Reason Magazine
- reason.com
- reason.tv
- reason.org
- Donate
- Site Search:
Reason on Facebook
Reason on Twitter
Reason on YouTube
Reason RSSGet Reason E-mail Updates!
Manage your Reason e-mail list subscriptionsadvertisements
House Prices Dropped 18 Percent Last Year
The latest news about house prices is not boffo if you bought one recently: Overall, house prices dropped some 18 percent from October 2007 to October 2008.
The drops are even bigger in the 20-city S&P Case-Shiller index, which tracks costs in big metro areas around the country:
Sunbelt cities suffered the most, but most of the country is watching home values fall. In Phoenix prices have plunged 32.7% since October 2007, Las Vegas home values are down 31.7% year-over-year, while San Francisco prices fell 31%. Miami, Los Angeles and San Diego recorded year-over-year declines of 29%, 27.9% and 26.7%, respectively.
"As of October 2008, the 20-City Composite is down 23.4%," said [Standard & Poor's David] Blitzer. "In October, we also saw three new markets enter the 'double-digit' club."
Atlanta, Seattle and Portland reported annual rates of decline of 10.5%, 10.2% and 10.1%, respectively.
The silver lining in all this? Well, there's at least two. First, if you're looking for a house, prices are falling. And second, for all the horror of the decline, notes an S&P big-wig, "home prices are back to their March 2004 levels."
They'll likely drop more, but there's some value in maintaining perspective, isn't there?
One more bad element to the housing bust:
"These data just add to the tremendous pressure on the president-elect and the Democrats to stimulate housing," [Jaret Seiberg, an analyst with the Stanford Group] said. "That means more lucrative tax incentives and broad foreclosure prevention. All of this will likely be in the stimulus that Congress adopts in January."
Reason's Matt Welch, committed renter, talks fluctuating house prices and more here.
Reason on "The Politics of Sky-High House Prices."
TallDave|12.30.08 @ 2:00PM|#
"These data just add to the tremendous pressure on the
president-elect and the Democrats to stimulate housing,"
Falling oil prices = good. Falling house prices = bad.
Christ, why even have markets?
|12.30.08 @ 2:00PM|#
March 2004? They are still over valued then. Take me back to
January 2001 and now you are talking.
As you may guess, I am currently renting looking to buy, but not
yet.
|12.30.08 @ 2:01PM|#
In Phoenix prices have plunged 32.7% since October 2007, Las
Vegas home values are down 31.7% year-over-year, while San
Francisco prices fell 31%. Miami, Los Angeles and San Diego
recorded year-over-year declines of 29%, 27.9% and 26.7%,
respectively.
Atlanta, Seattle and Portland reported annual rates of decline of
10.5%, 10.2% and 10.1%, respectively.
So the bubble was not more pronounced in markets with more land-use
regulation.
That theory was always nonsensical. It's no surprise the numbers
disprove it.
|12.30.08 @ 2:01PM|#
These data just add to the tremendous pressure on the
president-elect and the Democrats to stimulate housing
Pressure exerted by who, exactly? And how?
I mean, clearly, house prices in March of 2004 were at
catastrophically low levels. I remember all the headlines from back
then, about how if house prices didn't go up, pronto, we were all
doomed.
Naga Sadow|12.30.08 @ 2:03PM|#
I just want my condo on the cheap dammit!!! Stop with the damn stimulus!
|12.30.08 @ 2:03PM|#
house prices have declined enough now that the income/housing cost ratio is back in line historically. look for these levels to be long term stable levels - even though we'll probably overshoot in the meanwhile, since no one can get a loan, and there is too much fear.
|12.30.08 @ 2:04PM|#
My next-door neighbors have apparently abandoned their house, so
we're expecting it to be foreclosed upon. There's another one a few
doors down across the street. This is not good for the
neighborhood, I fear.
On the other side of the recently abandoned house is a house that
the owners have been trying to sell for 18 months. Since day one,
they've been asking at least 30% more than the market value of the
house. That's true today, all while these brilliant people are
living in another house. Because, you know, the house is worth
today the maximum dollar amount it was ever worth.
|12.30.08 @ 2:05PM|#
Falling oil prices = good.
You haven't been paying attention then.
How
High Gas Prices Can Save the Car Industry
Who
supports increasing petroleum fuel taxes (or price floor)?
|12.30.08 @ 2:07PM|#
At least as interesting as comparisons among markets are
comparisons within markets. In greater Boston, downtown units -
including condos - have held their value or increased over the past
couple of years. This is especially odd, since condo prices tend to
swing more wildly during downturns.
The last set of data I saw about this was in the summer, and the
writer theorized that this was a result of gas prices. I wonder if
the pattern has held up? Or if the same thing is happening outside
of northeastern metro regions.
Citizen Nothing|12.30.08 @ 2:10PM|#
My boss just bought her neighbor's house. She made a ridiculous
offer and they accepted. Apparently she's had no difficulty finding
good renters.
My neighbor's house (and 24 acres of creekfront land) has been on
the market for more than a year. I'd make a lowball offer to annex
it to CitizenNothingsylvania, if I thought I could rustle up a
reasonable loan.
whiner|12.30.08 @ 2:10PM|#
Already lost one kids college education in housing, and half of anothers in stocks. Didn't overleverage either - put 20% down, and did renovation on top of it. As always, the few people who play by the rules, get screwed the worst. should have levered up and gotten 2nd mortgage.
|12.30.08 @ 2:10PM|#
I just want my condo on the cheap dammit!!! Stop with the
damn stimulus!
Just buy at Daytona Beach, Naga. Every other condo there has a FOR
SALE sign on it.
robc|12.30.08 @ 2:14PM|#
I bought in October of 2007. My appraisal for refinancing was 1k higher than my purchase price. Not a big increase, but considering the market....
robc|12.30.08 @ 2:17PM|#
since no one can get a loan
I refied last Monday, so it isnt just Senators that can get a loan.
The place I closed at is so insanely busy doing closings that they
were training a back-of-the-house guy (I think IT) to do closings
because they couldnt handle them all.
I guess he gets to drink coffee now.
Kolohe|12.30.08 @ 2:17PM|#
So the bubble was not more pronounced in markets with more
land-use regulation.
That theory was always nonsensical. It's no surprise the numbers
disprove it.
1) We haven't seen the final drops so it is still a little early to
assess the final magnitude of the bubble for a the given
markets
2) Those Californian cities don't have 'high' levels of land use
regulation? At least higher than Atlanta?
Zeb|12.30.08 @ 2:18PM|#
I bought a house in 2005 and I still think that this is good news, since I bought what I could afford and intend to, you know, live there. Anyone who didn't see this coming 4 or 5 years ago is living in fantasy land.
robc|12.30.08 @ 2:18PM|#
My 90+ year old neighbor died about a month before I moved into my new place, so I guess she was never my neighbor, technically. Anyway, the house finally went on the market this summer. Ive seen 1 person looking at it.
|12.30.08 @ 2:19PM|#
I bought in Fall 2004.
I can't feel too bad - the 20% I was able to put down all came from
buying and then selling two other homes during the runup.
|12.30.08 @ 2:21PM|#
Kolohe,
1) We've seen pretty considerable drops for a long time now.
2) Those Portland and Seattle areas have much stricter land-use
regulation than Las Vegas and Phoenix. There are examples all over
the place, but the correlation just isn't there.
|12.30.08 @ 2:22PM|#
I bought in 2002, sold in 2006. The house went up 25% in value over that time. Gotta get in on the party early.
Kolohe|12.30.08 @ 2:23PM|#
My take on why the housing prices in urban cores have remained stable are those were the less marginal owners to begin with, people are increasingly tired of long crappy commutes, and as crime has essentially gone away as an issue (compared to say a generation ago), there is less negative feedback on the trend to move closer to the center of population. Also, both in DC and Honolulu, condo prices haven't gone down, but they haven't gone up much either (compared to what they were doing pre-06). But the number of sales is a fraction of what it was two years ago.
Nigel Watt|12.30.08 @ 2:26PM|#
Joe, Dallas isn't exactly a mecca of urban planning, and it had the lowest drop (3%) in the index. Houston would be a better measure, but for some reason it isn't included.
Naga Sadow|12.30.08 @ 2:30PM|#
What? People are having trouble getting loans? How bad must your
credit be? They don't check your income even now.
Epi,
I want some panhandle property. That dick I was tryin to buy from
on Navarre sold it out from under me at the last minute.
BakedPenguin|12.30.08 @ 2:31PM|#
I guess he gets to drink coffee now.
"Second prize is a set of steak knives. Third prize is - you're
fired."
|12.30.08 @ 2:32PM|#
Naga,
As we discussed some time ago, a person in your position shouldn't
buy property but should go from foreclosed house to foreclosed
house. You could do that for a couple of years, probably.
|12.30.08 @ 2:35PM|#
That's an interesting idea Kolohe. Traditionally, there have
been more "marginal owners" in the inner city areas, because that's
where the people who could just barely afford - or maybe not
actually afford after all - to more up from renting could find a
house to buy.
Now, however, we're seeing relatively well-off people who are
"marginal owners" because they either bought too much house, or
refied out the yin-yang, which seems to be more of a middle class
surburban problem.
people are increasingly tired of long crappy commutes It
is interesting that gasoline consumption and miles driven have not
rebounded to previous levels, even as gas prices have plummeted. I
was pleasantly surprised that gasoline purchases turned out to be
so elastic when the prices went up, and now I'm presently surprised
again. Maybe people just don't believe they're really going to stay
low.
and as crime has essentially gone away as an issue (compared to
say a generation ago), there is less negative feedback on the trend
to move closer to the center of population
Certainly, improvements in urban quality of life have lifted urban
real estate markets over the past decade or two. Should we conclude
that the similar rises in urban and suburban home prices over the
past decade are actually masking two different trends - bubble
growth in the suburbs, but more "real" growth in the cities?
But the number of sales is a fraction of what it was two years
ago.
Most would-be buyers need to sell first?
Seward|12.30.08 @ 2:38PM|#
Recently I heard a comment about housing being what amounts to be our version of industrial policy. That seems to be about right.
|12.30.08 @ 2:38PM|#
Nigel,
I'm not arguing that there is an opposite correlation, just that
the theorized one (more regulation = greater bubble) doesn't seem
to hold up.
There are high regulation/bubble markets (San Diego). There are low
regulation/bubble markets (Phoenix). There are high regulation
non-bubble markets (Seattle). There are low regulation non-bubble
markets (Dallas).
|12.30.08 @ 2:41PM|#
Naga,
Navarre is nice. Were you looking on the beach or back in
Holly-Navarre? If you do the beach, make damned sure you get a 3rd
floor or higher unit and for Zod's sake, don't buy a beach house.
You should have seen the toothpicks that
Opal and
Ivan made of that place. Of course, if you are local you
already know that.
Naga Sadow|12.30.08 @ 2:42PM|#
Pro Lib,
I'm aware of your plan to get me to fill that vacant house next to
yours. Sorry. I want some beachfront property to lord over my
family.
Lawyer: I am so sorry. My apologies, we're so busy today. It's good
to see all of you.
Dennis: That's quite alright, sir. Don't worry about it. Listen,
would now be a good time to say a few words about my wonderfully
warm and caring mother?
Sweet Dee: No, just get to the reading part.
Frank: Get on with it, man. Let's go.
Lawyer: Alright. Uh, which one of you, uh, is Frank Reynolds?
Frank: Yo!
Lawyer: Okay uh, Frank, I have something here I need to read to you
from Barbara. [reading] Frank, if your fat monkey heart is still
beating, then congratulations. I want you to know that I hereby
leave all of your money to Bruce Mathis, the real father of my
children.
Dennis: What?!
Sweet Dee: What?!
Frank: Bruce Mathis?!
Lawyer: [reading] A handsome man with a beautiful soul and a nicer
penis.
Frank: You're giving all of my money to that jerk-off!?
Lawyer: You know, Mr. Reynolds, I'm reading what's on the
document.
Sweet Dee: Why are you giving it to him?!
Lawyer: I'm not--
Sweet Dee: She barely even knew him!
Lawyer: Yeah, I'm not giving any money to anybody, you see. I'm
just reading what's on a will.
Frank: Where is that rat bastard?!
Lawyer: Sir, I don't know!
Frank: 'Cuz I wanna smash his face, until he's dead--killed
dead!
Dennis: Frank, would you forget about Bruce?! Mom just gave away
all of our money!
Lawyer: You know what, we should just move forward, okay? [reading]
For my darling son, Dennis... presumably. [motioning to Dennis] I
give you my house.
Dennis: Yeah, okay... well yeah, now it's starting to make sense.
Read on.
Lawyer: ...on the sole condition that Frank not be allowed
in.
Dennis: I would never let him in.
Frank: What?!
Lawyer: Deandra?
Sweet Dee: Yes.
Lawyer: You get nothing. You were a disappointment and a
mistake.
Sweet Dee: A mistake? We're twins.
Lawyer: Yeah...
Sweet Dee: We were born at the same time. What are you talking
about. You're not making any sense.
Frank: Tell that bitch it doesn't make sense!
Lawyer: Okay, I'm reading the words that someone else wrote, kay? I
don't know your mom; never met your mom. In fact, I'm certainly not
speaking to your mom now, because she's dead!
Sweet Dee: Yeah, we know she's dead. We're venting because we're
frustrated.
Frank: You tell her, she's a god damned whore--always been a
whore!
Sweet Dee: Whoa whoa, what about jewelry? Does it say anything
about jewelry?
Lawyer: It does say something about the jewelry in here, in that
um, she wants to be buried in it.
Sweet Dee: God damn it... oh god damn it!
Frank: Oh! Oh! She's taking it into the grave!
Sweet Dee: Tell you what, you son of a bitch, I'm very disappointed
in you today--very upset with you! You tell her from me, that I
will be in touch with her, somehow...
Frank: Yeah, tell her she's a bitch!
Lawyer: These are awkward situations, often, and I know it can be
difficult...
Dennis: [whispering to the lawyer as Frank and Sweet Dee leave]
Hey, thanks for the house, dude.
Lawyer: You know... [awkwardly "bumping fists" with Dennis] You
know, I didn't give you the house... that's not how this whole
situation works...
Dennis: [gleefully] Yes you did! [laughs]
Lawyer: Mmm-hmm, kay.
[Dennis leaves]
Lawyer: [to himself] Jesus Christ.
Naga Sadow|12.30.08 @ 2:47PM|#
Kwix,
I live in Biloxi. The property I was after was a bungalow. The
property on the cheap was what I was after. The bungalow was only
about 1500 square feet. I just wanted to rent it out for the cost
of the property for about 3 years then decide what to do with
it.
Kolohe|12.30.08 @ 2:47PM|#
the correlation just isn't there.
That I'll buy. I read you as saying there was correlation, just the
other way. I still say there is a part of land use regulation that
is part of it, but not it's simple existence. Those bubble cities
all have in common is that you can't just build anywhere, you're
limited by terrain and water (either too much or too little)
(And I'm still not sure on the long term trend on those Portland
and moreover Seattle prices. The other shoe hasn't dropped yet for
the Pacific Northwest economy, but if aviation has a multi year
slowdown and commodity prices stay low, the tech sector (the part
which isn't going overseas) is simply not large enough to take up
the slack. I could easily see happening in the Northwest what
happened in New England during the '90 recession, where a slight
downturn suddenly manifested into one of the higher areas of
economic distress in the country. And would be a relative drop(esp
psychologically) more than the industrial midwest, which albeit is
currently in the worse economic shape in the country, has spent the
entire decade in the doldrums.
Paul|12.30.08 @ 2:47PM|#
That's funny, my tax assessment went up $58,000 for last year. Someone at King County isn't getting the word...
|12.30.08 @ 2:51PM|#
Naga,
Nah, the vacancy is a recent thing. I just think Florida has many
opportunities for you. I'm a few miles from the Bay, anyway, and
you really should be over in Pinellas County, on the Gulf. Jumping
from foreclosed beach house to foreclosed beach house.
|12.30.08 @ 2:54PM|#
Kolohe,
I guess I could have been clearer, because a couple people have
read my comment that way now.
By definition, bubbles happen when prices are based on speculation,
unmoored from the supply and demand for the underlying good.
So while land use regulation can certainly cause higher prices -
that's what snob zoing is for, mainly - it would produce, in the
overall market, a slow steady increase, and one not prone to a
dramatic reversal. Exactly the opposite pattern of a bubble.
On Seattle and Portland: even if what you say happens - the crummy
economy lowers demand, so prices fall - that would be something
different from the true bubble markets, where the declining real
estate values came first, and the lousy economy was a consequence
of that.
|12.30.08 @ 2:55PM|#
I bought a house in So. Cal. (Ventura County) nearly a year ago and paid almost exactly 1/2 of what the previous owners paid for it. The place across the street was foreclosed on before we bought ours and it's still for sale. I've only ever seen 3 people look at it.
|12.30.08 @ 3:00PM|#
I would like to see these numbers with the really bad areas taken out rather than just an aggregate. Some of the bubble and the corrisponding fall is the result of building houses in the middle of nowhere with horrible commutes and selling them to people who couldn't afford them. Take those out of the equation and then look at prices. If Washington DC is any indication, prices of homes closer in are not falling anywhere near 19% and prices of the ones built too far out are falling more.
Naga Sadow|12.30.08 @ 3:02PM|#
Domo,
Its from Always Sunny in Philadelphia. Quite possibly the most
deranged show I've ever had the pleasure of watching.
Pro Lib,
Your plan while cunning will not work. My current financial plan is
to max out a card then transfer the balance to another card. They
reward me by increasing my limit. Genius, I know. I want to apply
the same logic to housing.
|12.30.08 @ 3:07PM|#
Naga,
My cunningness knows no bounds. As you collect foreclosed-upon
homes, you can rent them to others. For instance, during the
upcoming Super Bowl, you could probably get $10,000/week for each
beachfront property that you rent.
|12.30.08 @ 3:07PM|#
I don't have time to do the research, but I'm hoping somebody
else already has and knows this off the top of their heads.
When studies like this come out that say that house prices have
dropped X%, what exactly does that mean?
Does that mean that, on average, the fair market value of every
house in that market has decreased by that amount?
Or, rather, does it just mean that the median price of homes sold
in that market during that period is x% lower than it was?
If the latter, it seems that these numbers could well be largely
skewed by the mix of the homes being sold (influenced by people
buying up low-end foreclosed properties). In other words, that the
% of homes being sold in the low-end range is now higher than it
was previously.
Any insights from those more in the know?
|12.30.08 @ 3:07PM|#
I would like to see these numbers with the really bad areas
taken out rather than just an aggregate. Some of the bubble and the
corrisponding fall is the result of building houses in the middle
of nowhere with horrible commutes and selling them to people who
couldn't afford them. Take those out of the equation and then look
at prices.
Hypothesis - this type of housing represents the bulk of the
decline in values. The difference in the decline between places
like Phoenix and Vegas vs. places like Seattle and Portland in the
% of the region's housing that is "this type."
|12.30.08 @ 3:17PM|#
I'd be interested to see numbers for the increase in home sale
prices in those same markets during the runup.
A single-digit decline in metro-Boston and metro-Cleveland could
mean very different things.
And how about Detroit, -20%? Was there even a runup in Detroit at
all?
Naga Sadow|12.30.08 @ 3:18PM|#
Pro Lib,
I will keep it in mind my friend. Gotta get ready for work now.
Later.
|12.30.08 @ 3:34PM|#
Thanks, Joe.
So to me, these numbers seem largely meaningless if one is trying
to figure out how much they can expect to have to pay for a
particular type of home in a particular market year over
year.
These numbers just tell us that of the few houses that are being
bought and sold, more are undesirable houses that people are
scooping up cheap from foreclosure sales.
|12.30.08 @ 3:37PM|#
"These data just add to the tremendous pressure on the
president-elect and the Democrats to stimulate housing,"
The best way for the next administration to increase the value of
people's homes would be to implement an extensive set of
regulations limiting the creation of new housing stock and
simultaneously work to destroy existing houses - homes that are in
foreclosure and currently unoccupied would be a good place to
start.
Any other course is likely to fail miserably.
And this plan has the added benefit that the first part has been
implemented in many areas already.
|12.30.08 @ 3:39PM|#
Joe,
I don't think there was a run up in some places. Twelve years ago
when my wife was in college, Boston was a significantly more
expensive city than Washington. Now the opposite is true. I think
that is because real estate in Washington went batshit insane and
didn't in Boston. Thus, Washington has more of a bubble to pop.
|12.30.08 @ 3:39PM|#
I think you're overstating the case, Brad.
Are you actually claiming that the prices of individual homes isn't
lower, and that the only thing that's changed is the mix of types
that sell?
thoreau|12.30.08 @ 3:44PM|#
I have nothing to add to this, I just want to say that I'm learning a lot from reading these comments.
|12.30.08 @ 3:47PM|#
"The best way for the next administration to increase the value
of people's homes would be to implement an extensive set of
regulations limiting the creation of new housing stock and
simultaneously work to destroy existing houses - homes that are in
foreclosure and currently unoccupied would be a good place to
start."
Condeming, buying for a price and knocking down homes that have
been vacant for a given period of time would not be a horrible way
to solve the problem. If there is an excess of something, you just
get rid of the excess. But that of course leaves us with high home
values, which I don't think is a very good thing.
|12.30.08 @ 3:49PM|#
Joe,
Washington is a new level of crazy. They sell nice colonials here
for 800K. When I figured out that I could live in Melrose, MA, a
really nice suburb of Boston for less money than I could live in
some of the crappy burbs of Washington, I wanted to cry.
thoreau|12.30.08 @ 3:51PM|#
Oh, regarding gas prices:
Yes, demand proved to be surprisingly elastic during the oil price
bubble. If all other factors had stayed constant, then gasoline
demand would have risen after the oil bubble burst. However, the
timing of that burst coincided with (1) fall (less driving) and (2)
an economic downturn (less money to spend) so it isn't surprising
to me that demand for gasoline has not rebounded.
The real test will be next summer, when prices will rise but
probably not get anywhere near their levels in summer of
2008.
But, yeah, I do suspect that people don't really believe that
prices will stay this low. OTOH, I remember reading in the
Economist even in 2005 that oil companies were making investment
decisions on a presumption that the fields would need to be
profitable at $20-$25/barrel. They aren't omniscient, but they
presumably know something about their market, and right
now their long-term predictions are looking pretty good.
robc|12.30.08 @ 4:03PM|#
people are increasingly tired of long crappy
commutes
This is part of the reason Ive never had a job "downtown". I want
to live outside the urbs and I want to work near where I live.
|12.30.08 @ 4:16PM|#
I agree, John, the crazy in metro-Washington home prices goes to
eleven.
Colonials? Try $800k townhouses! In the burbs in a development, not
even the classy old neighborhoods.
But it is very common to see 10% increases in home prices in
eastern MA communities every year between 2001 and 2006. That's not
chicken feed, either.
|12.30.08 @ 4:16PM|#
If you house is your home, stop whining. Dropping house values
do not raise your property taxes, do not raise your mortgage
payments. If you were looking to trade up you can still trade up.
Homes are an investment only as a side-effect.
Yeah, you lost a tiny bit of equity to help finance your kitchen
remodeling. Let's get together and I'll show you my 401k and we
both can have a good cry. In the meantime you still have a
home.
|12.30.08 @ 4:21PM|#
"Colonials? Try $800k townhouses! In the burbs in a development,
not even the classy old neighborhoods."
The Condo market kills me. Nothing against condos but it is a
fucking apartment. In Washington they want a half a million or more
for ones in good neighborhoods. In Central Park West maybe, but
this is Washington DC complete with lousy schools, high crime and a
terrible city government. Half a million dollars for an apartment
is ludacis yet happens all the time here.
The Wine Commonsewer|12.30.08 @ 4:22PM|#
Part of Vegas and Phoenix woes is the fact that there was huge
demand for housing fueling the run-up in prices. Las Vegas has more
population today than the entire state of Nevada had 20 years ago.
Phoenix was the fastest growing metro area in the US for many
years.
I bought my place at the bottom of the last downturn (1997). I
waited and waited. It paid off. My house is worth considerably less
than it was two years ago. But it is still worth at least 2.5 times
what I paid for it.
For those who are waiting patiently. Be patient. If you are paying
attention, you'll notice when the prices begin to tick the other
direction. It doesn't happen in a week or two, but it will happen.
There's sixty some million kids coming of age in the next decade or
so that are going to need a place to live. That's called an
increase in demand.
The Wine Commonsewer|12.30.08 @ 4:28PM|#
Meant to say that when area housing prices run up exponentially,
there is room for huge declines comparatively. So, comparing price
declines between Portland and Vegas is comparing apples to oranges.
You can do it, but it doesn't mean much.
As for land use regulation, Phoenix and Vegas both have plenty of
that. They aren't California, which is insane, but since both have
been invaded by expatriate Californios, a certain amount of
Californicate numbskullery has been adopted by Nevada and Arizona
of late.
|12.30.08 @ 4:54PM|#
Half a million dollars for an apartment is
ludacis...
What can I get for Fifty Cent?
TWC,
But...but...the population of Las Vegas and Phoenix hasn't
declined. There might be some slackening of demand for homes, but
it can't possibly be the 30% range indicated in the story. For the
prices to plunge that that, absent a mass plague, a lot of that
runup had to be speculative.
|12.30.08 @ 5:31PM|#
Brad, joe, et al: I'm reading this story differently than
Gillespie did, and wondering if it makes any difference:
The original story (which I have heard/read from a number of
sources) says (paraphrasing) that "housing prices in October 2008
were 18% lower than they were in October 2007", not "housing prices
in October 2008 had dropped 18% since October 2007".
Here's kind of what I'm confused about:
Sep07 Median = $1,000,000
Sep08 Median = $ 700,000
Oct07 Median = $1,000,000
Oct08 Median = $ 820,000
Nov07 Median = $1,000,000
Nov08 Median = $ 700,000
In that scenario, comparing Oct07 to Oct08 shows an 18% drop
between the two months', however it is not reflective of the trend,
which shows actual house prices dropping somewhere closer to %30
(in my imaginary example) over that span of time. No?
|12.30.08 @ 5:36PM|#
Sure, James, your logic is fine, but is there any reason to believe that happened? That the October to October comparison is an outlier like that?
Paul|12.30.08 @ 5:58PM|#
the crummy economy lowers demand, so prices fall - that
would be something different from the true bubble markets, where
the declining real estate values came first, and the lousy economy
was a consequence of that.
Except that Seattle was one of the last markets to decline. The
economy was tanking and report after report showed that Seattle was
'immune' from the housing price decline. Seattle had it's housing
price decline, it just came about a year after the first reports of
housing bubbles bursting.
Although I will say that the signs were there, even before some of
the reports were 'official'. Real estate signs were beginning to
grow cobwebs.
|12.30.08 @ 6:37PM|#
joe, I have not gathered the data. (I don't know where to look, frankly.) I just found it curious that Gillespie would use the "since" modifier rather than the "when compared to" modifier. There seems to be a different implication depending on which is used, hence the curiosity. It would seem to matter, since the actual drop in housing prices might be much more than 18%. Or much less. In either case, it would be a different article.
Invisible Finger|12.30.08 @ 6:51PM|#
I was pleasantly surprised that gasoline purchases turned
out to be so elastic when the prices went up, and now I'm presently
surprised again. Maybe people just don't believe they're really
going to stay low.
More like people are in debt up to their eyeballs and can't even
afford the stuff when it's relatively cheap. No point in driving to
the mall if your HELOC has been reduced or your mortgage reset to a
$500/month higher payment.
Invisible Finger|12.30.08 @ 6:52PM|#
For the prices to plunge that that, absent a mass plague, a
lot of that runup had to be speculative.
Absolutely. The sand states had lots of second-home buyers. They're
gone.
Invisible Finger|12.30.08 @ 6:55PM|#
Be patient. If you are paying attention, you'll notice when
the prices begin to tick the other direction. It doesn't happen in
a week or two, but it will happen.
Tell that to the Japanese.
There's sixty some million kids coming of age in the next
decade or so that are going to need a place to live. That's called
an increase in demand.
And there's 80 million old farts gonna be dying in the next decade
or so. That's called an increase in supply.
Invisible Finger|12.30.08 @ 7:01PM|#
Twelve years ago when my wife was in college, Boston was a
significantly more expensive city than Washington.
That's 1995-1996.
In the mid-80's real estate went batshit insane in eastern Mass.
and the prices you saw in 1995 were unchanged from 1991. Back then
a housing crash meant prices weren't going up. Ah, the good old
days!
Invisible Finger|12.30.08 @ 7:03PM|#
Condeming, buying for a price and knocking down homes that
have been vacant for a given period of time would not be a horrible
way to solve the problem.
The Bulimic's Solution!
|12.30.08 @ 7:25PM|#
Paul,
Except that Seattle was one of the last markets to decline. The
economy was tanking and report after report showed that Seattle was
'immune' from the housing price decline. Seattle had it's housing
price decline, it just came about a year after the first reports of
housing bubbles bursting.
I think we're misunderstanding each other. I was saying that
Seattle and Portland were cases of the bad economy coming first,
and real estate prices falling as a result.
The bubble pops in the bubbly markets, it kills the construction
industry, it kills the financial industry, the economy tanks, and
THEN places like Seattle and Portland, that didn't rely on bubble
growth, see a decline in home prices, along with things like rising
unemployment, as a result of the economy being tanked.
I think we're saying the same thing.
|12.30.08 @ 7:28PM|#
In the mid-80's real estate went batshit insane in eastern
Mass. and the prices you saw in 1995 were unchanged from 1991. Back
then a housing crash meant prices weren't going up. Ah, the good
old days!
Yup, I remember that.
|12.30.08 @ 7:39PM|#
But...but...the population of Las Vegas and Phoenix hasn't declined. There might be some slackening of demand for homes, but it can't possibly be the 30% range indicated in the story. For the prices to plunge that that, absent a mass plague, a lot of that runup had to be speculative.
I don't know about LV, but Phoenix has a large number of "winter
homes" for retired snow birds. A downturn in chillier climates
could easily mean a lot of houses for sale in the Phoenix area
without a population change. My suspicion is Las Vegas would
experience something similar.
The Wine Commonsewer|12.30.08 @ 7:47PM|#
Invisible....The old farts won't be dying at greater rates than
the whippersnappers needing houses until nigh on the end of this
century.
Joe, not saying the runup wasn't partly speculative, well, I don't
like that word, but it will suffice.
I'm saying that prices in Vegas an Az rocketed upward further than
they otherwise would have because there was a lot more demand
influencing prices in the Great Southwest than other places.
That demand has ceased because nobody in Ca can take the equity and
run to lower priced Nv and Az and buy a better house for less money
than the one they left behind.
Bubble bursts + demand stops = big drops in prices
comparatively.
Not that it matters that much, just making conversation is all.
The Wine Commonsewer|12.30.08 @ 8:03PM|#
Back then a housing crash meant prices weren't going up. Ah,
the good old days!
I'm old. I've lived my entire life in Californicate. I have seen at
least three housing market crashes. Each of them was as severe as
this one. In each case the market has settled out and eventually
began to creep up again. In each case, the bottom of the market was
higher than the time before.
I bought my house in 1997 (bottom of the last market crash) for
less than it cost to build in 1987. It is still worth at least
double what it cost to build twenty years ago.
My folks paid 12,900 for their home in 1960. It is still worth at
least 450,000 in today's crappy market.
In the long term, crashes and runups notwithstanding, housing
prices will not permanently decline until such time as there is
more supply than demand. That isn't likely to happen in our
lifetime.
Wait patiently for the bottom. Have a good down payment. Be ready
to jump when the time is right. Don't jump until you're sure it's
the right thing. Keep in mind that condos drop faster than single
family houses when the market goes to hell.
|12.30.08 @ 8:19PM|#
I gotcha, TWC. The actual increase in housing demand in those
markets was so dramatic that homebuilders overshot in production
when the demand eventually dropped off.
Not real estate investor/homeowner speculation, but builder
speculation. Because the scale of the population increase was so
large, they ended up overshooting by a lot.
fortyouncer|12.31.08 @ 1:51AM|#
Brad,
These numbers, I believe, come from the Case Schiller / Standard
and Poors Index. They are cacluted from repeat sales of the same
house, therefore they take away the problem you mentioned of the
"mix of sales" driving the median price artifically down. These
numbers only talk about the change in prices, not the actual price
itself (from what I can tell). They are the best numbers out
there.
EscapedWestOfTheBigMuddy|12.31.08 @ 3:33PM|#
@joe
2) Those Portland and Seattle areas have much stricter land-use regulation than Las Vegas and Phoenix. There are examples all over the place, but the correlation just isn't there.
I won't argue your point, joe, because I have no idea what the data
look like, but drawing conclusions about correlations from six data
points puts in a a state of sin.
Repent!
Serious question: most (all?) of those are in growth regions. But
which are growing faster than others, and in what demographics? My
uninformed guess is that the worst it regions were growing in the
45+ demographic.
There could be something there...
|1.2.09 @ 9:24AM|#
WASHINGTON EXCEPTION: The story fails to acknowledge the recent
D.C. increase exceptions in home prices. According to the local
multiple real estate listing service, MRIS, resale data reported
average October and November home sale prices increasing 20% and
22% respectively. The 20004 zip code neighbors both the White House
and Capitol.
Check out resale prices in your zip code:
http://www.mris.com/reports/stats/zip_stats.cfm
Site comments/questions:
Media Inquiries and Reprint Permissions:
(310) 367-6109
Editorial & Production Offices:
3415 S. Sepulveda Blvd.
Suite 400
Los Angeles, CA 90034
(310) 391-2245