The real estate research firm Zillow.com released a sobering statistic, and it took some by surprise: more than one-third of homeowners who bought in the past five years have negative equity in their homes.

Negative equity is owing more on your mortgage than the market value of your home. On the heels of the United States' greatest residential real estate boom in the modern era, how did the above occur?

Two factors, so says economist Peter Dawson.

First, many regions of the U.S., particularly the west, experienced abnormal gains during the 2003-2007 real estate boom. "Total appreciation rates over 300% were not unusual during the period. It was an amazing run, fueled by adequate national GDP growth, and low mortgage rates," Dawson said. "But as we've seen, ultimately the appreciation rates proved to be unsustainable, everywhere they occurred."

Dawson says a 7-9% annual increase in the U.S. median home price is normal, and his models label a 10% annual increase or higher as "outsized" -- a deviation from the mean that calls for a correction at some point in time. "But during the boom, it was not uncommon to see 30%, 40%, 50% annual increases over multiple years," Dawson said. "Clearly unsustainable. Downright frothy. But these conclusions were largely ignored during the boom, on the fallacy of 'what has occurred will continue.' "

Second, a financial habit shifted, Dawson said. Way, way back in the twentieth century, Dawson recalled, the biggest stigma when he grew up in a typical neighborhood in White Plains, N.Y., a suburb about an hour north of New York City, was... Not gaining acceptance at a good college? No. Not getting the hottest date for the high school senior prom? No. "We learned that the Smith's [not their real name] down the street had to take out...a second mortgage," Dawson said.

New home sales in the U.S. fell 2.5% to a seasonally adjusted, annualized pace of 512,000 in May, with sales in the Western U.S. plunging to a 26-year low, the U.S. Commerce Department announced Wednesday (pdf).

Economists surveyed by Bloomberg News had expected May new home sales to register a 515,000 annualized rate.

Sales are still down about 40% compared to a year ago. In 2007, 776,000 new homes were sold, compared to 1.05 million in 2006.

Meanwhile, inventories rose to a 10.9-month supply in May at the current sales pace, compared to a 10.6-month supply in April. A typical, healthy housing market has a three to four month supply of homes for sale.

Sales fell in three regions: 11.6% in the West, 7.9% in the Northeast, and 5.1% in the Midwest. Sales rose a scant 0.4% in the South. Further, the West's 114,000 annualized sales pace was that region's slowest sales pace in 26 years.

U.S. new home sales unexpectedly rose 3.2% (PDF) to a seasonally adjusted, annualized pace of 526,000 in April 2008 -- the first rise in new home sales in six months, the U.S. Commerce Department announced Tuesday.

Economists surveyed by Bloomberg News had expected April 2008 new home sales to register a 522,000 annualized rate.

Nevertheless, sales are still down about 42% in the last 12 months.

Meanwhile, inventories dipped to a 10.6-month supply in April 2008 at the current sales pace, compared to an 11-month supply in March 2008 and a 9.8-month supply in February 2008.

Also, the median sales price increased 9.1% in April 2008 to $246,100.

Sales rose in three regions: Northeast, up 42%; West, up 8.3%; and the Midwest, up 5.8%. Sales fell 2.4% in the South.

Economic Analysis: Sales did nudge-up slightly in April 2008, but the key stats remains the large, 10.6-month supply of unsold new homes and the 42% decline in new home sales compared to a year ago. A normal, healthy market has a 3-4 month supply of new homes for sale, and that fact, combined with the large decline in year-over-year sales, suggests a market with scant demand. Investors / traders should also ignore the one-month rise in the median sales price: a trend takes at least 3-4 months to form, and the higher one-month median price jump could simply reflect a large number of lower-priced homes taken off the market, or not sold.

Sales of existing homes in fell 1.0% in March 2008, the National Association of Realtors announced Wednesday, as the prospect of continued home price declines discouraged potential buyers.

The NAR's existing home sales index declined to 83.0 in March 2008. The index totaled a revised 83.8 in February 2008, and stood at 103.9 in March 2007.

Economists surveyed by Bloomberg News had expected the March 2008 existing home sales index to drop to 83.8%.

Regional conditions vary

Conditions varied by region. In the Midwest, the index fell 10.4% in March 2008 to 74.1; in the West, the index fell 1.4% to 91.2, and in the South, it fell 0.1% to 84.9. In the Northeast, the index rose 12.5% to 80.8%.

Home foreclosure activity jumped 23% in Q1 2008 and a whopping 112% in the past 12 months, as the housing sector's deep recession continues. And substantially more default notices, auction sales notices, and bank repossessions were reported in Q1, research firm RealtyTrac announced Tuesday.

In Q1 2008, one in every 194 U.S. households received a foreclosure notice, RealtyTrac said, adding that foreclosure activity increased in 46 of 50 states and in 90 of the nation's 100 largest cities in the same period.

State foreclosure rates

In Q1 2008, Nevada (one in 54 households) had the U.S.'s highest foreclosure rate, followed by California (one in 78 households), and Arizona (one in 95 households). Vermont (one in 103,186 households), North Dakota (one in 6,156 households), and West Virginia (one in 6,138) had the nation's lowest foreclosure rates.

U.S. new home sales fell to a seasonally-adjusted, annualized pace of 526,000 in March 2008 - - a 17-year low, the U.S. Commerce Department announced Thursday. (pdf)

Economists surveyed by Bloomberg News had expected March 2008 new home sales to register a 580,000 annualized rate.

Sales have now declined for five consecutive months, and are down 36.6% in the last 12 months.

Meanwhile, inventories surged to an 11-month supply at the March 2008 sales rate, up from a 9.8-month supply in February. Inventories are at their highest level since 1981. A healthy housing market typically has a 3-4 month supply.

Also, February 2008 sales were revised down slightly, to 575,000 from the earlier released 590,000.

In addition, the median sales price of new houses sold in March 2008 was $227,600; the average sales price was $292,200. The median sales price has now decreased 13.3% in the past 12 months.

Sales fell in every U.S. region: declining 19.4% in the Northeast, 12.9% in the West, 12.5% in the Midwest, and 4.6% in the South.

My Ph.D. adviser David E. RePass, professor emeritus at the University of Connecticut, used to frequently recite an axiom about the U.S. Congress that rings true, regardless of era, or circumstance.

"Congress does not react, unless not reacting will result in the wrath of the American voter."

Well, concerning housing, it looks like Congress sees the wrath of the American voter ahead because the legislative body is starting to react.

Two measures working their way through Congress may ease the housing crisis. The first, a bipartisan Senate measure, is a modest step to address the rise in home foreclosures, The New York Times reported Friday.

Sales of new homes fell 2.8% to a seasonally-adjusted annual rate of 588,000 in January 2008, the U.S. Commerce Department announced Wednesday (pdf). Economists surveyed by Bloomberg had expected a seasonally adjusted rate of 600,000.

Meanwhile, the December 2007 seasonally-adjusted total was revised to 605,000.

The median sales price of new houses sold in January 2008 fell 4.3% to $216,000; the average sales price rose 0.7% to $276,600.

In addition, the seasonally-adjusted estimate of new houses for sale at the end of January 2008 was 482,000 -- representing a 9.9-month supply at current the current sales rate.

Economist Steve Affinito told BloggingStocks Wednesday the January 2008 new home sales data is in-line with earlier data on existing home sales, indicating that the housing slump is far from over.

Sales of existing homes and condominiums in January 2008 totaled a seasonally-adjusted annual rate of 4.89 million units, the National Association of Realtors announced Monday. The January statistic was roughly in-line with the 4.84 million consensus estimate.

The January 2008 stat was also 0.4% lower than the revised 4.91-million-unit December 2006 annualized rate, and was also the lowest sales pace since the NAR started tracking combined sales in 1999.

Further, on a year-over-year basis, resales plunged 23.4% compared to January 2007.

Housing's doldrums continue

Economist Steve Affinito said the song remains the same regarding the U.S. housing sector.

Home prices fell in a record number of U.S. metropolitan areas in Q4 2007, the National Association of Realtors announced Thursday, in a statement.

Prices fell in 77 of 150 metropolitan areas tracked, the most since the NAR start tracking values in 1979. Moreover, 16 metro areas recorded declines of 10% or higher.

U.S. median home price declines

Meanwhile, on a year-over-year basis, the U.S. median home price also declined 5.8% in Q4 2007 to $206,200 compared to $219,000 in Q4 2006. Even more telling, home prices have declined more than 10% since their July 2006 peak.

The metropolitan area with the biggest decrease was Lansing- East Lansing, Michigan, which recorded a 19% decline. Prices fell 18.5% in the Sacramento, California region and 17% in Riverside and San Bernardino, California, and in the Jackson, Mississippi, region, the NAR announced.

Home prices fell in every region. The regional totals: West, down 8.7% to $324,100; Northeast, down 4.8% to $261,700; South, down 8.7% to $171,700; and the Midwest, down 3.2% to $156,300.

Sales of existing U.S. homes fell more than forecast in December 2007, contributing to the largest yearly slump in housing in more than 20 years.

Purchases declined 2.2% to a seasonally-adjusted annualized rate of 4.89 million, the National Association of Realtors announced Thursday. Analysts had expected the annualized rate to fall to just 4.95 million.

Further, sales for 2007 declined 12.8%, the largest drop since 1982. There were 5,652,000 existing-home sales in 2007, the fifth highest year on record, but still 12.8% below the 6,478,000 transactions recorded in 2006.

Trying to see bright side

Economist Steve Affinito told BloggingStocks Thursday he's trying to see the bright side to the housing sector's slump, but it's hard to do so.

"Let's try to see a silver lining here, if we can. Housing had really robust sales growth for about four years, so the 2008 stat is facing really difficult comparisons, year-to-year," Affinito said. "That said, there's no denying that the housing sector is in slow-motion mode, with large inventories."

U.S. Treasury Secretary Henry Paulson is on the wires again, this time predicting that the number of potential home-loan defaults "will be significantly bigger" in 2008 than in 2007.

In an interview with The Wall Street Journal (subscription required), Paulson said, "The nature of the problem will be significantly bigger next year because 2006 (mortgages) had lower underwriting standards, no amortization, and no down payments. He added that "We'll watch carefully mortgages that will be reset."

Home prices fall

Paulson's comments came before the National Association of Realtors announced that home prices had fallen in 51 of 150 U.S. metropolitan areas in Q3, with the median sales price falling to $220,800 in Q3 2007, compared to $225,300 in Q3 2006. The NAR also announced that home sales fell to an annualized rate of 5.42 million units, including single-family homes and condominiums, compared to a 6.29-million-unit annualized rate a year ago.