CR - can you run this data series back to 1985? I'd sure like to see the rate-of-change of the down curve to compare to the current rate of change.

It's damn steep right now, implying that the half-way point has passed, i.e. more than 50% of the final price decline has occurred.

And I just don't think that's true based on income/price ratios.

Never mind, I was looking at the second graph first. Based on the rate-of-change of the first graph in the early 1990s, we've seen over 50% of the final price decline but the remaining 40-45% decline will probably take three to four years to bottom.

That makes sense, i.e. the bulk of the pricing loss will be obscured by inflation, just like in the 1990s.

Nades, thanks for the heads up. I like this part.

don't be the last one into commercial real estate. The next boom is upon us. Buy now or be priced out! Warehouses are hot!

Do they seasonally adjust these? I notice the MN graph is a lot bumpier.

Maybe it's harder to get the seasonal adjustments right in a place that has real seasons.

I remember how shocked I was when I spent a year up north and it literally went from snowing one week (in May) to being 80 degrees the next.

ac - In the USA we are "all bubble, all the time"

i think the romans discovered a recipe for a good bubble detergent. I have it somewhere.

the article that Nades posted just makes me chuckle about my good fortune.

Recently I've had several people tell me they have friends that are flipping cars.

I'm not kidding.

If they're flipping Pruises, it just might work.

Bob,

Good find!

"and the signals flash through the night in vain" also my favorite part...

Some day us humans will learn... I'm not holding my breath tho....

LOL - find out more about that okay? Sounds like a very funny story. But then when I first heard about flipping old houses I laughed then too...

I have a brother-in-law here who's done it profesionally for years, so I'll ask him, but the people I'm hearing this from are former co-workers that are talking about fellow white collar professionals doing it.

One of these guys who's trying to recruit me to go work for a financial company (lol) is coming over for a visit this week so I'll pump him for info.

But I hear a used SUV with 50k miles upgraded with burled walnut and granite cup holders is selling for 30% more than a new SUV off the lot now.

Kuwait pumps 5 billion into Citi and Merrill.

OMG it's Dubai Ports all over again.

Terror mortgages.

McCain: Offshore drilling provides beneficial ‘psychological impact.’

Bush psychosis now McCain psychosis

psy·cho·sis (s-kss)
n. pl. psy·cho·ses (-sz)
A severe mental disorder, with or without organic damage, characterized by derangement of personality and loss of contact with reality and causing deterioration of normal social functioning.

GOP = party of psychotics

On gas prices i asked this before at the end of an old thread:

Is $5.00 / gallon gas here to stay? A co-worker and i were discussing this but neither of us know squat. Any oil junkies have a semi-educated opinion?

TIA!

How about Grande Ol Psychotics
Anonymous | 06.24.08 - 7:23 pm | #

Yes that works !

Car flipping to Europe - ex girlfriends husband does this into Holland. TJ Cruiser is the latest - he'll net $5k on the vehicle after costs to ship. Doing one or two per month, no less than $2k net per deal. Course he IS Dutch, so that helps.

It was the Gang Of Pedophiles who stopped Congress from passing the correct remedy--returning the power of BK judges to cram down mortgage principal, ensuring both parties pay a hefty price for the bad loan without turning entire cities into ghost towns. The current bill is just a substitute for that. It spares foreclosure, but at the cost of a huge haircut for the lender, and a recourse loan and foregone appreciation for the buyer.

It doesn't matter anyway. Nobody is going to declare a bonus over this weak tea.

The big underlying trend of the past 25 years, and of the last 7 in particular, has been the increasing concentration of wealth in a very small number of hands - roughly the top 0.1% in the US and a few European countries. They have managed to essentially capture all income growth for themselves, leaving everybody else with stagnant real incomes.

Exactly the same trend we saw leading up to the Great Depression - wealth pooled in one part of the economy and the other part of the economy attempted to make up for it by borrowing.

The problem is even if the government tries to redistribute this wealth, the rich folks may decide to wage a financial war to protect it. It could be that we're already seeing that to some degree with the rising commodity prices.

"If any question why we died,tell them,because our fathers lied."Kipling at his briefest,and true of most wars.

But I hear a used SUV with 50k miles upgraded with burled walnut and granite cup holders is selling for 30% more than a new SUV off the lot now. -ac

Beanie Babies with wheels... wow. Now I've seen everything. I suppose at the end of this mania we'll see pimped SUVs selling on street corners too...

diogenes writes:

Gee, where are the DemoKrats? Wait till the "savior" gets in.

And wouldn't the GOP know about presidents touted as superhuman saviors who turn out to be abject, total failures!

Yes, those are lubricated prices this time around. A bubble minus easy credit equals lubricated prices on the way down.

The phrase "happy cat on wet linoleum" comes to mind.

Any fresh LEH rumors lately?

Prior house price declines tell us nothing about this one. This past year has seen the fastest drop ever, including the Great Depression. CA fell about 10 times as fast it did in the previous decline.

This decline is being driven by a very different mechanism from other post-WWII declines. In those, people mostly could afford their houses and mostly still had equity. They sold only when life changes forced them to. Now so many are profoundly overstretched and/or hopelessly underwater that they leave even without additional stresses. In earlier declines houses were held back from the market. In this one there's no stopping the REOs from hitting the market and making prices collapse.

Indications from areas that started the collapse somewhat early (San Diego, inland CA) are that it doesn't slow. I see no mechanism to halt the drop until renting becomes more expensive than owning, and that's what's going to happen. Until we reach that we will continue to see decline rates far exceeding those of any post-WWII collapse and rivaling or surpassing the Great Depression peak.

On topic - Is the complacency amongst underwater debt-slaves a result of their belief that house prices fluctuate like the DOW, and this is just a momentary blip?

I live in the infamous Bay Area. What you state above is how the mortgage-holders I know here sleep at night.

Previously, what was allowing them into dreamtime was the thought that "things are different here."

They are indeed different here: 25% off y-o-y on a median home is a ~$150,000 loss on a property that's bleeding you to the tune of $5k/month.

For fun, I ran the numbers: 25% loss is 14 years of equity on a 30 year loan at 6%.

"The only risk is that appraisal fraud could be used to defraud the government now." -Fair Economist

What about the impact of the flood of low-ball appraisals for distressed properties depressing prices even further for those who are not currently distressed? Wouldn't this serve to INCREASE the number of distressed properties?

Two things.

First, thanks for digging up the tiered price numbers. A great piece of work. I already posted a link on my blog to get people here so they can get to the numbers.

Second, Fair Economist Wrote,

The mortgage bill is not a bailout. The Feds aren't going to spend very much, if anything. It will save taxpayers on the back-end by reducing transaction costs on foreclosures, which are going to end up in taxpayer laps via FDIC. It's just a way to encourage banks to take inevitable losses in a way somewhat less damaging to the overall economy when possible (specifically, avoiding foreclosure when the current residents could afford the house at a fair price.) The only risk is that appraisal fraud could be used to defraud the government now.

To which I would respond:

There is no way to determine the cost of the bailout until the costs are realized. Whether or not it costs money is highly dependent on any number of factors which have nothing at all to do with housing. Fair economist is making a WAG which is what the appraisers call a wild ass guess. Somehow, I doubt it is going to be inexpensive given the fact that the head of the FHA is practically pleading with Congress not to do it.

By the way how do you determine a "fair" price for a house.