Housing numbers fail to improve

|  May 26, 2009 |

If the current trend continues we may be on track for the lowest number of housing starts since the end of World War II. The Wall Street Journal is reporting that the Case-Shiller index recorded a 19 percent drop, in the first quarter of this year, the biggest decline in it’s history.

This is obviously bad news if you bought your house at the peak of the boom, but then again it’s good news in that home prices need to come down. There will be no construction industry recovery until housing prices come back to earth. And according to author and blogger Barry Ritholtz, they still have a long way to fall. There are still two to three years of “toxic” balloon mortgages out there ticking like time bombs and these need to be cleared up as well before any recovery can happen.

Once we get past these current troubles, the prospects for a housing recovery look great. Population growth will add 60-million or so new people by 2030, and they have to live somewhere. Smart builders will probably put up fewer MacMansions and build smaller homes on smaller lots and more multifamily. Granite countertops may have to yield to laminate and people will have to stop believing what they see on A&E’s Flip This House. But as long as government policy doesn’t screw it up  (as it has with Fannie, Freddie, ACORN and the rest) the new housing boom should take off in about three years.

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