By Ian Swanson - 05/12/11 10:07 AM EDT
Home prices fell for the eighth straight month in March, highlighting a huge problem for President Obama.
While gas prices and the unemployment rate are getting more attention, those numbers are at least moving in the right direction.
To make things worse for Obama, some of the states most affected by the housing downturn will be key to his 2012 chances.
Florida saw prices including distressed sales fall by 10.6 percent in March 2011, according to CoreLogic, a housing analytical firm.
Large drops were also recorded in Ohio (-10 percent) and Nevada (-10 percent), two other swing states Obama moved to the Democratic column in 2008. Nationally, prices fell by 7.5 percent.
Experts predict prices will continue to drop through at least the end of the year, and say it’s possible 2012 could see prices drop further.
If there’s any good news in the numbers for the White House, it’s that the figures are skewed because of the “distressed sales” of homes that are under foreclosure.
In Florida, if distressed sales are excluded, home prices in the state only dropped by 2.5 percent. In Ohio, prices actually rose by 0.2 percent when distressed sales are left out, CoreLogic reported.
The problem is that there are a lot of distressed sales still to come. The National Association of Home Builders (NAHB) estimates that there are still 2 million to 4 million homes in the country in or near foreclosure.
One sign for optimism, according to David Crowe, the chief economist for the homebuilders, is that the ratio between home prices and income is steadily declining and nearing its historical norm.
Before the housing bubble burst, the ratio of home price to income was at an all-time high of 4.7, a rate that suggests many mortgage holders were getting deals that were too good to be true. As it turned out, they were.
The historical level is 3.2, a ratio that held steady through much of the 1990s. Today’s level, according to statistics compiled by NAHB, is 3.3.
The other thing Realtors, homebuilders and the White House will be watching for is increased demand, and there’s reason to think that will happen.
During the recession, millions of people quit buying cars and homes. That includes a number of college graduates and young couples who put off purchasing homes while the market was bad.
NAHB estimates a shadow demand of 2 million households.
A rebound in the housing market is, of course, related to the broader economy. That’s why last Friday’s labor report showing the economy added 242,000 jobs and that 265,000 were added by the private sector is good news for the housing market and the White House. If people are finding jobs, they are more likely to eventually buy homes.
One peculiar aspect of the recession was that it caused divorce rates to plunge. Couples couldn’t afford to hire lawyers to divide up possessions during economic hard times. In some cases, they couldn’t figure out what to do with their homes.
Now divorce rates are starting to spike up. A report in the Financial Times last month quoted a Las Vegas lawyer as saying there is “huge pent-up demand to split.”
“People no longer argue about who’s keeping the house, but about who’s stuck with it,” the lawyer told the newspaper.
Swanson is the news editor at The Hill.