Whether you are an optimist or a pessimist about the housing market there is plenty of data available to support your position.  During my search for what to write about today I came across a number of articles supporting a recovery in the housing market and an equal number of articles suggesting we aren’t out of the woods yet.  I will start with the bad news today and finish with the good tomorrow.

Perhaps the most depressing news is that there are still approximately 10 million homes in the United States that are worth less than what their owner still owes on them.  That is almost a quarter of all residential properties with a mortgage.  That is a staggering number.  Now just because all those homes are under water doesn’t mean they will be foreclosed upon but it wouldn’t take much, like say, gas prices reaching $5/gallon (or more) to see an increase in the number of homes that actually do reach the foreclosure stage.

The number of homes that reached the foreclosure stage last year was down almost 34 percent from 2010 but it appears the main reason for that was the legal problems banks had with their repossession processes (primarily robo-signing).  Bloomberg is reporting numbers from RealtyTrac that say banks are likely to foreclose on more 1 million homes this year.  That number would signal a 25 percent increase in foreclosures year over year and would likely keep home prices from rising in 2012.

The final bit of bad news is that home prices closed the year on a low note.  The Case-Schiller Index of home prices in 20 cities around the country closed 2011 at its lowest level since February 2003.  Of course, 20 cities is a fairly small sample of housing markets in the United States and there are certainly cities where prices are not at nine year lows and are even rising.

For those of you who are optimists I hope this post doesn’t dampen your hopes too much.  I think I would suggest cautious optimism.  The numbers above do not signal the end of the world but rather that the climb out of the hole which resulted from the housing bubble bursting won’t be easy or quick.  Tomorrow I will post reasons to be optimistic about a possible housing recovery.