New Home SalesCENSUS
306K
U.S. Housing Market · 2011
U.S. Housing Market in 2011
2011 trough306K new salesshadow inventory
Existing SalesNAR
4.26M
Median PriceNAR
$166,200
30Y MortgagePMMS
4.45%
2011 was the absolute low for new-home construction. Builders sold 306,000 new homes — less than 24% of the 2005 peak and the lowest reading in the entire Census series back to 1963.
The shadow inventory of distressed properties had reached 4.3M units by year-end. Foreclosed homes were being sold at deep discounts, undercutting builders who could not match the price/sqft of bank-owned inventory. Existing sales recovered slightly to 4.26M — but median prices fell again, to $166,200, the lowest since 2003. Mortgage rates averaged 4.45%, the lowest annual figure on record at the time.
Macroeconomic Context
Two thousand eleven brought a new form of uncertainty to an already fragile recovery: a self-inflicted fiscal crisis. Congressional Republicans and the Obama White House engaged in a months-long standoff over raising the federal debt ceiling, coming within days of a first-ever U.S. default before a last-minute agreement. Standard & Poor's nonetheless stripped the United States of its AAA sovereign credit rating in August — the first such downgrade in history — roiling equity markets and temporarily disrupting confidence in Treasury securities. GDP growth for the year was approximately 1.6 percent, below the pace needed to meaningfully reduce unemployment.
Internationally, the Eurozone debt crisis intensified throughout 2011, with Greece requiring a second bailout and contagion spreading to Italy and Spain. The European sovereign crisis created ongoing headwinds for global growth and periodically triggered flight-to-quality flows into U.S. Treasuries, paradoxically keeping American mortgage rates low despite the domestic fiscal drama. The Federal Reserve launched Operation Twist in September, selling short-term Treasuries and buying long-term bonds to further compress long-term yields without expanding its balance sheet.
Consumer price inflation ran approximately 3.2 percent, elevated partly by energy costs following the Arab Spring and Libyan civil war. Unemployment averaged 8.9 percent. The housing market continued to suffer from a large shadow inventory of distressed properties, with foreclosure timelines lengthening as servicers navigated the aftermath of the robo-signing scandal. Home prices hit multi-year lows in many markets. The bottom was near but not yet visible in the data — that clarity would come in 2012.