NEW YORK (Reuters) – Home prices fell for the 53rd consecutive month in November, taking the decline past that of the Great Depression for the first time in the prolonged housing slump, according to Zillow.

Home prices have fallen 26 percent since their peak in 2006, exceeding the 25.9 percent drop registered in the five years between 1928 and 1933, the housing data company said in a report on Monday. Prices fell 0.8 percent over the month.

It is a dubious milestone for the U.S. housing market which has failed to gain much traction despite a host of government programs to reduce delinquencies and encourage demand with temporary tax credits and lower interest rates. Many economists expect further price drops, even if there are some anecdotal signs of growing demand, such as in pending home sales data.

“For the next six to nine months, the larger factors affecting the housing market that will produce more home price declines will be the excess inventory of homes, high negative equity and foreclosure rates, and weakened demand due to elevated employment, Stan Humphries, Zillow’s chief economist, said in a blog post.

Declines are accelerating, and it will take a while before falling unemployment and other signs of economic improvement support the market, Zillow said.

Home prices fell at a 0.78 percent pace in November, the fastest since February 2009, the company said.

(Reporting by Al Yoon, Editing by Kenneth Barry)

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www.SellMyHouse.com has been saying for a very long time that the HAFA program has been at best, a very iffy program. But last week the US Treasury implemented new rules to make short sales easier. We’ve heard this before of course.

Changes to HAFA:

- Short sale answers must come within 30 days
- Servicers are no longer required to verify a borrower’s financial information
- Servicers are no longer required to determine if the debt-to-income exceeds 31%
- Second lien holders no longer must accept 6% of the unpaid balance.

The goal of these changes is to expedite short sales, which is good news for home owners, realtors, investors and ultimately the banks.

As always, www.sellmyhouse.com will stay on top of the results for our Realtor and investor networks.

The www.SellMyhouse.com Team

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Last week Diana Olick of CNBC interviewed an investor who buys foreclosed properties and rents them out long-term for solid returns. He claims that’s the only way to right the housing market — get long-term investors to eat up the excess inventory. The biggest roadblock, however, is credit. Fannie Mae and Freddie Mac both limit the number of investor mortgages.

Fuse | Getty Images

Multiple sources now tell me that the Administration, specifically over at the Department of Housing and Urban Development, is considering ways to get more investors into the housing market, possibly with the help of Fannie and Freddie. HUD would not confirm that, but Fannie Mae’s chief economist Doug Duncan said it is definitely on the table both at HUD and at Fannie.

“We’re certainly exploring the opportunities to expand that,” said Duncan in an interview, cautioning, “the data in our own portfolio show that when you get to a certain number, like ten is the number we’ve chosen, if there’s any default issue, all the loans go bad at the same time, so at the present time we have two mandates, one is to help provide liquidity and help with funding, but the second is to protect taxpayers as well.”

No question that any such program would have to require investors to have significant skin in the game, that is, large down payments on all properties, and perhaps a designated capital reserve level to protect against losses. Underwriting would have to be stringent, unlike what went on in the heyday of the housing boom.

Part of the problem is that the Administration doesn’t want to spend any more money on housing, and it is particularly politically unpalatable to offer financial assistance to investors, who are widely blamed for causing the housing crisis in the first place. But we’re talking about a different kind of investor here. There is an awful lot of hedge fund capital just sitting on the sidelines, if and only if the banks would let them on the field.

With home prices falling yet again, a collective $1.7 trillion of collective home equity lost in 2010, according to Zillow.com, and mortgage rates rising, more potential home buyers are being priced out of the housing market. 23 percent of borrowers are now underwater on their mortgages, which means they can’t sell to move up. Inventories are still far above a healthy level, and the shadow inventory of foreclosed properties will only add pressure to prices. I’m sure the Administration is well aware of all that, which is why officials are putting ever more pressure on Fannie and Freddie to write down mortgage principal.

“The Administration believes strongly that the FHA short refi [which involves principal write-down] is a viable option to deal with borrowers with negative equity, and outright refusal to implement a program which could have economic value to the institutions bearing the risk, we think is shortsighted,” FHA commissioner David Stevens told me.

Whether it’s principal write-down or investor incentives, it is becoming ever more abundantly clear that the housing market is not going to right itself on its own without considerably more pain.

The www.SellMyHouse.com Team

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More bad news out of the housing market today as Zillow, a leading online real estate marketplace, released their third quarter report and it largely echos what we saw in yesterday’s Clear Capital report – the housing market is double dipping. Home values fell an average -4.3% in the third quarter. Stan Humphries, the Chief Economist at Zillow says the housing market decline is likely to surpass the Great Depression’s decline and that prices are unlikely to recover before next summer:

While not unexpected, the unceasing declines in home values signal that we’re in for a long, bleak winter of continued troubles for the housing market. The length and depth of the current housing recession is rivaling the Great Depression’s real estate downturn, and, with encouraging signs fading, will easily eclipse it in the coming months.

Humphries also said the number of foreclosures reached a new all-time high and that the number of homeowners under water on their loan has now reached 23% – a high this year. Humphries is not optimistic:

The high percentage of homeowners in negative equity continues to be troubling, in that it represents a huge number of people who are not only more vulnerable to foreclosure, but who are essentially trapped in their current homes and are prevented from selling and buying a new home. This has profound implications for future demand and will be a millstone around the neck of the housing market.

The housing market is playing out almost exactly as I’ve expected in recent years. This still remains a simple supply and demand story. The overhang of inventory is crushing meager demand and the mortgage mess isn’t helping matters as shadow inventory is pushed further into the future. If you thought the housing crisis in the USA was behind us you might want to think again. Housing was the domino that set the credit crisis in motion in 2007 and it could pose a very serious risk in 2011.

Source: Zillow

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