Photo by kenpower
Our southern neighbour is still far from housing market recovery, says State of the Nation's Housing, a recent report from Harvard University. The statistics are chilling and show little sign of improvement.
The number of new construction hit the post-war low in the last year. The new home inventory has only 183,000 units. Despite this fact, prices continue to fall sharply. The fresh update of the Case-Shiller national home-price index shows a 4.2% drop in the first quarter of 2011 and a 4.1% drop for the whole of 2010. Around 11 million homeowners are stuck with negative equity. Almost half of them owe at least 25% more than their property is worth. Add another 4 million who have overdue payments, or are in foreclosure process.
In the 2006-2010 period, US households lost period 58% of house equity, which fell from $14.9 trillion to $6.3 trillion on a national level. The supply of new homes for sale was 7.3 months in March 2011, up from 7.1 months a year earlier and still well above the long-run average of 6.2 months. Home sales dropped by 5.7% despite the homebuyer tax credit, which ran in 2010. Negative equity in many houses means that many regions are hit by spiralling problems, since homeowners cannot move out of the troubled areas with high unemployment.
Luckily for US homeowners, there was also some positive news. The rental market shows signs of improvement, with the vacancy rate dropping from 10.7% to 9.4%, the lowest rate since 2003. Nominal rates began to rise slightly in 2010, and the number of people who do not intend to continue to rent after the next move rose slightly, from 41% to 46%. This will put some much-needed pressure on demand. However, there is still a long way to go for the US real estate market.