2007 Worst Year for US Housing Market Since Great Depression
On Thursday there were a couple of datapoints that were released that spelled out exactly how bad the US housing market was in 2007.
First off, sales of existing single-family homes dropped 13% in 2007, the biggest plunge since 1982, which was in the midst of the oil crisis and sky-high interest rates.
Even more interesting was the fact that the median price for a home in the United States actually dropped in 2007, which marked the first decline since 1968. Lawrence Yun, The National Association of Realtors chief economist, said that it was unlikely that the country has experienced a decline in housing prices over an entire year since the Great Depression.
In addition to these stats that were released today, the government last week released a report that said that construction of new homes fell by 24.8% in 2007, the largest one year dip since 1980.
So what does all of this mean?
It means that the housing market likely has further to fall in 2008, due to: increased foreclosures resulting in an increased supply and potential buyers waiting to purchase a new home because they feel that prices will drop further. With the market plunging, would you dive into the housing market right now? If you are like most people, the answer is likely no.
Until we work off some of this supply, the housing market won't turn around. I think that the turnaround will likely begin in late 2008 once prices have dropped some more. At that point, buyers will be lured into the market by strong deals and lower interest rates. It is hard to think that 2008 will be worst than 2007, but you just never know. I forecast another 6-8 months of pain for the housing market before it starts to turn.
Filed under: Real Estate News | The Economic Meltdown | General Knowledge