No End in Sight for Housing Crises

One might think that four years after the housing bubble burst that the real estate market would be showing signs of recovery. This is nowhere near the case, however. Homes that have already been lived in are down a fair amount, about 10-15% of what experts consider normal and healthy. The problem in that case, however, is that about 40% of the sales are distressed properties, which means they are under foreclosure or the sales are short sales.

The situation with new homes is even more desperate and seems to continue to get worse all the time. Sales of newly constructed homes are now running at the lowest rates since the U.S. federal government began keeping records about fifty years ago. This segment of the economy is acting as an anchor to the overall recovery, since the construction of just one home is said to create the equivalent of three jobs for a year. It also causes upwards of $100k in various sorts of local, state and federal taxes to be collected.

Why are new homes sales so slow? The biggest reason is price competition. Although new homes typically sell for a premium of about 15% higher than used homes, that difference is currently running at about 30%. This makes new homes far more expensive than used homes, and most buyers are opting for the better deal.

In addition, the amount of foreclosed homes is so high that getting this excess inventory off the market is taking a long time. And it is clear that this situation will go on for probably at least a few more years, since the number of foreclosures predicted for 2011 is even higher than the one million that happened in 2010.

One statistic recently released by the census bureau paints the most startling picture of all. It was reported just last week that almost one out of every five homes in the entire state of Florida is sitting empty. In some parts of the state, like the Naples area, just under one out of three houses is vacant. This is hard to imagine, especially in a state of almost twenty million people.