Posted on 06/21/2009 6:37:37 AM PDT by FromLori
We've discussed supply and demand, price-to-income and price-to-rent ratios, and real house prices, in trying to forecast how long house prices will continue to decline.
This is a comparison of real house prices and the unemployment rate.
Note: House prices are national from Case-Shiller (back to 1987) and Freddie Mac's Purchase index (back to 1970). The Case-Shiller index was set equal to the Freddie Mac index in Q1 1987, and then both indexes adjusted by CPI less shelter.
Click on image for larger graph in new window.
The two previous national housing bubbles (late 1970s and late 1980s) are shown on the graph. The dashed purple lines line up the peak unemployment rate - following the housing bubbles - with house prices.
It appears real house prices declined until the unemployment rate peaked, and then remained stagnant for a few years. Following the late 1980s housing bubble, the Case-Shiller index suggests prices declined for a few years after the unemployment rate peaked.
Although there are periods when there is no relationship between the unemployment rate and house prices, this graph suggests that house prices will not bottom (in real terms) until the unemployment rate peaks (or later, especially since the current bubble dwarfs those previous housing bubbles). And it is unlikely that the unemployment rate will peak for some time ...
I'll post some similar graphs for a few Metropolitan Statistical Areas (MSA) later, comparing local house prices with the local unemployment rate.
Harry Dent
http://www.youtube.com/watch?v=JOOEfRjpFjw&feature=related
Predicts housing to reach values of the 1990’s, the depression ahead - about 2010-2011 is the worst to come.
People who bought after 2000 or who refinanced to the hilt may be in trouble.
America’s Battle Cry: VOTE THEM ALL OUT
Don’t Tread on Me!
I attended a party of over 20 people last night and the consensus of all the people there was VOTE THEM ALL OUT! Mood of the American people is not good for politicians. Any of them. They’re too arrogant and power-hungry to realize it yet.
Prices are not going to recover until 2011 at the very least.
That little box is the same thing I get everytime I try to post a picture lol
What little box? I have a perfect picture of the chart from this article on my screen.
Really it is a little box with an x in it no picture.
Based on what I am reading, they will be no recovery, just a flat line with minor fluctuations on housing prices slowly moving up as homes are more affordable and credit available.
Those folks who bought at the top of the bubble are never going to get back there price wise again.
Home values over the last 8 years were all artificial and skewed by a social engineering congress bent on putting every low life liberal in a home
I see the chart.
I'm pretty confident that even those who bought at the peak of the bubble, as long as the used a fixed-rate mortgage and can hold for at least 10 years, will get their money back and then some. There's just no way this massive infusion of money won't give us double-digit inflation.
That's the rub, who can afford to buy your home with double-digit inflation since to control inflation, interest rates will rise dramatically.
At the top of the bubble my home was worth on paper $235,000. I bought it at $109,000 a mere eight years ago. Today it somewhere around $175,000 (I hope)
That means my home will have to increase $6,000 a year for 10 years. I seriously doubt it.
I think my example is pretty close to typical
Interesting. I think a lot of the recent inflation of home prices were due to more people being able to buy homes that could not really afford them (thanks Barney and Chris) and low interest rates. The available supply may shrink since less houses have been built the last few years and our population is still increasing. I think the big question mark is going to be interest rates. With Obama printing money to make up for deficit spending that would seem to push interest rates up. If they can somehow keep interest rates low I think the market will recover.
The decline in houseing prices was inevitable. The bubble had swollen for far, far too long. Housing is so expensive, people have to go deep into debt just to own a home. Also, too many people used their home equity for unwise purposes and got themselves in too deep. Further exaserbating the problem were greedy mortgage companies who encouraged people to buy homes they couldn’t afford.
>>People who bought after 2000 or who refinanced to the hilt may be in trouble.<<
Nope. Just walk away.
>>VOTE THEM ALL OUT!<<
HAHAHAHAHA
Here lies your answer to that silliness: http://billstclair.com/lodge/Books101.shtml
“America is at that awkward stage. It’s too late to work within the system, but too early to shoot the bastards.” —opening lines of 101 Things To Do’Til The Revolution by Claire Wolfe
You only inch closer to the second solution and away from the first. It is how it ALWAYS works.
“Prices are not going to recover until 2011 at the very least.”
Prices are never going to be the same. Back to 1990’s level is best case scenario. Worst case scenario is a total collapse of the US economy.
Look at what they have done to the USD:
http://s.wsj.net/public/resources/images/ED-AJ638A_laffe_NS_20090609175213.gif
http://online.wsj.com/article/SB124458888993599879.html
I can envision a situation where housing prices either stagnate, or rise by a very low percentage (1-3% annually) while non-housing inflation hits double digits. That would have the effect of correcting house prices just as surely as the drop-during-a-low-inflation-period thing we've just seen.
Especially if you are in a state where the lender can’t go after you for any dificiency. Walk away, rent for a couple of years and buy again when you have 20% down about the time the housing market hits bottom. If you have 20% down when pricing hits bottom, a lot of lenders will be fighting to give you a mortgage.
I just sold my house in Indiana.
Started out at 220k and after 5 months moved it at 195.
I’m glad to be out.
The place I bought started at 325 and I bought it for 250.
30 years at 5% fixed.
Hope to pay it back with Baraqqi minibucks.
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