by ilene - May 9th, 2011 2:09 pm
Courtesy of Trader Mark at Fund My Mutual Fund
The same economists shocked by the original housing crash (prices can’t go up forever?), now appear to be in the fetal position as the much too obvious second leg of the downturn has arrived. While I do have an economist degree, living in the locale experiencing a 1 state Depression [Jan 27, 2011: Metro Detroit Home Prices Back to 1994 Levels...Before Accounting for Inflation] had me much more negative than those who live in the ivory towers of Manhattan or D.C.. I wrote a few years ago about a few articles that also opened my eyes to what was going on out there in the rest of the country. [May 30, 2005 - Fortune: Riding the Boom] [Sep 11, 2006: Option ARMs - Nightmare Mortgages] Hence in late 07, I showed with simple math why we were in for a doozy of a drop in the housing market. [Dec 6, 2007: What Should Median Housing Prices be Today?]
As you can see from the mid/late 1970s to 2001/2002 the ratio was consistent in a tight range between 2.6x to 3.0x. Essentially this means the median home price in this country was 2.6x – 3.0x median household income. And it’s been right around 2.8x for most of that time. That’s 30 years….
Then in 2002+, we had innovation…. great innovation… and 1% interest rates. Easy money. No mortgage regulation. Happy times. And crazy housing prices that detached from reality. In 2006 at the height of ‘innovation’ (where were these politicians 1 year ago? seriously), the ratio went "off" the chart, it appears 4.0x. After the ‘correction’ we’ve had, that ratio has fallen all the way to…. 3.8x.
In July 2006 at the height of insanity the median price of a home was $230,200
It has already fallen in less than a year (October 2006) to $207,800
Pain over, correction done – time to party. Right? Wrong.
What are median incomes nowadays? As of 2006 the median household income was $48,201.
$48,201 x 2.8 ratio
by ilene - February 10th, 2010 11:51 am
Courtesy of Mish
With pent-up housing demand headed for exhaustion, if not well past exhaustion already thanks to $10,000 tax credits for new buyers, the housing recovery is about to reverse.
Please consider Reversal of Fortune.
One in five housing markets entered a second leg of home price declines in late 2009, after showing price increases for nearly half of last year, according to a report released Wednesday by Zillow.com, a real-estate Web site.
In 29 of the 143 markets tracked by the site — including Boston, Atlanta and San Diego — prices flattened or began to decrease again in the second part of last year, after five or more months of consecutive monthly increases, according to the site’s fourth quarter real-estate market report.
Home prices in another 29 markets, including Los Angeles and New York, increased each month throughout the fourth quarter. But the rate of increase slowed from November to December in 21 markets, according to the data.
Nationwide, home values fell 5% in the fourth quarter compared with the fourth quarter a year earlier. Values fell 0.5% from the third quarter of 2009.
"While we have seen strong stabilization in home values during 2009, there are clear signs that they will turn more negative in the near-term," said Stan Humphries, Zillow’s chief economist, in a news release.
"What we saw in mid-2009 was a brief respite from a larger market correction that has not yet run its course," he said.
Still, Humphries said markets that see a "double dip" in values before reaching a bottom won’t see a return "to the magnitude of depreciation seen earlier." Instead, the drop will look like a "modest aftershock" of the initial drop in prices. In this scenario, a "double dip" is defined as two periods of sustained declines separated by a brief stabilization or recovery, according to the release.
It’s important not to make too much of stabilization. If you throw enough money at something, prices are bound to stabilize, at least for a while. However, eventually the pool of pent-up demand is exhausted, much like the pool of original fools was exhausted.
The shadow supply of homes is through the roof, rental prices are dropping, and there is no
by ilene - November 19th, 2009 12:20 pm
Zillow reports on the actual changes in home values, as well as the perception/misperception of changes, in different regions over the last year. (My yellow highlighting) – Ilene
Confusion Reigns as Home Values Fluctuate Regionally; Northeastern Homeowners Overly Cynical About Home Values, But Western Homeowners Are Too Confident
Homeowners Across the Country Predict a Full Recovery in Next Six Months, According to Zillow(R) Q3 Homeowner Confidence Survey
SEATTLE, Nov. 18 /PRNewswire/ — Homeowner confidence was all over the map in the third quarter, as home values in some parts of the country stabilized while other areas saw continuing declines. Homeowners in the Northeast were the most cynical about their own homes’ values over the past 12 months, although the region posted the highest percentage of homes increasing in value during that same time period, according to the Zillow Q3 Homeowner Confidence Survey(1) and the Zillow Q3 Real Estate Market Reports.
One in five (20 percent) Northeastern homeowners believes their own home gained value in the past 12 months, according to the survey. But in reality, 31 percent of homes in the region increased in value, according to the Zillow Q3 Real Estate Market Reports.
That translates to a Zillow Home Value Misperception Index(2) of -6, which means Northeastern homeowners believe values performed worse than they did in reality – a first in Homeowner Confidence Survey(3) history. A Misperception Index of 0 would mean homeowners’ perceptions were in line with reality.
Homeowners in the West were the least realistic in the country, with 28 percent believing their own homes’ values increased in the past 12 months. According to Zillow, 17 percent of homes in the region actually increased, resulting in a Misperception Index of 17.
The Midwest had a Misperception Index of 8, while the South had an Index of 15.
Nationally, 25 percent of homeowners believe their own home’s value increased in the last 12 months. In reality, 22 percent of U.S. homes gained value. But fewer than half (49 percent) believe their home’s value decreased over the past 12 months, while 72 percent actually decreased. That discrepancy between perception and reality resulted in a Misperception Index of 10.
U.S. homeowners were also more optimistic about the future of their own homes’ values than at any time in the past six quarters. Two in five (41 percent) say their own home’s value will increase in the next six months.…