ZT, 2011 年房地產價格會降嗎？

Posting question: the housing price in the Greater Boston area has gone up more than 3% this year. There was a bidding war for a house on our street recently. Someone is predicting price drop next year. Is this a reasonable prediction?





Building on a bubble

Housing is the forgotten crisis.

Itwasn't always so neglected. Early on in the downturn, the governmentdug deep into its policy tool kit to find answers for the collapse ofhousing.

They lowered interest rates in an effort to boostaffordability. They took over Fannie Mae and Freddie Mac, and they toldthe Federal Housing Administration to lend freely. The Federal Reservepurchased more than $1 trillion in mortgage-backed securities and bondsto support housing. They approved tax credits for buyers, and extendedthose credits several times. They tried to get lenders to modify loans.

Nothing has worked. At least, not well enough. The housing market is still dead, and worst of all, prices are falling again.

Fora while, it seemed as if housing was at least bottoming out, if notimproving. The low mortgage rates and tax credits boosted sales, butonly temporarily. And when sales fell back, so did prices.

Nationally,home prices are down about 30% from their peak. In some cities, such asPhoenix and Las Vegas, prices are down more than 50% from the highpoint, according to the Case-Shiller home price index.

Accordingto the CoreLogic home price index, home prices fell 1.8% in September,the fastest decline since early 2009. Other price measurements tell thesame story of falling prices since mid-summer. Recently, Fitch Ratingsprojected that prices would fall another 10% in 2011.

Accordingto the Fed, the decline in home prices in the third quarter subtractedabout $584 billion from the equity Americans have in their homes.

More trouble ahead

Sinceearly 2006, American families have lost $7 trillion in home equity —more than half of their equity has simply vanished. Many millions, ofcourse, have lost everything they put into their house, and more.

Yearsof blood, tears and sweat equity gone. Remember, for most families,home equity accounts for most of their wealth. In the past, wealth inthe form of home equity has often been the ticket to upward mobility;many a small business or college education has been funded from realestate wealth.

About 11 million families — about 23% of thosewith mortgages — now owe more on their house than it's worth. Beforethe bubble burst, that figure was about 1%. About 5 million familiesowe at least 25% more than what their house would sell for; they are sofar underwater that it could take a decade or more to regain any equity.

Another 2 million families could go underwater if their house loses 5% of its market value.

Theimpact of that much lost wealth could be severe if it continues, butthe most recent declines haven't had any visible impact on the economy.Housing remains invisible.

Rising housing wealth helped driveconsumer spending in the middle of the last decade. The best guess byeconomists is that consumers will spend about a nickel more if theirhousing wealth rises by $1, or spend a nickel less if wealth falls by adollar. The bubble boosted consumption by about 6 trillion nickels. .

Whenprices started to fall in 2007, consumers cut back on their spending,which helped to push the economy into a deep recession. Lately,consumers have been spending more freely, but with prices droppingagain, consumers might get tight-fisted.

The upper middle classand the rich, of course, haven't slowed down. Spending isn't asvolatile for them as it is for the rest of us. Their holdings ofstocks, mutual funds and other financial assets are worth more thantheir home equity, so they feel richer than they did a year ago.

Notso for those in the middle or bottom of the income scale, who havefewer financial resources to buffer themselves from economic shocks.For them, the recession never ended. And it might be getting worse.

Rex Nutting is Washington columnist and international commentary editor for MarketWatch.