The Housing Chronicles...

Let's start with a March 31 report that shows "all cash" sales in housing are at record highs (gee, that makes buying a house soooo much easier for 95% of the population).

Nationwide, cash buyers grabbed 33 percent of all used homes sold in February, the National Association of Realtors reported March 21. The figures, based on agent reporting, do not include foreclosure auctions on courthouse steps, which are usually cash-only.

In early May, Flopping Aces had a great post about "The Housing Recovery That Wasn't". The numbers and charts are staggering.

Capt. Ed then posted about how the home buying credit from last year really didn't do much for the market.

"... it turned out to be a pretty bad deal for those who used the credit as well as taxpayers. Thanks to the artificially higher home prices that the tax credits provided, buyers have lost almost twice as much in value as the credit itself, and in some cases 150% more..."

The AP then talks about how the low interest rate on mortgages aren't helping matters much because:

In many metro areas, real estate is straining under the weight of foreclosures, higher down-payment requirements, tighter credit, still-high unemployment and buyers' expectations of even lower prices.

"If people aren't confident about the economy, about jobs and home prices, they certainly aren't going to sign up for the biggest purchase of their lives," said Greg McBride, a senior analyst at Bankrate.com.

Then April's existing home sales slipped nearly 1%.

And new housing starts fell nearly 11% that same month.

"The Census Bureau reported today that the annualized rate of new residential starts dropped over 10 points from March to April, and that single-family starts dropped 5.1%. Permit applications also declined by 4%, which indicates that no one sees much hope for renewed demand in the market."

Reuters, then, stated the obvious:

Residential construction is being crowded out by an oversupply of used homes on the market, in particular, foreclosed properties, which sell well below their value.

Jazz Shaw at Hot Air asks the all-important question - "Where have all the home buyers gone?":

The four worst states for housing sales were Arizona, California, Florida and Nevada. But regionally, the biggest drop came in the Northeast. So who were the big winners? Among them, South Carolina and Texas. One of the biggest individual losers in the Northeast? Connecticut.

What do the elements of this tale have in common? States embracing right to work laws and electing legislatures who are lowering taxes to attract businesses which bring jobs are seeing growth in housing sales. States who seek to balance their budgets on the backs of higher taxes and engage in anti-business practices are seeing their populations flee and their houses go unsold.

By the end of May, housing foreclosures still accounted for 28% of all homes sold. That's still six times higher than normal.

Foreclosure sales, which include homes purchased after they received a notice of default or were repossessed by lenders, hit the highest share of overall sales in a year during the first quarter, foreclosure listing firm RealtyTrac Inc. said Thursday.

"It's an astronomically high number," said Rick Sharga, a senior vice president at RealtyTrac. "In a normal market, you're looking at the percentage of homes sold in foreclosure to be below 5 percent."

The pace at which homes are entering the foreclosure process has slowed in recent months amid bank and court delays. But distressed properties remain a fixture of a housing market still searching for a sustained recovery. The properties, often in need of repair, typically sell at a discount, weakening prices for other types of homes...

The report continues:

Bank-owned homes accounted for nearly 19 percent of all sales, up from 17 percent in the fourth quarter and up from 18 percent a year ago, the firm said.

That's not good news for the housing market.

RealtyTrac estimates there are 872,000 homes that have been repossessed by lenders, but have yet to be sold. At the first-quarter's sales pace, it will take three years to clear the inventory of 1.9 million properties already in some stage of foreclosure.

For bank-owned properties alone, that amounts to a 2-year supply.

And how about in my neck of the woods?

In California, foreclosure sales accounted for 45 percent of all home sales in the first quarter, down from nearly 48 percent a year earlier.

The nationwide home-price index has fallen to such an extent that:

Prices have now fallen further since the bubble burst than they did during the Great Depression. It took 19 years for the housing market to regain its losses after the Depression ended....

...Many economists think prices nationally will drop at least 5 percent more by year's end. They aren't likely to stop falling until the glut of foreclosures for sale is reduced, employers start hiring in greater force, banks ease lending rules and would-be buyers regain confidence that a home purchase is a wise investment.

"Folks are having so much difficulty in getting financing for a home," said Mark Vitner, senior economist at Wells Fargo. "It may be early next year before prices hit bottom."

Another obstacle to a rebound in prices: A delay in processing foreclosures. Homes in foreclosure sell for, on average, 20 percent discounts. When they do, they pull prices down further. But many foreclosure sales have been delayed while federal regulators, state attorneys general and banks review how those foreclosures were carried out over the past two years.

Once those homes are eventually foreclosed upon, they will trigger a further price drop in many markets. Those declines are "etched in stone," said Patrick Newport, U.S. economist at IHS Global Insight.

Judson Burger picks up on the state of things in this report:

The bleak prediction comes after he released a report estimating that since the collapse began from the pricing peak of 2006, prices have fallen 33 percent -- more than the 31 percent dive recorded between the 1920s and 1930s.

Remember, though, that the boom from 1998-2006 was severely artificially inflated to more than triple in just eight years. He continues:

The data underscores the trouble the U.S. economy is having emerging from what is described as the worst recession since the Great Depression. "The sharp fall in house prices in the first quarter provided further confirmation that this housing crash has been larger and faster than the one during the Great Depression," the analysis said.

Dales said the collapse has eclipsed that of the Great Depression because the boom that preceded it was much bigger. Unlike during the 1920s, access to the housing market was far more open leading up to 2006.

"This boom was characterized by homeownership becoming the norm for pretty much anyone," Dales said, noting that the boom has effectively been thrown in reverse.

A key sentence here:

Nationally, prices hit a new post-collapse low in the first quarter, and have returned to roughly 2002 levels.

Exactly! It still needs to get back down to 1998 levels (adjusted to the low inflation rate over these last 13 years). Which is why home prices still need to drop (and will drop) over the next 1 to 2 years.

And then yesterday's AP report just continues with more of the same:

Home sales sank 3.8 percent last month to a seasonally adjusted annual rate of 4.81 million homes, the National Association of Realtors said Tuesday. That's far below the roughly 6 million annual sales rate typical in healthy housing markets.

Since the housing boom went bust in 2006, sales have fallen in four of the past five years. Analysts say they expect sales to level off at about 5 million a year. That's not much better than the 4.91 million homes sold last year, the worst showing in 13 years...

...One sign of the housing industry's struggles is that fewer first-time buyers are entering the market. The number of first-timers ticked down to 35 percent of sales last month. In healthy times, they drive about half of sales.

First-time buyers are critical because they tend to improve their properties and invest in their communities, a combination that raises home values. And their purchases allow sellers to move up to pricier homes.

Instead, the market has been saturated with foreclosures...

...Bigger required down payments, tougher lending rules, heavy credit-card and student-loan debt and a shortage of desirable starter homes are keeping many would-be buyers away. Even some who do have enough money for a down payment and a solid credit history are holding off, worried that home prices will keep falling.

Investors are filling some of the void. They are spending cash to scoop up deeply discounted homes in hard-hit areas of Phoenix, Las Vegas and Tampa. Last month, investors accounted for 19 percent of all sales.

Peachy, ain't it?