Falling US & Global housing prices

The slow down in the US (and global) housing market is not news, of course. Everyone’s known for the past year that the crazily increasing prices of real estate – especially in hot markets like California – have been slowing down. But so far prices haven’t actually decreased in most markets. Unlike stock prices, a real estate bubble doesn’t generally burst, they say; instead it suffers more of a slow leak, leading to a slowdown and plateau.

Well now it’s gone a step further. Now prices are actually decreasing.

abcnews.go.com/Business/wireStory?id=2986208

[quote]U.S. home prices continued to fall in January, with prices in 10 major cities now down 0.7% year-over-year, according to Standard & Poor’s and MacroMarkets LLC, which released the January Case-Shiller price indexes on Tuesday.

The 10-city index is down 0.7% in the past year, the first year-over-year negative reading since 1996. The 20-city index is down 0.2% year-over-year. A year ago, prices were rising 15%.

“The annual declines in the composites are a good indicator of the dire state of the U.S. residential real estate market,” said Robert J. Shiller, chief economist at MacroMarkets. . .

“We look for price declines in the bubble regions but flat prices nationally,” wrote Michelle Meyer, an economist for Lehman Bros. Goldman Sachs economists said they expect prices to fall 5% in 2007 compared with 2006. . .

Home prices fell from December to January in 17 of the 20 cities; only Miami showed any price gains. Prices were flat in Charlotte, N.C., and Seattle. Prices were falling fastest in January in San Diego, down 1.7%, or a 22.4% annual rate. Prices dropped 1.1% in Los Angeles, or a 14% annual rate. . . [/quote]
Marketwatch Article

Bad news for homeowners and bad news for the stock market, but good news for me as I hope to escape this rock some day and return to California, where prices have soared to absurd heights. Looks like in a year or so things may be looking better. :slight_smile:

There’s also a discussion in Business & Money about the reasons behind the decline:

forumosa.com/taiwan/viewtopic.php?t=60047

My call is that there’s still a ways to go before the damage is done.

Incidentally, here’s one company’s forecasts for the worst housing markets in 2007 (shown with median price of single-family residence and annual change in price) and best markets. Obviously, the worst markets have become highly overpriced in the past few years because large numbers of people find them desirable locations, and the best markets have not, because most people find them less desirable.

WORST HOUSING MARKETS
Price 2007 Forecast
1. Miami, Florida $348,000 − 13.9%
2. San Diego, CA $569,000 − 13.5%
3. Boston, MA $424,000 − 11.7%
4. Los Angeles, CA $469,000 − 10.2%
5. Nassau, NY $448,000 − 9.4%
6. San Francisco, CA $694,000 − 9.3%
7. Sacramento, CA $325,000 − 9.0%
8. Oakland, CA $681,000 − 8.9%
9. Detroit, MI $146,000 − 8.9%
10. Cambridge, MA $407,000 − 8.8%
11. Providence, RI $269,000 − 8.8%
12. San Jose, CA $680,000 − 8.7%
13. Phoenix, AZ $285,000 − 8.7%
14. Edison, NJ $369,000 − 8.3%
15. Alexandria, VA $726,000 − 8.1%
16. Grand Rapids, MI $132,000 − 7.6%
17. Las Vegas, NV $269,000 − 7.5%
18. Denver, CO $231,000 − 7.0%
19. Fort Lauderdale, FL $324,000 − 6.9%
20. Indianapolis, IN $119,000 − 6.9%
21. Tampa, FL $221,000 − 6.7%
22. Orlando, FL $245,000 − 6.2%
23. White Plains, NY $397,000 − 6.0%
24. Bakersfield, CA $281,000 − 5.9%
25. Portland, OR $234,000 − 5.5%

BEST HOUSING MARKETS
Price 2007 Forecast
1. New Orleans, LA $152,000 8.4%
2. Houston, TX $148,000 7.8%
3. Little Rock, AR 117,000 7.0% 4. Odessa, TX 67,000 6.9%
5. Nashville, TN $155,000 6.9%
6. Albuquerque, NM 155,000 6.5% 7. Brownsville, TX 73,000 6.2%
8. Austin, TX $160,000 6.1%
9. Jackson, MS $137,000 6.1%
10. Raleigh, NC $239,000 5.9%
11. Monroe, LA $164,000 5.9%
12. Biloxi, MS $140,000 5.9%
13. Newport, NC $208,000 5.8%
14. Fort Smith, AR $112,000 5.8%
15. Valdosta, GA $115,000 5.8%
16. Bar Harbor, ME $398,000 5.5%
17. Atlanta, GA $185,000 5.4%
18. Hot Springs, AR $159,000 5.4%
19. Syracuse, NY $105,000 5.3%
20. Charlotte, NC $235,000 5.2%
21. San Antonio, TX $139,000 5.2%
22. Pascagoula, MS $111,000 5.2%
23. Spokane, WA $178,000 5.1%
24. Decatur, AL $139,000 5.1%
25. Casper, WY $157,000 4.8%

www.housingpredictor.com

California Home Sale Price Medians by City
Home Sales Recorded in February 2007

This is an intersting house price listing as almost all areas have dropped in value recently and are on the way Doooowwwwwwwnnnn!

U.S. could withstand effects of debt sale: Bernanke I don’t know what kind of medicine this guy is taking, but it must be quite strong I imagine.

China shifts to euros for Iran oilThe beginning of the end for the U.S.D.?

the largest U.S. home builder by revenue, said earnings plummeted 73 percent during the fiscal first-quarter as the worst housing slump in more than a decade scared away potential buyers.

Gulf economies to ‘drop the dollar’ Excellent!!! [add evil laugh and rubbing of hands]

All in all I am very happy with some of the latest headlines, as the hard earned cash that my family earns saves might one day finally be worth more than the massive supply of unrepayable credit that is owned by people in countries such as the U.S and Britain. Apparently the British pound is tagged to the U.S. dollar, and so I am even more ecstatic that the pound might be dumped in the millions and one day allow me to purchase a house back home for a reasonable and not glue sniffing induced price.

Interesting article in the economist this week

http://www.economist.com/finance/displaystory.cfm?story_id=8885853

best market: New Orleans?

:roflmao: :roflmao:

[quote=“urodacus”]best market: New Orleans?

:roflmao: :roflmao:[/quote]

Yea, it’ll probably take a long time, if ever, to turn things around there. But at least there’s nowhere to go but up.

On the other hand, Austin’s on that same list, it does seem like a hot market, and I was surprised to see its median price at just $160,000. It seems like a great place, a college town with beautiful scenery, great art, music and food, and a booming tech community. :beer:

propertycrash.com is where I get much of my news about recent economics and house price changes in the states and in Britain. The site is of course providing more sotries that may indicate a coming crash in Britain mostly, but does include other global stories as they are factors. I have been checking it for a while and it seems like a fairly balanced site overal, so I would recomend it.

Yes, Austin is where I hope to move to once I leave Taiwan. My wife and I met there, and we both love the city. Hopefully the housing prices won’t shoot up too quickly before we’re ready to move there many years from now.

Here’s a cool video that’s going around showing US Housing Prices adjusted for inflation if it were a roller coaster. It really demonstrates just how big and unusual the increase in prices over the last 10 years has been.

video.google.com/videoplay?docid … 9528285056

I just did a whirlwind tour of the West Coast and don’t see any evidence in Portland, Seattle, LA or the Bay Area to back up those numbers. My cousin bought a starter home in Tustin, Ca (Orange county) two years ago, and while it hasn’t gone up in value neither has it decreased. My sister does real estate in Portland, and her local market also seems to be bucking national trends. The insiders in the Real estate industry all say the crash has yet to begin…But begin it will, and probably with more drama than many are expecting.

Remember too, that even with these corrections…Real estate in these high demand areas only continue to rise long term. Instead of quoting industry experts…I’ll give you some figures on the neighborhoods where I grew up in suburban LA.

Long Beach: Where I was born, and my parents first starter home purchased for 14,900US in 1960 is now on the market for 564,000 dollars…All 1150sqft of it (just slightly over 30 pings).

Simi Valley: Purchased in 1966 for around 20k(1,800sqft)…Now in the 700,000US range.

Newbury Park: Purchased in 1975 for 45k (2,500sqft)…Now hovering just over the 1 million mark.

Novato; Marin County (Northern Ca, Just north of SF) Purchased in 76 for around 65k(3,200sqft)…Is now nearing 2 million US.

The market can crash and burn short-term, but the sad truth is that I’ll never be able to afford to live anywhere near where I grew up, which I’m sure will be the truth with most of the transplanted Californians on Forumosa.

My Aunt summed it up rather nicely when she said “When you leave California, make sure you never plan to return”.

Shit. :s

[quote=“MJB”]I just did a whirlwind tour of the West Coast and don’t see any evidence in Portland, Seattle, LA or the Bay Area to back up those numbers. . . . . . .

My Aunt summed it up rather nicely when she said “When you leave California, make sure you never plan to return”.

Shit. :s[/quote]

Don’t worry, it’s still got a ways to go.

[quote]Plunge in Existing-Home Sales Is Steepest Since ’89

Sales of previously owned homes suffered their biggest drop in nearly two decades last month, raising concerns that a rebound in the housing market is still far off.

The National Association of Realtors said today that sales of existing homes, which account for about 80 percent of all home sales, fell 8.4 percent in March. That was the steepest decline since 1989.

At the same time, prices also dropped. The median price of an existing single-family home decreased 0.9 percent last month, to $215,300, compared with a year earlier. . . [/quote]

nytimes.com/2007/04/25/busin … eb.html?hp

More good news for those hoping to move to the states in the next few years.

First Annual Drop in Housing Prices in More than 50 years.

[quote]The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950.

Economists say the decline . . . will probably be modest — from 1 percent to 2 percent — but could continue in 2008 and 2009. Rather than being limited to the once-booming Northeast and California, price declines are also occurring in cities like Chicago, Minneapolis and Houston, where the increases of the last decade were modest by comparison.

The reversal is particularly striking because many government officials and housing-industry executives had said that a nationwide decline would never happen. . .[/quote]

Link.

Will it affect the REIT’s funds?

The Schiller housing price index in the US (most respected one) reported yesterday that prices are now down 3% YoY. What makes it even more scary, is that the Schiller index, from what I read, does NOT include all those subprime/zero-money down type houses that have imploded already (down 20% or more). It is made up of stable houses (I presume ones with mortgages nearly paid off, etc). Anyway, this index of prices down 3% YoY is the biggest fall ever YoY.

About U$250-400bn in ARMs reset in next 6-9months.
ARMs = adjustable rate mortgages.
Most had fixed rates for firs 2-3 years and then adjust to market rates, and guess what, the interest rate has only gone UP in last 5 years. In the real world, this will add about U$1200 to a monthly intesest payment for people who probably can’t even save that amount of money per month to save their livees.

If you want to buy an American house on the cheap, say down 30-50% from latest peak prices, best time to buy will be around 2008-2009. Trust me.

Educate yourself on www.thehousingbubbleblog.com
Read that and the comments for about 1 month and you’ll know more about the housing bubble than people on Wall Street do. I’ve been reading it for 17 months now, and all their forecasts have been accurate, from the subprime blowing up at end of last year, to Alt-A blowing up this past spring.

[quote=“MJB”]

My Aunt summed it up rather nicely when she said “When you leave California, make sure you never plan to return”.

Shit. :s[/quote]

Hey MJB,

You should look into that cultural hotbed, Bakersfield, only a ways from Ventura County and you could listen to all the Buck Owens you want. :wink:

Or a bit North from your old digs. Solvang?..I’ve always wanted to own a real fake Dutch windmill.

DurinsinMJBsdishBane

Lots of interesting articles on this subject lately, and everyone seems to be saying the worst (or best if you hope to buy in a few years) is yet to come.

[quote]The housing market is in its worst downturn since the Great Depression – and it’s taking the rest of the economy down with it. Most forecasters insist there won’t be a recession, although the August job losses forced even optimists to acknowledge that the meltdown is causing serious economic problems. . .

The downturn should not have been a surprise. House prices rose at an unprecedented rate over the past dozen years. For a hundred years, from 1895 to 1995, house prices nationwide increased at the same pace as the overall inflation rate. Since 1995 inflation-adjusted house prices have risen by more than 70 percent. It should have been clear to economists that this run-up was being driven by a speculative bubble. There was no change in the fundamentals of supply or demand that could have explained the rise.

Like Japan’s in the 1980s, the U.S. housing bubble coincided with its stock bubble. While the two bubbles burst simultaneously in Japan, in the United States the stock collapse actually fueled the growth of the housing bubble. Investors, after losing much of their wealth in the stock crash, viewed housing as safe. The housing bubble in turn fueled the recovery of the U.S. economy from the stock crash recession of 2001.

Soaring home prices pushed construction and home sales to record levels. Even more important, the run-up in home prices created more than $8 trillion in housing bubble wealth. This wealth fueled a consumption boom, as homeowners withdrew equity from their homes almost as it was created. The savings rate plummeted to near zero in 2005 and '06. People used their homes as ATMs, borrowing to take trips, buy cars or just to meet expenses.

This pattern of growth could not be sustained. Record house prices were supported by a tidal wave of speculation, as millions of people suddenly became interested in investment properties. As prices soared, financing arrangements became ever more questionable. Down payments went out of style. . .[/quote]
cbsnews.com/stories/2007/09/ … 1247.shtml

[quote]The Federal Reserve sent the stock market soaring yesterday. So can it stop the decline in home prices, too?

Don’t count on it.

From the late 1960s until 2000, the price of the typical American home and the income of the typical family moved almost in lock step. House prices rose a bit more quickly than incomes during the occasional real estate boom, but would always settle down again. In 2000, the median home cost about $130,000, roughly three times the typical household income — almost precisely the ratio that had held since the ’60s.

Then came a real estate boom unlike any before it. By last year, this ratio of prices to incomes had suddenly shot up to 4.5. For it to return to its old level, home prices would have to fall by an almost unthinkable one-third, and probably more in California, Florida and the Northeast.

There are good reasons to believe that the real estate slump won’t be quite that severe — more on that shortly — but there is also reason to think the slump still has a long way to go. . .

mortgage lenders had filed 244,000 foreclosure notices last month, up from only 113,000 a year earlier. Amazingly, more than a third of the filings were in just two states, California and Florida, the sites of some of the largest price increases and the most ridiculous mortgage lending . . .

In the Los Angeles area, 35 percent fewer homes sold this August than in August 2006, according to an analysis by DataQuick Information Systems. Around San Francisco, the decline was 31 percent. . .

there is a good deal of evidence to suggest that the typical home last year was overvalued by something like 20 percent. I wouldn’t necessarily argue with anyone who insisted on 15 or 25 percent. . . [/quote]
link

STill going down.

[quote] Home Prices Fall for 10th Straight Month

The decline in home prices accelerated and spread to more regions of the country in October, according to a series of private indexes released Wednesday.

Prices fell 6.1 percent from October 2006 in 20 large metropolitan areas, according to Standard & Poor’s/Case-Shiller indexes, compared with a 4.9 percent decline in September. All but three of the 20 regions saw real estate values fall, and even the three places — Seattle, Portland, Ore., and Charlotte, N.C. — where prices were up from a year ago saw prices fall from a month earlier. . .

“The one disconcerting thing about the number is the rate that prices are falling is accelerating,” said Patrick Newport, an economist at Global Insight, a research firm outside Boston. . .

By Mr. Shiller’s calculation, the decline in home prices is greater than at any time since 1941 when the housing market was faltering at the start of World War II. Since their peak in July 2006, home prices in the 20 regions have dropped 6.6 percent. Many economists are predicting that home prices will fall 10 percent to 15 percent from their peak to their trough, though some pessimists believe the drop could be as large as 30 percent.

Prices are dropping fastest in the Midwest, which has been hit hard by job losses in manufacturing, and in California, Florida and the Southwest, where the housing boom was at its frothiest. Prices have fallen the most in Miami (12.4 percent from a year ago), Tampa (11.8 percent) and Detroit (11.2 percent). Prices are also falling in the nation’s two largest metropolitan areas — Los Angeles (8.8 percent) and New York (4.1 percent).

In Charlotte, Seattle and Portland, where the local economies are relatively healthier, prices were up from a year ago but lower than in September. “It suggests to me that the psychological factor is very important,” Mr. Shiller said. “Even in cities that are doing well people see what is going on nationwide and they don’t want to bid as much.” . . .[/quote]
nytimes.com/2007/12/26/busin … eb.html?hp

I just sold my condo in Metro Detroit. Net loss of 37% in 7 years. On the market for 18 months when I decided that I could minimize damage by moving to Taipei and putting what’s left of my condo’s value into CD’s.

Industrial property in Michigan has basically stopped selling – determining a market price is now impossible due to the lack of buyers after commercial credit collapsed in August '07. My seat-of-the-pants barometer of industrial property here says a minimum drop of 70+% from the 2005 peak.

Commercial is just beginning to collapse here. All the projects green-lighted in '05 are just about finishing now. Glorious, vacant testaments to greed and poor planning.

The nightmare of selling my condo introduced me to “market price” and “market clearing price”. The first is what everyone wants for the property and the majority of listing are priced at. The second is what price properties actually change hands at. One is vernacular, the other an economic term. In Michigan, people still believe that their properties have only fallen 15%-20%. Actual market clearing prices for housing in the metro-Detroit area is closer to 50% net loss (including commisions and fees).

We’ve still to hit the peak of sub-prime (that’s 2008) and after sub-prime we will have alt-A and option-ARM loans to default on. My realtor sold (4) units the month she sold my condo. Mine was the only one not in forclosure. 9/10 properties my realtor sells today have 0.00% or negative equity - it’s all been borrowed out.

So, I figure another 3-4 years of falling property prices. Maybe throw in one more year because these things always undershoot on the way down. Subprime, alt-A, option-ARM are just going to put too many foreclosures onto the market for the next several years. Once Americans figure out that it’s cheaper to walk away from an overpriced house with 0.00% equity rather than pay double or triple what it’s worth, we’re going to see a real spike in foreclosures.

I figure my condo will have lost 60-80% of its value by the end of the property crash.

Seattle, Portland and one other major USA city are showing positive year-on-year gains. Every other major city in the USA is now showing negative. If November and December show negative appreciation, 2007 will be the first time since the Great Depression the USA (as a whole) will have seen 12 months of back-to-back property value decline. And the recession hasn’t even started yet.

This downturn will be global and it will be bad.

Thanks for your story, I find reading actual personal accounts far more interesting than the ticker on CNN.

I’ve got around 65% equity in our property in NZ, and even so I won’t rest easy until it’s all paid off. NZ is a long long way from the US, but a similar mentality has been gaining momentum over the last 5 years or so, and many young people have got so used to 20%+ year on year capital gains that year after year it’s almost ritualistic to head to the bank and borrow as much as possible to pay for a new car, expensive holidays, basically anything to spend, spend, spend cos next year a visit to the bank will fix everything.
It’s all coming home to roost soon, but try preaching that to people who only got into the market at the start of the boom - they just don’t believe it can go down.

Ironically, in NZ the mortgage rates are now over 10%, so it doesn’t take a rocket scientist to see the fall will be even harder there. Even a flat market means you’re going backwards pretty rapidly.

We are going to visit the 30s again, I’m sure.