I'll take this place off of someones hands for $5,000 Canadian cash money, and I'll throw in a pack of smokes.
Posted on 12/30/2010 6:01:46 PM PST by blam
‘Unexpected’ U.S. Home Price Decline Is A Serious Reason To Worry About Economy
Housing-Market / US Housing
Dec 30, 2010 - 05:26 AM
By: Mac Slavo
The Standard & Poors/Case-Shiller index’s most recent report shows that home prices across the country are sliding. For economists, this is yet another unexpected decline. For readers of non-mainstream news, analysis and opinion, this was to be expected.
Robert Shiller, co-creator of the index joins the Wall Street Journal and shares his perspective:
It’s still only a few months we’ve seen these declines. So, it’s not clear that we have a downtrend.
But, if home prices continue on this pace down, I think the economy has serious reasons to worry.
…
According to our survey, forecasters are expecting on average - these are professional forecasters - prices will be up 7% by 2014. So, that’s not bad, but it’s not great either. On the other hand, a good share of those forecasters are predicting declines. I think the outlook has become steadily more pessimistic over the last few months. With today’s announcement our professional forecasters are going to be a little more pessimistic.
The same professional forecasters who didn’t see the collapse of 2008 coming are being relied upon now to tell us what is coming next. Like Ben ‘the sub-prime crisis is contained’ Bernanke, the mainstream forecasters out there are touting the group think line. No one wants to step outside of the group and tell us how it really is - even if they know what’s coming.
Luckily, we don’t live in the mainstream bubble, so we don’t have a problem being called fear mongers. In reality, we’re just reality mongers.
And the fact is, that the home price decline has a long way to go.
We will not return to the home price tops of 2006 for at least a decade - and that’s being optimistic. We will see further deterioration in home prices from here - in real terms, likely in nominal terms as well. Regardless of how much money the Federal Reserve prints and how much value the US dollar loses, the relative price of a home compared to assets like gold, food and energy will go down. End of story.
In May of 2010 we responded to a report which showed the home construction was up. In that response we penned the reasons for why the real estate market will not only not recover, but will continue to decline - significantly. Rather than trying to explain it in different terms, here’s what we wrote in May:
We have the government tax credit now expired, roughly 7 million plus foreclosed and delinquent shadow inventory homes that have not yet been reflected on banks’ books, credit markets remain tight, mortgage rates will likely rise due to federal debt problems, millions of adjustable rate mortgages are resetting interest rates higher over the next two years, and home prices in many areas have resumed their downward slide.
While today’s news may seem positive, one must consider the dynamics of the entire real estate market before rushing to judgment about a recovery in real estate.
Our view since the Summer of 2009 has been that the bottom for real estate is not yet in, with average national home prices still well above the historical, inflation adjusted price of around $110,000 (going back 100 years).
This is a credit contraction and the pendulum is now swinging in full force from the top of the bubble to the extreme opposite. If history is any guide, corrections are equally as violent as bubble formations, if not more, because the momentum in the other direction can be ferocious and very fast. This means that the pendulum will not simply revert to the mean, but will likely overshoot in the opposite direction.
Since the housing bubble’s peak, which reached an average national home price of around $200,000, we’ve seen real estate prices deflate nearly 20% to about $165,000. So, just to revert to the historical average of around $110,000 housing prices would need to slide another 30% from here.
Over the last twenty years the Japanese real estate market, blown from an easy money bubble and the expectation that real estate will never go down because people keep being born, has lost over 70% of its value (inflation-adjusted).
We can expect the same in the US. That means we’ve got about 30% to 50% more to go in terms of real estate declines. It sounds crazy, yes. But, it’s been a pretty crazy last couple of years, as well. So crazy that had you predicted ten years ago that we’d see a detonation of the real estate bubble, the insolvency of every major banking institution in the country and the trillions in bailouts that followed you would have been called a doom and gloom quack.
Biflation is the order of the day, where debt-based assets like homes will continue to lose value, while essential goods like food and energy will continue to rise.
When we talk about tanking real estate prices going forward, it should no longer be ‘unexpected.’
Video Interview with Robert Shiller and the Wall Street Journal:
(Click to the site to see the video)
guess i’ll have my house and property value re evaluated - pay less property tax
That’s inconceivable!
Canadian real estate is overvalued, but this crazy lady says 90% declines...it is to laugh. She also slags the oil sands and is totally wrong. She is an envirowacko.
I'll take this place off of someones hands for $5,000 Canadian cash money, and I'll throw in a pack of smokes.
You keep saying that word. I do not think it means what you think it means.
"Ya think, DiNozzo?"
The unexpected has become undeniably the expected exception!
Be careful what you ask for. I turned 65 in June of 2010, that means that in my county, my taxes were due to go down considerably, about 40% by my estimate.
I filed the proper statement and was told how much (in dollars) I would have to pay in 2011.
Within a month of that I received a notice from the county that my house had been reevaluated upwards - not by 40% but by about 25%. This isn't over by a long shot, I am of course appealing the reevaluation but the process itself can take a year or more.
Germane to my reply - I live in Illinois.
There is only one 'desolate' town anywhere near the oilsands. Fort McMurray. One. And they have gone thru the boom and bust many many times. So the argument starts on a faulty premise.
As I said back when housing starts were reported to be up that we were just seeing a shell game as already planned housing was transfered from business to business, or more normally, from builder to bank. The thought at the time was that the end was near but we’ve still yet to see any real crash in the commercial market.
And we’ve still not seen it. I know many businesses that are paying nothing in rent and not being evicted for fear that the paper on the loan will get called if occupancy drops to less than 50%.
More and more honest people are reevaluating their loan terms and are far more willing to consider gaming the system, or turning good loans for bad, knowing that the lender has little choice but try to restore loans.
It's ridiculous to project the price of anything expressed in dollars when the dollar is being inflated. Project the price of houses in terms of ounces of gold and/or barrels of oil and then I'll pay attention.
Under inflation the only use for fiat money is the instantaneous buying and selling of real properlty. Money becomes simply a conduit rather than a store of value.
Here's a question for you ... if the dollar was losing its value rapidly and the peso was very stable in terms of its value, would you prefer to be paid in dollars or the equivalent value in pesos?
I predict in the future laws will be passed that require all transactions within the US to be in US dollars.
I wonder how much difference this will make if any?
GOP Shifts on Fannie, Freddie Overhaul (Republicans want bipartisan “compromise” with Obama, Dems)
http://www.freerepublic.com/focus/f-news/2648799/posts
They are desperately trying to re-inflate the housing bubble to move those toxic loans off the banks books. It will be interesting to see how this all plays out because Whalen claims all those mortgage buy backs that BOA is being sued for could take down the bank.
Whalen: Foreclosure Peak Still Ahead for US
“We understand what the problem is for Bank of America. They are insolvent. They still have huge losses to take on their mortgage book, and balance sheet. They also have to deal with everyone wanting them to buy-back mortgages.”
“By this time next year the majority of home sales will be involuntary - more foreclosure sales than normal sales.”
“We haven’t seen the peak of foreclosures yet. That will come 12 months from now.”
“QE and QE2 are just hidden subsidies for the big banks.”
“Bank of America is in the worst shape of any U.S. bank.”
“Bank of America senior bondholders will have to take a hit, convert debt into equity.”
“There is no doubt they will have to be restructured.”
http://www.moneynews.com/Headline/christopher-Whalen-Foreclosure-Peak/2010/12/06/id/379123
I'll quit transacting in public.
Ha ha. Dream on. Local taxing authorities are busy raising rates to compensate.
My BIL's house in Central Florida declined in value from about $280k to $180k, and shazam! his property tax bill is virtually unchanged.
Where I live in KY, the portion of my county property taxes for the library has seen the rate (millage rate) go up by 65% since 06.The value of my house hasn't changed in 3 years, but that portion of my taxes has nearly doubled.
Great thing for the local governments is that if our property values ever increase, they are going to get a huge windfall in revenue. And we are going to be raped without benefit of lubricant.
Unexpected by WHO? *I* expect everything to go in the crapper, sooner rather than later.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.