Housing market entering depression status nationwide

CNBC reported yesterday that the housing market nationwide is now officially in a "depression":

Home values have fallen 26 percent since their peak in June 2006, worse than the 25.9-percent decline seen during the Depression years between 1928 and 1933, Zillow reported.

November marked the 53rd consecutive month (4 ½ years) that home values have fallen.

What’s worse, it’s not over yet: Home values are expected to continue to slide as inventories pile up, and likely won't recover until the job market improves.

Zillow includes the following graph:


Zillow housing graph

Each year in gray shows a decline. The uptick following 2008 is merely a decline in the rate of decrease, not an actual increase in values or prices.







While most commentators think that the housing market will improve only when employment numbers improve, the real cure for this depression would be for the government to allow prices to fall. At some point, prices would finally reach the point where they should be - where real estate is affordable to consumers without the need for a credit bubble to spur buying. The government only delays this process by propping up prices with stimulus money, targeted tax credits, etc.