Thinking about buying a home? You might want to proceed cautiously. The housing market may continue to decline, potentially for at least three more years, Bloomberg reports today.
There is some evidence that a double-dip in housing may be looming. According to data released by CoreLogic today home prices remained flat in July compared to the same period last year, the first time in five months without a year-over-year increase. Compared to June of this year, prices in July declined 0.6 percent.
But the housing market's biggest concern is an excess of housing inventory, which continues to grow as mortgage-holders default and more homes hit the anemic market Bloomberg estimates that 12 million homes will flood the market over the next three years, as lenders put the "shadow inventory," or homes with delinquent loans, up for sale.
Citing analysis from Moody's, Fannie Mae, Barclays and Morgan Stanley, Bloomberg reports the housing market has already tanked 28 percent since 2006. It's been a fairly dismal summer for housing, as July saw a 25.5 percent drop in existing sales from the same period in 2009, according to the National Association of Realtors. It was the lowest number of existing home sales since 1995.
As long as prices continue to fall, the conventional wisdom goes, sales won't rebound, as potential buyers wait on the sidelines. Making matters worse, a whiff of recovery could send prices right back down. A survey by online real estate search company Zillow shows that 3.8 million homes, or five percent of the nation's total, would hit the market within six months of any housing market improvement, as their owners try to take advantage of higher prices.
The government has been struggling to prop up the housing market with strategies such as tax credits, loans and low interest rates. The debate in recent weeks has been whether it would benefit the country more for the government to do nothing -- to allow the market to tank and then figure out its own recovery.
As the New York Times notes, the government faces a choice between helping current homeowners or future ones.
Meanwhile, web real estate search company Trulia has the latest statistics for individual cities' price drops. Ranked based on the percent of home sellers which reduced their prices in August, the top five are:
1. Minneapolis, 43 percent of homes
2. Milwaukee, 40 percent of homes
3. Phoenix, 39 percent drop homes
4. Mesa, Ariz., 37 percent of homes
5. Albuquerque, New Mexico, 35 percent of homes