For all of you worrying about the twin crises involving housing prices and mortgages, please note that the government is worrying right along with you. According to a report by the Census Bureau, new home prices managed to tumble another 13% in October. That is the largest dip in home prices since 1970. One reason for the fall is the approximately 200,000 new homes that still remain on the market from prior months, driving prices down.

The extreme issues facing the mortgage market are also contributing to the crisis conditions. Facing a record number of foreclosures as payment amount increases hit more and more variable mortgagees, the mortgage market is in disarray. This is keeping many buyers from finding the financing they need to buy a home. The mortgage crisis may be more dangerous than the slide in new home sales, with approximately 250,000 American homeowners currently involved in some sort of foreclosure.

The mortgage problem is especially unsettling in California, Florida, and Nevada, home of the largest housing boom in recent years. Some industry watchers see signs that the foreclosure levels are evening out, although they are still occurring at an extremely high level. The problem is so bad that the number of vacant homes in some American neighborhoods is spurring crime waves. This phenomenon has been observed in many parts of the country, usually in older areas of larger cities, like Atlanta and Cleveland

The new home problem may also be worse than it appears. Builders, stuck with homes that won’t sell, are offering major incentives to buyers, such as paying their closing costs or adding free features to homes that have already been completed but are not selling. Many builders are cutting back on new starts, finally, now that the dual crises have started to hit them in the pocketbook.

It is easy to see that the unrealistic mortgage market of the past several years, which was clearly unsustainable once variable payment amounts started to rise, is the major culprit. While mortgages were easier to get, builders naturally built the new homes necessary to satisfy the buyer frenzy. They continued as long as cheap mortgages were easy to get, and in the end were caught with their pants down. Government watchdog groups failed to spot the problem early, and now the country is paying the price for their laxity.