The real estate market is already in the deepest depression in modern U.S. history. If you think it can’t get any worse, think again. In several cities, the real estate market is about to drop even more. Home values in many of those cities, such as Las Vegas, have already collapsed as unemployment has shot higher. And with no hope of quick recovery, housing prices are expected to continue to fall. 24/7 Wall St. identified ten housing markets that are expected to drop by at least another 10% by 2012.

Methodology: We used data from the Fiserv Case-Shiller Indexes, which track real estate activity in 380 cities. We selected those that are forecast to have the largest percent price drop between the first quarter of this year and the first quarter of next. We added several other pieces of information to our city-by-city information, including June unemployment levels, median household income, and when home prices are expected to reach their troughs in each market.

Median household income in these cities tended to be near the U.S. median, and in some cases well below. We expected to find high unemployment in these cities. This turned out to be the case. In all but one of the cities we examined, unemployment was well above the national average. The rate was over 18% in two of the cities. This link between unemployment and expected future drop in home prices shows again how insidious the housing price problem is.

Home prices fell from all-time highs in 2006. Home equity tapped by second mortgages had been a tremendous source of income then for families who used it for retirement saving, education, and simple consumer purchases. Three years later, many of those homes were worth less than their mortgages. A large population of homeowners still owed a second mortgage. The burden of those two home loans happened to come at a time when national unemployment rose from 4% in the mid-2000s to 10%. The mix of unemployment and high mortgage payments ripped the home market apart.

The ten markets on the 24/7 Wall St. list of “Housing Markets That Will Collapse This Year,” and several others like them, may not see a full recovery in home prices for years. Inventories in these markets tend to be large. Demand tends to be low as the unemployed cannot be buyers. Finally, fear of further price drops all exacerbate the problem. No person or organization, including the federal government, has been able to help support the housing market, although the Administration has tried. Not a single plan has built even a thin net under home values, despite the best efforts of the best economic minds in the world.

1. Naples, Florida

Expected price drop: -16.6%
Median family income: $62,800 (137th highest)
Unemployment rate: 10.5%
Median home price: $225,000 (40th highest)
Projected to hit lowest level: Q4 2012

Like much of southwest Florida, Naples was one of the fastest-growing communities in the country as it prepared for the millions of baby boomers on the cusp of retirement. When the housing bubble burst, however, the thousands of construction projects for condominiums and retirement communities were halted or lost money, and home values plummeted. From peak home value in 2006, prices dropped by 55%. They are expected to keep falling through next year more than any major city in the country. By Q1 2012, home values will drop an additional 16.6%, or nearly $40,000.

2. Riverside-San Bernardino, California

Expected price drop: -15.6%
Median family income: $59,700 (190th highest)
Unemployment rate: 13.7%
Median home price: $181,000 (70th highest)
Projected to hit lowest level: Q1 2012

Like so many industrial cities in California, Riverside-San Bernadino is being affected by the recession and housing crisis more than most other parts of the U.S. Unemployment has hit 13.7%, home vacancy and rental vacancy rates are high, and home values are plummeting. Median home prices are down more than 55% from their peak in 2006. By the beginning of next year, prices are expected to drop an additional 15.6%, or nearly $30,000.

3. Las Vegas, Nevada

Expected price drop: -13.9%
Median family income: $58,900 (196th lowest)
Unemployment rate: 12.4%
Median home price: $140,000 (90th lowest)
Projected to hit lowest level: Q4 2012

Las Vegas was one of the center points of the meteoric growth in the first half of the 2000s, only to be followed by a catastrophic fall in the second half. Between 2008 and 2011, home prices in the city dropped by 42.3%, the second greatest decline in the country. Although home values in the city are already more than 58% off their peak, they are projected by Case-Shiller to drop an additional 13.9% by Q1 2012, and then 6.3% more by Q1 2013.

4. Detroit, Michigan

Expected price drop: -13.4%
Median family income: $49,000 (47th lowest)
Unemployment rate: 12.7%
Median home price: $42,000 (the lowest median home price)
Projected to hit lowest level: Q2 2012

Since the recession began, Detroit has been the horror story for plummeting home values, foreclosures, vacancies, and unemployment. To date, Detroit’s median home price of $42,000 is the lowest among all 385 major metropolitan areas. While the Motor City has been languishing for some time before the recession, the drop in home value has been more steady, as opposed to the rapid drop-offs seen in cities in Florida, Nevada, and California. Detroit’s already record-low values are expected to drop an additional 13.4% by the first quarter of 2012.

5. Merced, California

Expected price drop: -13.2%
Median family income: $42,900 (8th lowest)
Unemployment rate: 18.6%
Median home price: $112,000 (38th lowest)
Projected to hit lowest level: Q2 2012

Merced, California, has a median family income of just $42,900, placing it among the ten poorest major cities in the country. In 2008, the city’s property lost 46.1% of its value. This was the second-greatest depreciation in home value for a city since at least 1980. The city’s median home prices are expected to drop an additional 13.2% by the beginning of next year.

6. Miami, Florida

Expected price drop: -13%
Median family income: $47,800 (32nd lowest)
Unemployment rate: 13.4%
Median home price: $175,000 (76th highest)
Projected to hit lowest level: Q2 2013

At 13.4%, Miami has one of the highest unemployment rates of any major American city. Home values are above average, but are down by more than 50% since 2006. Partially as a result of the staggering unemployment rate, the value of the city’s homes are projected to decrease by another 13% by the first quarter of 2013. What’s more disturbing: Prices will then likely fall an additional 10.1%. If this second drop occurs, it will be by far the greatest depreciation of property values in the country in an area already decimated by current low prices.

7. El Centro, California

Expected price drop: -12.1%
Median family income: $43,300 (10th lowest)
Unemployment rate: 28.6%
Median home price: $130,000 (70th lowest)
Projected to hit lowest level: Q1 2012

El Centro, California, is located five miles from the Mexican border, and is one of the poorest cities in the country. Median income is just $43,300 per family, the tenth-lowest in the U.S. Unemployment is at a staggering 28.6%. Between 2006 and 2011, home prices decreased by more than 50%. According to a report in the Imperial Valley Press, one home was sold in the El Centro area before the recession for $390,000. In 2009, that home was listed at $200,000. Prices are expected to drop an additional 12.1% by the first quarter of 2012.

8. Salinas, California

Expected price drop: -11.8%
Median family income: $62,100 (145th highest)
Unemployment rate: 12.8%
Median home price: $240,000 (34th highest)
Projected to hit lowest level:  Q2 2012

Salinas, California, is a small coastal city located 25 miles south of San Jose. Since 2006, the median value of the 125,000 houses there decreased in value by more than 61%. This is the fourth biggest decline from peak home value among all major American cities. More than 40% of this drop occurred in 2009, the year after the housing bubble burst. Unemployment in the city is at 12.8%, well above the national average of 9.2%. Several companies in the area, including food processing company Romco, expect to continue to lay off workers in the coming months, which should serve to further depress home values.

9. Bethesda, Maryland

Expected price drop: -11.5%
Median family income: $114,100 (the highest)
Unemployment rate: 5.1%
Median home price: $417,000 (5th highest)
Projected to hit lowest level: Q3 2012

Bethesda, the extremely wealthy D.C. suburb, has the highest median family income in the country — $114,100. It also has the fifth highest median home price, at $417,000. That position may change, however, as Case-Shiller projects home values will drop by more than $60,000 by next year.

10. Fort Lauderdale, Florida

Expected price drop: -11.1%
Median family income: $58,800 (194th highest)
Unemployment rate: 11.8%
Median home price: $196,000 (55th highest)
Projected to hit lowest level: Q2 2013

Since 2006, home prices in Fort Lauderdale have dropped by nearly 50%. A full 28% of that drop occurred in 2009 alone. As was the case throughout most of Florida, the collapse of the housing bubble decimated the construction-based economy. The unemployment rate of nearly 12% is evidence of the construction sector’s disastrous decline. The value of the 686,000 homes in the Fort Lauderdale area is expected to get even worse through at least the second quarter of 2013. Between Q1 2011 and Q1 2012, the median home price is projected to decline an additional 11.1%. Between 2012 and 2013, that number will further decrease by 8.7%.

Goldman’s economist Jan Hatzius looked at the University of Michigan and Thomson Reuters poll, which asks consumers whether they believe their family income will rise more than inflation in the next 12 months. Hatzius applied a six-month moving average to smooth out the data and found that wage pessimism is at its lowest in more than two decades.

“Households are already very pessimistic about future real income growth,” wrote Goldman’s economist to clients. “A slowdown in job growth would presumably translate into a further deterioration in (expected and actual) real income growth. This would heighten the downside risks to our current forecast that real consumer spending will grow 2.5 percent to 3 percent over the next year and might call for another downward revision to our forecast for US GDP growth in 2011 and 2012.”

Real hourly wages have dropped 2.1 percent on an annualized basis over the past six months, a rate of decline not seen in 20 years, according to Goldman. This analysis is backed up by the other most-watched consumer survey from the Conference Board, which indicated earlier this week that the proportion of consumers expecting their incomes to increase was below 15 percent in May.

“I am much more concerned that the second half resurgence we all expect never arrives and by early 2012 we are in a recession,” said Joe Terranova, chief market strategist for Virtus Investment Partners and a ‘Fast Money’ trader.

S&P 500 Index (.SPX) 1300.16     -12.78  (-0.97%%) INDEX

Stocks [.SPX  1300.16    -12.78  (-0.97%)   ] are sliding in June ahead of the monthly jobs report released on Friday. Economists have slashed the number of jobs they believe were added last month as a string of recent economic data have pointed to a slowdown. The 10-year Treasury [US10YT=XX  2.996    0.003  (+0%)   ] yield broke below 3 percent Wednesday as investors bought bonds as a safehaven in case of the slowing economy.

The fact that income expectations are so low, makes the jobs outlook that much more important, argues Goldman and other investors. These same surveys show that consumers are not nearly as pessimistic about job growth. So once enthusiasm on the labor front is dented at all, then all aspects of consumer confidence are lost.

“The labor market is particularly important because household finances currently seem even more dependent on job growth than they are normally,” said Hatzius.

A typical recovery pattern goes like this: stock market bottoms, economic growth bottoms and then hiring and wage increases return. What’s unique and scary about this recovery is that the last piece of the recovery is not there.

In the 2001 recession, the country lost 2 percent of jobs from peak employment and then made that back in a 48- month cycle, according to data from money management firm Trutina Financial. In 1990, the jobs lost during the recession were recovered in 30 months.

Right now, about 38 months from peak employment during the housing boom, there are still six percent fewer jobs out there. Making up that amount of jobs in 10 months or less would be unprecedented, if not impossible.

“The crawl out of this economic ditch is going to be long and slow,” said Patty Edwards, chief investment officer at Trutina. “Even if they’re employed, many consumers aren’t earnings what they were two years ago, either because they’re in lower-paying jobs or not getting as many hours.”

For the best market insight, catch ‘Fast Money’ each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC.

By Andrea V. Brambila, Wednesday, May 18, 2011.   Inman News™

Flickr image courtesy of crabchick.

With home prices threatening to double-dip nationwide, most consumers don’t expect a housing recovery in the near term, according to a survey from property search and marketing site Trulia and foreclosure data site RealtyTrac.

Market research firm Harris Interactive conducted an online survey on behalf of the sites from April 15-19, 2011. The survey garnered 2,018 responses from U.S. adults — 1,257 were homeowners, 704 were renters, and 57 identified themselves as neither.

More than half of respondents, 54 percent, believe the housing market won’t recover until 2014 or later, up from 34 percent in a similar survey in November 2010.

While many experts predicted an improvement in the housing market this year, “We’re actually backtracking,” said Pete Flint, Trulia’s CEO.

“Foreclosures still continue to be a major part of the housing market, and as a result housing prices continue to drop. Even with mortgage rates still below 5 percent, the fact is, against a backdrop of joblessness, (even high affordability has) made consumers more skeptical where the housing market is concerned.”

For instance, renters who were interested in buying a home said they would wait two years before doing so, Flint said.

He predicted it would be another 18 months before home prices begin to stabilize.

“I expect the rest of 2011 to continue to be volatile,” he said. “Buyers can anticipate a big summer clearance on real estate,” he added.

Rick Sharga, senior vice president of RealtyTrac, expects prices to bottom this year.

“We’re not expecting a bounce off that bottom. (Prices will) flat-line there for the next couple of years and (we won’t see) prices increasing in any real manner until, best-case scenario, 2014,” Sharga said.

While most survey respondents also chose 2014 as the light at the end of the tunnel for the housing market, 24 percent of respondents — the same share as in the November survey — believe the market will recover in 2013. Some 15 percent of respondents say the market will recover in 2012, down from 27 percent six months ago.

Three percent think the market will recover at the end of this year, down from 10 percent six months ago. The same share, 5 percent, thought the market had already recovered.

Neither Flint nor Sharga believed the possibility that the mortgage interest deduction would be eliminated was keeping buyers away from the market.

Nevertheless, about 40 percent of surveyed renters said they won’t ever buy a home. “That suggests that it’s really a bad time to take away the incentives for people to buy homes,” Sharga said.

While there has been considerable debate at the national level surrounding the Obama administration’s Home Affordable Modification Program (HAMP) and the Home Affordable Foreclosure Alternatives Program (HAFA), the survey results indicate that nearly half (45 percent) of Americans want the government to do more to prevent foreclosures.

Of the respondents, 17 percent said too much was being done, while 16 percent the right amount was being done. More than one-fifth of respondents, 22 percent, were not sure.

“Many of these programs have been nothing more than a Band-Aid on a hatchet wound,” Flint said.

The prevalence of foreclosures in the market is likely a major factor in negative sentiment toward the government, the survey report said.

“Almost one-third (30 percent) of homeowners self-reported that they have or know someone who has applied for or received a loan modification, stopped paying their mortgage, foreclosed, walked away or … sold their home (in a short sale),” the report said.

Interest in foreclosures remains high. Among renters, 56 percent said they are at least somewhat likely to purchase a foreclosed home. Among homeowners, 47 percent said they are.

On average, respondents expected to pay 38 percent less for a foreclosed home compared to a similar, nondistressed home. That discount is fairly realistic — the average discount on an REO (bank-owned) home in 2010 was 36 percent, according to RealtyTrac.

However, “that interest isn’t quite high enough to burn through the inventory that’s out there,” Sharga said.

“Even if banks weren’t to foreclose on a single property this year, we have a nearly two-year supply of REOs before we burn through the inventory.”

“At the moment, there are over 900,000 properties on the banks’ books, but less than 30 percent are listed for sale. So there’s a 600,000 backlog. There is plenty of distressed inventory on the market with a boatload yet to come,” he added.

Sharga said he doesn’t see banks flooding the market with REO properties.

“(That) would cause another double dip in home prices and conceivably cause another wave of foreclosures as home prices (decline). They will put them on the market probably only as fast as they can sell them,” he said.

Foreclosure activity has fallen year-over-year for the past seven months, he said, largely due to controversy surrounding foreclosure documentation and procedures that prompted many major lenders to temporarily halt some foreclosure proceedings.

Lenders have had to refile tens of thousands of foreclosure proceedings, and those proceedings have received far more scrutiny in judicial foreclosure states, Sharga said. Law firms that used to handle such proceedings have also gone out of business or been ordered to stop handling them, so other firms have had to be trained to handle foreclosures, he added.

“I believe most of these things will be nailed by the end of the second quarter and we’ll start to see foreclosure activity where it should be sometime in the third quarter,” Sharga said. source: inman news

If you thought the housing crisis was bad, think again.

It’s worse.

New data just out from Zillow, the real-estate information company, show house prices are falling at their fastest rate since the Lehman collapse.

Average home prices are down 8% from a year ago, 3% over the quarter, and are falling at about 1% every month, according to Zillow.

And the percentage of homeowners in negative-equity positions — with a home worth less than its mortgage — has rocketed to 28%, a new crisis high.

Zillow now predicts prices will fall about 8% this year and says it no longer expects the market to bottom before 2012.

“There’s no way we can get to flat, from these depreciation levels, in the last nine months of the year,” says Zillow economist Stan Humphries. “Demand is a lot more anemic than we had previously thought.”

When in 2012 does Zillow see the market bottoming out? Humphries won’t say.

What a foolish boondoggle those tax breaks for home buyers have turned out to be. The government spent an estimated $22 billion between 2008 and 2010 on tax breaks to prop up the housing market. All it achieved was a brief suckers’ rally that ended last summer.

“As we said at the time, it was a giant waste of money,” says Mark Calabria, economist at the conservative Cato Institute. “None of these things really turned the housing market around. They just put off the adjustment for awhile.”

It’s hard to overestimate the scale of the carnage in the housing market. Zillow found prices fell in all but four U.S. metro areas.

Falling real-estate prices mean spiraling hidden losses throughout the economy, from banks to homeowners.

Remember Japan’s “zombie banks”? These were the financial institutions that haunted that country’s economic recovery after the 1990 crash. They staggered on with huge losses they could never repay — the walking dead.

Here in America we have “zombie homeowners.” Millions of them. According to Zillow, a record 16.3 million families are upside-down on their home loans. Sixteen million! And many are a long way upside-down. Their homes may never be worth as much as their mortgage. But they are hemorrhaging cash to pay the nut every month.

Recovery? What recovery? This looks a bit like a depression to me.

What does this mean?

All the misery makes me think of a great French general, Ferdinand Foch. He’s the one who defended Paris at the Battle of the Marne in World War I. During the darkest hour of the fighting, he is supposed to have looked around him and said:

“Hard pressed on my right. My center is yielding. Impossible to maneuver. Situation excellent — I attack!”

In other words, when it comes to distressed housing, I’m finding it hard not to be a contrarian bull.

Why? Am I crazy?

Well, maybe. But I’m a medium-bull for all the reasons everyone else is gloomy.

First, prices in many areas are now cheap. They have corrected a long way since the bubble began to burst five years ago. Of course, it depends on where you are. I’m still skeptical of the real-estate markets that have held up best — prime stuff like Manhattan, San Francisco or Beverly Hills. It’s hard to get a deal there.

But in the places that have fallen the furthest, there are deals aplenty. Zillow found only four metro areas in America that have leveled out, or risen, lately. Notably, two of those are in stricken Florida — Fort Myers and Sarasota. Have they fallen so far they’ve hit bottom? Maybe.

Look at this chart. It shows Miami real-estate prices, adjusted for inflation, over the past quarter-century, using Case-Shiller data. The picture is pretty remarkable. The gigantic bubble has been completely wiped out. We’re back to prices seen in the 1980s — when “Miami Vice” was on the air.

The second reason: There are tons of foreclosures and short sales on the market. And there are plenty more sitting in the wings. Banks are holding back big shadow inventories of homes. And that means you can get a great deal. They have to sell. You don’t have to buy. You hold all the cards. Remember, the name of the game isn’t “let’s make a deal.” It’s “take it or leave it.”

Third, in many places rental yields are terrific. It’s cheaper to own than to rent. There have been some forced sales in my building in Miami. Based on my math, the latest buyers have bought condominium units for six times gross annual rents, and maybe 12 times net rents. We’re talking net yields of 7% or more. And rents are rising, because so many former owners are now renters.

The fourth reason I’m bullish is that you can get a very cheap mortgage. Thirty-year conforming loans are going as low as 4.3%. Throw in the tax break on the interest, and you are talking cheap finance.

The fifth reason is that, as painful as this collapse has been, real estate has historically proven to offer very good long-term protection against inflation. Returns have typically averaged about 1% or 2% above inflation. At a time when everyone has been piling into gold, commodities and TIPS bonds to protect themselves against the possibility of inflation, it seems odd that the most popular and successful hedge, namely real estate, goes a-begging.

Thirty-year TIPS bonds are yielding just 1.6% over inflation, and shorter-term bonds offer even lower returns. Short-term TIPS are actually offering negative real yields.

The sixth reason I’m bullish is perverse, but I’m sticking by it. Everyone else is bearish. You cannot find a real-estate bull anywhere. No one wants to own this asset. No one wants to talk about it. No one wants to hear about it. Everyone seems to agree it’s just going down, down, down — forever.

They said much the same about stocks in 1987, 2002 and 2009; Treasury bonds in 1982; and gold in 2000. I cannot prove this is capitulation, but it sure smells something like it.

As ever, if you aren’t disciplined and patient, this probably isn’t for you.

I have absolutely no idea when real estate is going to hit rock bottom. It may take several years. I suspect it will do so in different markets at different times. But there are good homes out there going really cheap. If you hunt down the bargains, you’re disciplined about price, you get the right financing, and you hold on for five years or more, you’ll probably do pretty well from here.

Brett Arends is a senior columnist for MarketWatch and a personal-finance columnist for the Wall Street Journal.

The nation’s economic stress inched up in December because higher foreclosures outweighed lower unemployment, according to The Associated Press’ monthly analysis.

Bankruptcy levels remained largely unchanged from November. But the depressed housing market took a toll. Foreclosure rates rose in 33 states, most sharply in Utah, New Jersey, Nevada and Arizona.

Most analysts expect the economy to gain momentum this year, in part because of a tax-cut package that lowers workers’ Social Security taxes and puts more money in their paychecks. But two straight months of higher stress to end 2010 marked a setback after the nation’s economic pain had eased since the start of last year, the AP Economic Stress Index showed.

The AP’s index calculates a score from 1 to 100 based on unemployment, foreclosure and bankruptcy rates. A higher score signals more stress. Under a rough rule of thumb, a county is considered stressed when its score exceeds 11.

The average county’s score in December was 10.4, up from 10.3 in November. Slightly more than 40 percent of the nation’s 3,141 counties were deemed stressed, up slightly from November.

For all of 2010, economic stress eased in every state but five: Colorado, Florida, Georgia, Nevada and Utah. Stress fell most sharply in the Great Lakes states and the Southern states of Alabama, Mississippi and Tennessee. Those states have large manufacturing bases, and the AP analysis showed that stress dropped most in counties with large proportions of workers in manufacturing.

U.S. manufacturers are finally adding jobs after years of shrinking their payrolls. They added 136,000 workers last year, the first net increase since 1997. And in January, the manufacturing sector added 49,000 jobs — the most in any month since August 1998.

For 2010, the sharpest increases in economic stress occurred in counties with heavy concentrations of real estate workers.

Nevada was again by far the most troubled state with a Stress score of 22.56. It was followed by Florida (16.47), California (16.36), Georgia (14.5) and Arizona (14.46). Among those five, only Nevada’s Stress score rose from November to December.

And once again, the healthiest states were in the Plains and New England. North Dakota had the lowest Stress score in December: 4.65. It was followed by Nebraska (5.38), South Dakota (5.69), Vermont (6.19) and New Hampshire (6.95).

Nationally, the unemployment rate has sunk over the past two months, from 9.8 percent in November to 9 percent in January. But hiring remains weak because employers still lack confidence in the economy.

Most analysts say the tax-cut deal that took effect this year will help. Extra take-home pay could lead consumers — who fuel about 70 percent of the economy — to spend more.

“The tax deal provides the economy with some significant juice that will lead to better growth, better job creation and lower unemployment,” said Mark Zandi, chief economist at Moody’s Analytics.

In December, stress increased the most in the West. That was due primarily to worsening bankruptcies and foreclosures. Foreclosures in the nation’s hardest hit communities in California and Florida have dipped in recent months. But they’ve risen in areas like Seattle; Salt Lake City; Albuquerque, N.M.; and Greeley, Colo.

In December, Georgia joined the list of five most-stressed states for the first time, and Michigan emerged from the list for the first time. The Stress Index’s calculations date to October 2007.

Michigan is benefiting from having missed the real estate bubble and bust. It’s also managed its budget better than most other high-stress states have. Job hemorrhaging has been stanched, in part because of a more stable manufacturing sector. The state is expected to end 2011 with job gains for the first time in nearly a decade.

Many of the new jobs are in health care and professional services, though manufacturing is also adding jobs thanks to demand from overseas, said Hari Singh, an economist at Grand Valley State University in Grand Rapids, Mich.

“Manufacturing is definitely having a turnaround,” Singh said.

In Georgia, the unemployment rate has risen steadily since July. So have foreclosures and bankruptcy filings. Georgia has the second-highest bankruptcy rate at about 2.2 percent, trailing only Nevada. It’s also saddled with the seventh-highest foreclosure rate.

Its troubles stem from the state’s real estate boom and collapse, said Rajeev Dhawan, an economist at Georgia State University.

“Bankruptcies and foreclosures are the side effects of the damage from the real estate bust,” Dhawan said. “First, you have the real estate problem, and then it’s going to spill over into bankruptcies and foreclosures. That is what has been happening in Georgia.”

In December, the most economically stressed counties with populations of at least 25,000 were Imperial County, Calif (32.39); Lyon County, Nev. (27.56); Nye County, Nev. (25.91); Merced County, Calif. (25.37); and Yuma County, Ariz. (25.34).

The healthiest counties according to the Stress Index were Elias County, Kan. (3.48); Buffalo County, Neb. (3.74); Ford County, Kan. (3.95); Ward County, N.D. (4.02); and Sioux County, Iowa (4.12).

Schneider reported from Orlando, Fla., Crutsinger from Washington. source: yahoo

America’s home ownership rate, after holding steady for a while, took a pretty big plunge in Q4, from 66.9 percent to 66.5 percent. That’s down from the 2004 peak of 69.2 percent and the lowest level since 1998.

Homeownership is falling at an alarming pace, despite the fact that home prices have fallen, affordability is much improved and inventories of new and existing homes are still running quite high.

Bargains abound, but few are interested or eligible to take advantage.

More concerning than the home ownership rate is the vacancy rate. The Census tables don’t tell the entire story, but they tell a lot of it. Of the nearly 131 million housing units in this country, 112.5 million are occupied. 74.8 million are owned, and that’s only dropped by about 30 thousand in the past year. 38 million are rented, but that’s up by over a million year over year. That means more new households are choosing to rent.

Now to vacancies. There were 18.4 million vacant homes in the U.S. in Q4 ’10 (11 percent of all housing units vacant all year round), which is actually an improvement of 427,000 from a year ago, but not for the reasons you’d think.

The number of vacant homes for rent fell by 493 thousand, as rental demand rose. 471,000 homes are listed as “Held off Market” about half for temporary use, but the other half are likely foreclosures. And no, the shadow inventory isn’t just 200,000, it’s far higher than that.