here’s a chart sent our way by Gold Switzerland’s Egon von Greyerz, showing gold and gold stocks as a percentage of global assets:

Dare we point out that all four of those larger bars happened to mark major stock market bottoms?

About Addison Wiggin 88 Articles

Affiliation: Agora Financial

Addison Wiggin is the editorial director of The Daily Reckoning, and executive publisher of Agora Financial, a multi-million dollar financial research firm and publishing group based in Baltimore, Maryland. His second edition of The Demise of the Dollar… and Why it’s Even Better for Your Investments was just fully revised and updated.

He is also the executive producer of and a writer of I.O.U.S.A. a feature length documentary film nominated for the Grand Jury prize at the 2008 Sundance Film Festival. The film is inspired by the international bestsellers Financial Reckoning Day and Empire of Debt, which he coauthored with Bill Bonner.

Visit: The Daily Reckoning

1 Comment on Why 2011 Won’t be Much Better for the Housing Market

  1. The above is only 1/2 the picture. The growth in the US ecomony from 2000 to 2006 is not mentioned above. The boom was going on which is why things were so good, thanks to the our Government serving up this “everyone can own”… Advertising to borrow against your equity was through the roof, let alone the lending to anyone and everyone. I sold a house in Simi Valley, Ca. for 260,000 in 1999. That house again sold in 2006 for 700,000. That is just shy of a 200% markup. This is all bullsh*t about a 29% decline and comparing to the Great Depression. I certainly do not have an answer on how this will be fixed, but those responsible for all this are the ones trying to fix it and all they are doing is propping things up. Personally I do not trust anyone in Washington. I think it would be very interesting to see you many spouses to congressmen, senetors and Washington yahoos are realtors…what a shoe in!
    VERY Discusted in the South!

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