01/14/10 Baltimore, Maryland – It’s hard to picture 2.8 million homes. That’s about how many detached homes are in all of Pennsylvania or Illinois. It’s also how many homes were lost to foreclosure in 2009.
There were 3.9 million foreclosure filings last year, RealtyTrac reports today, 2.8 million of which resulted in foreclosure. That’s a record dating back to at least 2005 — when RealtyTrac started keeping track. We say it’s safe to call this one another “worst since the Great Depression” statistic.
Worse yet, RealtyTrac is planning on 3 million foreclosures in 2010. Makes sense – home prices are still way, way below what most people paid from 2003 to today. And 10-20% of the population is out of work… not the seeds of which a housing recovery is sewn.
So check out this bar-napkin math: Census says the average household is 2.59 people… times the 2.8 million homes this year and 3 million guess for 2010… that’s as many as 15 million people up the creek. OK, maybe half of those foreclosures were unoccupied homes… so 7-8 million — equal to the population of Virginia.
“The force of the correction is equal and opposite to the deception that preceded it,” is a dictum of Financial Reckoning Day. With that logic in mind, and the S&P/Case-Shiller Home Price Index, we’d be lucky to just get away with another 3 million foreclosures.
Ian Mathias
Ian Mathias is the managing editor of Agora Financial’s Income Franchise, where he writes and researches about retirement, dividend and fixed income investing. Much of his work is featured in The Daily Reckoning and Lifetime Income Report – Agora Financial’s flagship income investing advisory.
Previously, Ian managed The 5 Min. Forecast, a fun, fast-paced daily look into the future of global markets and macroeconomics. He’s also worked in public relations, where media outlets like Forbes, AP, Yahoo! and MSN Money have syndicated his writing. If he’s not at work, you’ll probably find Ian on a bicycle, racing up and down the “mountains” of Baltimore County. Ian has a BA from Loyola University in Maryland.
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Ian,
What does the graph look like adjusted for inflation? (Or has this been done?)
Ian, I have reservations about the utility of the Case-Shiller Index, simply because it tracks “same residence” sales, and simply whether the purchase/sale price increases or decreases since the last time that exact property was sold.
The data are flawed when there has been a HELOC draw-down in the interim.
A simple example: A detached house is purchased for $170,000 in a good neighbourhood in 1999. In 2005, it was refinanced to $670,000. In 2009, it was sold in a distressed sale for $370,000.
As you can see, someone has “lost” $300,000, yet the Case-Shiller Index (in my understanding) would list this as a $200,000 “gain”.
Unless my understanding is completely mistaken, the S&P Case-Shiller Index is not an acccurate representation of the increase or decrease in property prices.