Home, Home I'm Deranged, Part 15

New home sales for 2010 hit the lowest level in almost five decades.

Sales for all of 2010 totaled 321,000, a drop of 14.4 percent from the 375,000 homes sold in 2009, the Commerce Department said Wednesday. It was the fifth consecutive year that sales have declined after hitting record highs for the five previous years when the housing market was booming.

The year ended on a stronger note. Buyers purchased new homes at a seasonally adjusted annual rate of 329,000 units in December, a 17.5 percent increase from the November pace.

Still, economists say it could be years before sales rise to a healthy rate of 600,000 units a year.

"The percentage rise in sales looks impressive but 10 percent of next-to-nothing is still next-to-nothing," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, referencing the December increase. "New home sales are bouncing around the bottom and we see no clear upward trend in the data yet."

Builders of new homes are struggling to compete in markets saturated foreclosures. High unemployment and uncertainty over home prices have kept many potential buyers from making purchases.

Home prices fell in November in 19 of 20 major cities measured by the Standard & Poor's/Case-Shiller index, and nine of those cities fell to their lowest point since the housing bust.

Economists expect prices will keep falling through the first six months of this year.

Gosh, of course I was saying that 2010 was going to be a dismal year for home sales back in 2009, just like I said home sales in 2011 would continue to be dismal back in 2010.  I stick by that now.   There's a pretty good chance 2011's new home sales will come in under 2010's 321k, because 321,000 new homes is about 320,000 too many new homes being built with millions of existing homes clogging the market.

And more homes will be adding to that glut as the housing depression continues and layoffs and Foreclosuregate rolls on.  Home prices fall, homeowners end up underwater and they cut back on spending, the economy sputters, people lose their jobs, people lose their homes and add to the supply, and home prices fall.

We're approaching the fourth iteration of this cycle now, which appears to take about 9-12 months.  It's now self-sustaining and attempts to break the cycle by the Obama administration have failed.  Foreclosure activity has now spread into markets at all levels, places like Houston and Atlanta that didn't see big bubble gains in 2006-2007 are now seeing double digit decreases in housing prices.  As the fourth wave of foreclosures begins, we're seeing now evidence that housing prices will remain depressed in places like Las Vegas and California's San Fernando Valley for a generation or more.

In other words, housing prices in several areas of the country are effectively permanently broken for decades.  There will be no economic recovery for these areas.  They've become the ghost towns of the 21st century.

And each new cycle will drop more areas into this semi-permanent limbo state.  Some places in the country are now beyond any help.  More will be written off as the housing depression continues well into 2012.  And as housing prices and property tax revenues fall, more and more cuts will be made to local services, more city and county workers will be laid off, and more damage will be done to the economy.

With the stimulus now used up, the real long march begins for America.