Housing prices are still being pressured downward by foreclosure and unemployment trends.
Remember that Bruce Springsteen song from the 1980s, "I'm Goin' Down?" The Boss sang: "You used to love to drive me wild/But lately, girl, you get your kicks from just driving me down." If you wanted to put a theme song on what's been happening in the U.S. housing market lately, that old tune might be the perfect choice.
Values fall, foreclosures rise
The latest release of the S&P/Case-Shiller Home Price Indices confirms it: All around the country, home prices are continuing to deteriorate. The S&P/Case-Shiller Indices include a National U.S. Home Price Index, as well as two separate indices that track housing prices from 10 and 20 major metro areas. For the month of September, all three indices showed double-digit declines from the prior year.
The Case-Shiller National Index fell 16.6 percent from the prior year, while the Composite-10 Index and Composite-20 Index slid 18.6 percent and 17.4 percent, respectively. Of the metro markets tracked, Las Vegas and Phoenix were the weakest; both logged year-over-year declines greater than 30 percent.
The prevalence of bank-owned, or REO, properties on the market continues to be a major factor in the housing price tailspin. When bank-owned properties sell for below-market prices, it pulls down the values of comparable homes in the neighborhood. This impact is far more pronounced right now, because of the sheer number of bank-owned homes being sold. Back in August, RealtyTrac reported that it had roughly 750,000 properties in its national REO database. And some areas of the country are now reporting that bank-owned properties account for roughly half of the homes on the market.
A jobless homeowner is an unhappy homeowner
Rising unemployment is also working against home prices by putting pressure on existing homeowners and scaring potential buyers out of the market. Between May 2007 and September 2008, national unemployment climbed from 4.5 to 6.1 percent of the workforce.
More bloodletting on the way
Unfortunately, the trends in foreclosure and unemployment are likely to get worse. That means that home prices may keep falling. According to RealtyTrac, nearly 280,000 homeowners received a foreclosure filing in October. That's 25 percent higher than the number of filings recorded in the same month last year, and 5 percent higher than the number recorded in September.
The unemployment picture doesn't look any better. In October and November, the national unemployment rate rose 40 and 20 basis points, respectively. At 6.7 percent, the unemployment rate is now the highest it's been since October of 1993.
As a homeowner, you'll have to accept these value declines as part of the territory. If you feel the need to do something, try cleaning up your debt and polishing up your résumé. After that, you might as well pop in those headphones and let Springsteen drown out the noise.
Home Improvement taking a Hit from Financial Crisis
The tables have turned in the home improvement world. During the red-hot housing market, finding a contractor who would perform simple home improvement jobs was nearly impossible. As the market has iced over, renovation specialists are finding that the shoe is definitely on the other foot.
In the heyday of the housing boom, a home building contractor couldn't walk out his front door without running into leads for new work. Homeowners were happily tapping into ever-increasing lines of credit to perform home improvement projects. Often the tasks were grand in scope, including major additions or complete kitchen renovations.
As the economy has gone ice cold, homeowners are reconsidering their spending habits, and home building specialists are feeling the effects.
Back to renovation basics
Home improvement projects are indicative of the economy. People, no longer thinking about their dream houses, are doing their best simply to keep their homes.
In the renovation industry, that means grandiose projects have gone by the wayside. Generally, people are now performing only basic maintenance: replacing rotting roofs, or fixing cracks in the foundation. For contractors, this is the type of work that many passed up during the boom times. Many are reporting that work is off up to 40 percent.
Instead of backlogs, renovators are on a job-by-job basis, and finding that work isn't easy. Phones once rang off the hook, but now, home improvement specialists are the ones doing the calling. Many have been forced to employ direct mail campaigns and other types of tactics to drum up business.
Do-it-yourselfers pulling back
If renovators are finding less work available, then the logical assumption is that homeowners are now adopting a do-it-yourself approach. It should be gravy time for stores like Lowe's and Home Depot, which cater to people who prefer to take hammer in hand and save a few extra bucks.
It should be gravy time, but it's not. Home Depot recently reported that its third-quarter profit fell by 31 percent. While the numbers are better than what analysts had expected, the trend is still indicative of the slowdown. Included in those store closings is one of Home Depot's flagship stores, marking the first time the chain has ever closed one of these for performance reasons.
Municipalities are noticing that people are also pulling back on building permits. Many are filing for a renovation or extension, but then neglecting to pay their fee and pick up a permit. Others are extending the time they have to build by paying an additional fee, and then waiting to start construction.
Home building has ground to a halt during the recession, but home improvement projects have also slowed. Renovation experts are finding that their goldmine industry has slowed significantly. Instead of big jobs backordered on the books, home improvement specialists are knocking on doors looking to make basic repairs. Like the rest of the country, this industry will have to grit its teeth and soldier on through the tough times.
In the heyday of the housing boom, a home building contractor couldn't walk out his front door without running into leads for new work. Homeowners were happily tapping into ever-increasing lines of credit to perform home improvement projects. Often the tasks were grand in scope, including major additions or complete kitchen renovations.
As the economy has gone ice cold, homeowners are reconsidering their spending habits, and home building specialists are feeling the effects.
Back to renovation basics
Home improvement projects are indicative of the economy. People, no longer thinking about their dream houses, are doing their best simply to keep their homes.
In the renovation industry, that means grandiose projects have gone by the wayside. Generally, people are now performing only basic maintenance: replacing rotting roofs, or fixing cracks in the foundation. For contractors, this is the type of work that many passed up during the boom times. Many are reporting that work is off up to 40 percent.
Instead of backlogs, renovators are on a job-by-job basis, and finding that work isn't easy. Phones once rang off the hook, but now, home improvement specialists are the ones doing the calling. Many have been forced to employ direct mail campaigns and other types of tactics to drum up business.
Do-it-yourselfers pulling back
If renovators are finding less work available, then the logical assumption is that homeowners are now adopting a do-it-yourself approach. It should be gravy time for stores like Lowe's and Home Depot, which cater to people who prefer to take hammer in hand and save a few extra bucks.
It should be gravy time, but it's not. Home Depot recently reported that its third-quarter profit fell by 31 percent. While the numbers are better than what analysts had expected, the trend is still indicative of the slowdown. Included in those store closings is one of Home Depot's flagship stores, marking the first time the chain has ever closed one of these for performance reasons.
Municipalities are noticing that people are also pulling back on building permits. Many are filing for a renovation or extension, but then neglecting to pay their fee and pick up a permit. Others are extending the time they have to build by paying an additional fee, and then waiting to start construction.
Home building has ground to a halt during the recession, but home improvement projects have also slowed. Renovation experts are finding that their goldmine industry has slowed significantly. Instead of big jobs backordered on the books, home improvement specialists are knocking on doors looking to make basic repairs. Like the rest of the country, this industry will have to grit its teeth and soldier on through the tough times.
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