The recovery in the housing market is still alive, barely.

At the moment the housing market in USA stands at the crossroads. Optimists foresee a total recovery by 2011, but pessimists believe recovery is likely to lack vigor and may take a longer time. The boom time between 1997 and 2007 forced folks to flee to the exurbs in many regions unable to afford the rapidly rising house prices. The population explosion in Riverside County, California and Loudoun County near Washington DC are glaring examples. The big question is if it is that easy to recover from the domino effect of disasters till and after the bubble burst in mid 2005.

According to NYTimes

The recovery in the housing market is still alive, barely.

Home prices managed a 0.2 percent seasonally adjusted gain in November from the previous month, according to the Standard & Poor’s Case-Shiller Home Price Index.

The data, released Tuesday, reflected frenzied activity in 20 major cities as people competed to buy houses to take advantage of a government tax credit. But all those sales did not produce much more than flat prices.

A second index released on Tuesday showed a healthier market. The Federal Housing Finance Agency said its price index, which uses data from mortgages that have been sold to or guaranteed by the government, rose 0.7 percent in November from the previous month. But the agency also revised its October figures downward.

To blur the picture even more, a third national housing price index was released last week. Issued by the data firm First American CoreLogic, it showed a decline of 0.2 percent in November.

Put all these indexes together, and a portrait emerges of a market going nowhere.

The winter pause that people thought was going to happen seems to be happening, said Maureen Maitland, vice president for index services at S.& P.

A pause is certainly better than a plunge, which is what was happening during 2007 and 2008. But sales have slowed markedly since November. It is only a matter of time, the analysts say, before prices also undergo at least a slight dip.


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Housing Crisis in 2010

According to NYTIMES:

"The financial crisis and Great Recession have their roots in the housing bust. When it comes, a lasting recovery will be evident in a housing rebound. Unfortunately, housing appears to be weakening anew.

Figures released last week show that after four months of gains, home prices flattened in October. At that time, low mortgage rates (courtesy of the Federal Reserve) and a home buyer’s tax credit (courtesy of Congress) were fueling sales. That should have propped up prices. But it was not enough to overcome the drag created by a glut of 3.2 million new and existing unsold single-family homes — about a seven-month supply.

The situation, we fear, will only get worse in months to come. Rates already are starting to rise as lenders brace for the Fed to curtail support for mortgage lending as early as the end of March. The home buyer’s tax credit is scheduled to expire at the end of April. And a new flood of foreclosed homes is ready to hit the market.

It is increasingly clear that the Obama administration’s anti-foreclosure effort — which pressed lenders to reduce interest rates — isn’t doing nearly enough. High unemployment rates also mean that many borrowers who did qualify for aid have been unable to keep up with even reduced monthly payments.

As a result, an estimated 2.4 million foreclosed homes will be added to the existing glut in 2010, driving prices down by another 10 percent or so. That would bring the average decline nationwide to about 40 percent since the peak of the market in 2006.

A renewed price drop could usher in a new grim chapter in the foreclosure crisis. Already an estimated one-third of homeowners with a mortgage — nearly 16 million people — owe more than their homes are worth; in industry parlance, they are “underwater.” If prices drop further, ever more borrowers will sink ever deeper. Research suggests that the greater the loss of home equity, the greater the likelihood that borrowers will decide to turn in the keys and find a cheaper place to rent.

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