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Brett Arends' ROI
May 9, 2011, 12:01 a.m. EDT
By Brett Arends, MarketWatch
BOSTON (MarketWatch) "” If you thought the housing crisis was bad, think again.
It's worse.
New data just out from Zillow, the real-estate information company, show house prices are falling at their fastest rate since the Lehman collapse.
Average home prices are down 8% from a year ago, 3% over the quarter, and are falling at about 1% every month, according to Zillow.
And the percentage of homeowners in negative-equity positions "” with a home worth less than its mortgage "” has rocketed to 28%, a new crisis high.
Zillow now predicts prices will fall about 8% this year and says it no longer expects the market to bottom before 2012.
"There's no way we can get to flat, from these depreciation levels, in the last nine months of the year," says Zillow economist Stan Humphries. "Demand is a lot more anemic than we had previously thought."
When in 2012 does Zillow see the market bottoming out? Humphries won't say.
What a foolish boondoggle those tax breaks for home buyers have turned out to be. The government spent an estimated $22 billion between 2008 and 2010 on tax breaks to prop up the housing market. All it achieved was a brief suckers' rally that ended last summer.
Online real-estate listings firm Zillow seeks to go public, looking to run with consumer-oriented Internet companies headed for IPOs like Facebook, Groupon and Pandora.
"As we said at the time, it was a giant waste of money," says Mark Calabria, economist at the conservative Cato Institute. "None of these things really turned the housing market around. They just put off the adjustment for awhile."
It's hard to overestimate the scale of the carnage in the housing market. Zillow found prices fell in all but four U.S. metro areas.
Falling real-estate prices mean spiraling hidden losses throughout the economy, from banks to homeowners.
Remember Japan's "zombie banks"? These were the financial institutions that haunted that country's economic recovery after the 1990 crash. They staggered on with huge losses they could never repay "” the walking dead.
"Housing crash is getting worse http://on.mktw.net/lzkb8O" 11:11 p.m. EDT, May 8, 2011 from MKTWArends
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"True unemployment rate could sink Obama http://on.mktw.net/m0Jdd3" 12:34 p.m. EDT, April 29, 2011 from MKTWArends
Brett Arends is an award-winning financial columnist with many years experience writing about markets, economics and personal finance in Europe and the U.S. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He was educated at Cambridge and Oxford Universities, and has worked as an analyst at McKinsey & Co. He is a Chartered Financial Consultant (ChFC) and Accredited Asset Management Specialist (AAMS). His latest book, "Storm Proof Your Money," has just been published by John Wiley & Co.
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