Housing Prices Expected to Bottom in 2010, 21% Off ‘06 Highs
Thursday, January 24, 2008
Based on the current prices of CME housing futures that track the S&P/Case-Shiller home price indices, the median home in the U.S. is now projected to fall 21% from its peak in 2006 to its expected trough in November 2010. The chart below highlights the historical Case-Shiller data as well as the CME housing futures that track the index.
Hey, look on the bright side -- at least the futures are predicting a bottom in 2010. By November 2011, the average home price is only expected to be down 18% from its peak.
The markets are very optimistic.In what world does the price of a commodity rise 100% due to speculation while the supply is increasing, then only fall 21% while supply continues to increase.the rate of increase of supply is falling, but the supply of houses countrywide is still increasing faster than the demand for them.
Add to this mortgage rates and lending standards that are unlikely to get any lower and other recessionary problems and a 21% fall from peak in nominal prices can only be achieved through major inflation or market manipulation.
not to mention increasing numbers of high LTV borrowers making the rational decision to walk away from underwater loans.
Everything is relative. You overlooked the fact that the population is increasing faster than the supply of homes, the fact that there has been inflation through the entire run-up, the fact that the quality of homes is increasing, and the fact that our ability to create wealth is steadily increasing thanks to technology.
Also, a run-up of 100% only requires a fall of 50% to break even. A fall of 21% from the high is actually a fall to 158% of the original value. Inflation alone could account for a big chunk of that 58% appreciation.
Depending on my job situation, I'll start looking for my first home in 2010if the prices come down at a level in-line with this projection.
Exactly the kind of rubbish sentiment that started the housing bubble in the long run. Remember, in the long run houses retain their value in real terms, they do not appreciate. For this crash to be over prices must fall back to their historic norms, which even with high inflation will be much more than 21%.
Add to this mortgage rates and lending standards that are unlikely to get any lower and other recessionary problems and a 21% fall from peak in nominal prices can only be achieved through major inflation or market manipulation.
not to mention increasing numbers of high LTV borrowers making the rational decision to walk away from underwater loans.
Everything is relative. You overlooked the fact that the population is increasing faster than the supply of homes, the fact that there has been inflation through the entire run-up, the fact that the quality of homes is increasing, and the fact that our ability to create wealth is steadily increasing thanks to technology.
Also, a run-up of 100% only requires a fall of 50% to break even. A fall of 21% from the high is actually a fall to 158% of the original value. Inflation alone could account for a big chunk of that 58% appreciation.
Depending on my job situation, I'll start looking for my first home in 2010if the prices come down at a level in-line with this projection.
Exactly the kind of rubbish sentiment that started the housing bubble in the long run. Remember, in the long run houses retain their value in real terms, they do not appreciate. For this crash to be over prices must fall back to their historic norms, which even with high inflation will be much more than 21%.
graphics.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
No, we will revert back to normal, which is about 2000.
In short: look for a 30-40% decline in home values by 2011.
No, we will revert back to normal, which is about 2000.
In short: look for a 30-40% decline in home values by 2011.
