[RexBeach]

Whenever someone says "this time it's different," it isn't. Period.

[UB355]

Here is the real story. A newly re assessed home valued at $687,000.00 now up for sale. Asking price $885,000.00.

[ClearCase_guy]

Homeowners just saw their wealth shrink, by a lot.

Tech Bubble under Clinton: "I have $2 Million in Enron stock! Whoo-Hoo! I can retire!"
Rude awakening Type A: "My Enron stock has no value. I have to keep working."
Rude awakening Type B:"My Enron stock has no value. Good thing I diversified."

Real estate bubble under Bush: "I have a beautiful home! It's a $1 Million mansion!"
Rude awakening Type A: "I have a beautiful home! It's a $750,000 mansion!"

Bubbles hurt people who have made dumb decisions. It's the nature of economics.

[wmfights]

"Homeowners just saw their wealth shrink, by a lot. The numbers will only get worse. It's time to examine the clichés that the "experts" - chiefly analysts and economists from realtors and mortgage associations - used to convince Americans that what they're seeing now could never happen."
_________________________

I think the one myth that never seems to get debunked is "your home is an investment". It isn't and never has been. It is a place where you want to live. The pull back in the market is not all that surprising and anybody who bought with the idea that the property would continue to climb in real terms throughout the time of ownership should not have bought. However, I don't believe there will be a collapse in values. Those that could afford what they bought will mostly stay put for a while and sell at break even or slight gains.

[RSmithOpt]

I read the entire article and the explanation of the myths was pretty much on target. I predict a 12-20% delcine nationwide in the prices of a lot of homes in the overbuilt housing markets between now and 1st qtr 2008.

[stylin19a]

From the article...

In the Northeast, they dropped 2.1 percent from July of 2005, at the same time prices nationwide rose around 3 percent, meaning that houses lost over 5 percent of their value adjusted for inflation.

can somebody explain this math ? I mean, besides a Democrat explaining a program cut ...

[RightWhale]

My own property has been holding steady for 40 years. I can't imagine there is any kind of bubble here even if people are always making offers--usually offers to steal below market.

[FReepaholic]

Home sales here are flat as a pancake. Yet, the median price of homes last month rose by 4%. Go figure.

[Obadiah]

Anyone else see the stark irony in this article?

The guy blasts people, the market, whomever, for following the conventional wisdom that he says led to a real estate bubble. Now however, we have this ding dong, along with every other psydo-prognosticator, positively telling the herd that there is a real estate bust and that it's going to get worse. So on one hand he blasts those who proclaimed good times for real estate, and yet himself, proclaims a real estate apocalypse. Is is me, or does every third media story generated have to do with "The Coming Real Estate Bust"?

Cannot imagine such giddy delight in making such proclamations during the Clinton years.

[Eva]

We lived in California for twelve years, during which time the market went up and went down several times. One year we saw a 30% increase in the value of our home, the next year it had lost almost all of the gain. The market goes up and the market goes down, the problem is that the rest of the country is not used to the volatility of the active real estate market in a fast paced market. People are much more mobile, changing jobs and moving there families where ever the jobs lead them. People better just get used to it.

[JasonC]

Um, if a 0.9% decline is the popping of a bubble, what's a soft landing?

Prices may crater 50%. Then you can talk about a crash.

Prices may fall 20%. Give the size of the recent run up, you could then talk about a correction.

Turnover of RE vs. total RE outstanding is quite low. The last time most houses sold was maybe 10 or 15 years ago. Some regions the typical holding period might be smaller.

Any way you can see a 10 year holding period that results in a loss? If this is a sharp peak, and prices fall 50%, sure. Right now? 3% declines? Get real indeed.

I've seen some very speculative high end markets, like Nantucket, where prices have fallen 30-35% this year. But from paper only, no transaction, nosebleed levels at the start of the year. The last actual sales 4 years ago for the same house, are lower still by factors of 2 or 3.

Some purely paper gains appear momentarily and vanish. Whoppie doo.

[capitalist229]

There is no loss or gain until you sell.

And that's what is causing the high inventories. A lack of sellers and buyers.

They are still in the denial stage. But eventually reality catches up when they change jobs or their ARM rate goes way up and they can't afford it.

Until then a housing bust is just speculation.

BUMP>

[Always Right]

Forget about a crash, they assured homeowners. Expect a "soft landing" where your three-bedroom colonial in Larchmont or Larkspur not only holds onto its huge price gains, but keeps appreciating at a "normal," "sustainable" rate of 6 percent or so into the sunset.

Who ever said a soft landing meant continued 6% gains? These articles keep starting out with the false pretense. A 0.9% increase is an extremely soft landing. I am surprised the landing has been this soft.

[pfony1]

Thanks for the funny article. Since I know Shawn Tully, I'd say that these myths need "popping" as well:

Myth #1: Fortune Magazine would rather "report the truth" than make make BIG profits pandering to the insecurities of America's "Chicken Littles."

Myth #2: A degree in English from Princeton qualifies anyone to write articles about anything, even complicated economic matters.

Myth #3: "Pop" economists need not present graphs, charts or any historical figures that might reveal that their "pop" articles have been over-simplified to the point of being misleading.

Myth# 4: A .9% RISE in prices is ACTUALLY "...a giant popping noise...exploding like balloons pumped up with too much hot air."

Too much hot air, indeed...