An Even Bigger Housing Collapse

Things are not just bad in the U.S. housing market: They’re worse. The National Association of Realtors has just revised the data from property sales published since 2007 after finding that, in many cases, properties were counted more than once.

The Realtors group had already given a warning about the adjustment. But this doesn’t keep the announcement from feeling like a bucket of cold water, thrown just when it seemed that the industry had begun to bottom out after five years of contraction, during which time house prices fell to the level of 2003, the end of the last recession.

As a result of this counting error, the Association now confirms that sales in the period subject to revision were 14.3 percent lower than originally stated. It is enough to further undermine, in a never-ending spiral, the already fragile morale of property owners and those seeking to buy.

The contraction experienced in the property industry is now considered the worst in the history of the United States, with an average price drop of 30 percent. This has lead to many homeowners having a mortgage debt greater than the value of their properties, with 6.2 million in arrears.

The reason for this counting error is twofold: The data from the property market is not properly filtered and some properties appear listed more than once. If it’s any consolation for the homeowners in hardship, the Realtors group’s revision does not affect the prices of their properties.

The revision also does not change new home sales, which the Census Bureau publishes with data provided by the Department of Housing and Urban Development. Therefore, it cannot be used as a reference for the state of the construction sector. It is also not expected to have an impact on banks’ portfolios.

But the market dictates itself. And what remains to be seen is how this change in perception of the evolution of the property market over the last five years can affect the economy in general, in terms of confidence, and the property sector in particular.

Economists have been pointing out since the beginning of the crisis that the depression experienced in the real estate sector is the biggest obstacle to recovery, and they are crying out for measures that will allow it to stabilize. The Federal Reserve could therefore see itself forced to reactivate the purchasing of mortgage debt.

Before having detailed knowledge of the Realtors group’s revision, the National Association of Home Builders announced an increase of 9.3 percent in the initiation of new projects, to 685,000 units annually. It is the highest level in 19 months, although it is still 1.2 million units below normal.

The sector’s activity is expected to improve throughout 2012. But as with the boom that began in 2003, the progress is not geographically uniform. And it can be seen that the largest increase is taking place in buildings with more than five apartments, instead of single houses.