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Zillow Real Estate Research reports that home values are falling fast
Howard Richman, 5/9/2011

A new study from Zillow Real Estate Research (No Respite from Housing Recession during the First Quarter) reports that house prices are falling at their fastest rate since 2008. Here is a selection:

Nearly three-quarters (74.5 percent) of homes in the United States lost value from Q1 2010 to Q1 2011. That’s up from Q4 2010, when 69.2 percent had lost value, but is down substantially from a peak of 85.5 percent in Q1 2009.

A record (37.7 percent) number of homes sold in March were sold for a loss. The rate of homes selling for a loss has steadily increased since June 2010.

Negative equity in the first quarter reached new high with 28.4 percent of all single-family homes with mortgages underwater, from 27 percent in Q4....

Because of the strong depreciation in the first quarter, we’ve revised our forecast for the total home value decline nationally in 2011 to 7-9 percent (previously 5-7 percent) and our forecast of the bottom from late 2011 to 2012 at the earliest. As always, our expectation post-bottom (where we define the bottom as the end of consistent monthly depreciation) is for a long period of below-normal real estate appreciation during which time we work out the remaining overhang of excess housing supply.

Although the media are only just now figuring it out, we'd like to remind you, dear readers, that we told you last month in American Thinker that house prices were in free fall (House Prices in Free Fall). I'd also like to remind you that I predicted this free-fall in a blog entry dated December 9, 2008 ( House Prices will Roar Back in 2009). In American Thinker we noted:

It may soon become clear that the Federal Reserve and the federal government wasted hundreds of billions of dollars simply to delay an inevitable fall in housing prices.  Economic historians may compare their policies to the pervasive price subsidies that eventually bankrupted the Soviet government.

Last week Fannie Mae asked the federal government for another $8.5 billion. In our May 1 American Thinker article about the Paul Ryan's House Republican's budget plan (House Republican Budget Plan would Benefit the Poor) we pointed out:

Ryan's plan would reduce the deficit by $4.4 trillion over ten years by repealing ObamaCare, substituting private health plans, and making block grants to the states for Medicaid. It also imposes hard spending caps on domestic spending. It ends government bailouts to Fannie Mae and Freddie Mac, which have already cost the U.S. taxpayer hundreds of billions of dollars (and, with house prices continuing to fall, will likely cost hundreds of billions more)....

And on April 26 on this blog (Obama, Bernanke and Congress losing war against supply and demand in the housing market), I explained why Congress is unable to stop these foolish subsidies to try to keep house prices high. I wrote:

Meanwhile, the Republicans in Congress have been foiled by lobbyists from their attempt to end the bleeding. AP reports:

Feeding lawmakers' concerns are realtors, mortgage bankers and home builders, powerful constituencies and campaign contributors. The bankers and builders brought throngs of members to the Capitol last month to visit legislators, and the realtors are coming in May....

In a statement that sounds like it came from the script of Atlas Shrugged, Vince Malta, a spokesman for the National Association of Realtors, blamed conservative tea party supporters for attempting to stop the bleeding of taxpayer money to Fannie and Freddie:

Vince Malta, a vice president of the realtors, said Republicans trying to end the federal role in mortgages are listening too much to their conservative tea party supporters.

"The move here is political and not based on the reality of what is best for the housing finance system," Malta said.

So there you have it. In order to please lobbyists, Congress and the Obama administration will keep shoveling out taxpayer money in a doomed attempt to keep house prices from falling to their normal levels.

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Comment by Jesse Richman, 5/11/2011:

Good post!  One thing I'd add is that I stick by my basic guide for home purchasers.  Pay a non-bubble price by adjusting a pre-bubble price for inflation.  Of course, in some markets you may still take a loss for a time.  But you should do okay in the long run with this strategy. 


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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

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  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]