2012 Real Estate Outlook: Where We Are Today

2012 Real Estate Outlook: Introduction
2012 Real Estate Outlook: The Rise (1980 - 2006)
2012 Real Estate Outlook: The Fall (2006 - 2011)
2012 Real Estate Outlook: Where We Are Today
2012 Real Estate Outlook: Where We Are Going
2012 Real Estate Outlook: Demand - Willingness
2012 Real Estate Outlook: Demand - Ability
2012 Real Estate Outlook: Supply - Local Market
2012 Real Estate Outlook: Supply - Shadow Inventory
2012 Real Estate Outlook: Conclusion
2012 Real Estate Outlook: Commercial Real Estate

In the fall of 2008, the banking system, holding a tremendous amount of subprime mortgages that were under water, had a heart attack and almost completely disintegrated. The collapse of Lehman Brothers froze the entire financial system around the world. Fannie Mae and Freddie Mac went under in August of 2008 and were nationalized. Home prices continued their free fall and the country entered into a depression with jobs disappearing from a nation that was dependent on real estate construction, sales, and financing.

Now, we will look at where we stand today, after six years of carnage in the real estate market from the peak in 2006. We’ll begin with home prices and the most recent data from the various indexes that track them nationally.

CoreLogic showed a 1.4% decline in December, now down 33.7% from the peak.

The Case Shiller index was down .7% in November and is now down 33.5% from the peak.

The LPS House Price Index was down .8% in October and like the previous indexes, it has hit a new post bubble low.

FNC and Zillow also reported month over month declines leading to new post bubble lows.

The state of the home building market can be looked at through building permits, housing starts, and housing completions.  All charts run from 1960 through present day.

Total Housing Permits:

Total Housing Starts:

Total Housing Completions:

Every chart shows that every phase of new home development (permits to starts to completions) is currently at depression levels. The numbers are staggering in that our population has grown significantly since 1960 and every chart is still at the trough of all time record lows.

This section has given us an overview of where we stand today in terms of the price structure and health of the home building market. Now, we get to the heart of the conversation: where we move forward from here. As I discussed in the introduction, the foundation of understanding how we arrived here is crucial to understanding where we are headed moving forward. We will re-layer this understanding and foundation with new data to extrapolate out into the future.

Next: 2012 Real Estate Outlook: Where We Are Going