Economics

Merry Christmas, Your House is Worth Less Than It Used to Be

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From Forbes comes this stocking stuffer:

10 worst real-estate markets for 2009

The housing market hasn't bottomed out yet. For the third quarter, the closely-watched S&P Case-Shiller national home-price index fell 16.6%, and experts are predicting further declines. Of the top 100 markets, here are 10 with the worst forecasts.

The whole list is here. Eight of the top 10 are in California. The other two are Miami, Florida and Washington, D.C.. All are looking at 20 percent or greater declines over the coming year.

Happy holidays!

Watch Peter Wallison of the American Enterprise Institute explain the role of the federal government in pumping up home ownership rates and values. The 25-minute talk is from Reason's 40th anniversary conference in November:

And go here for embed code, downloadable versions of the talk, and related materials.

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  1. Well, good thing people buy houses to live in, not as investments right? Right?

  2. The list is actually from “Fortune” (not “Forbes”).

  3. The other two are Miami, Florida and Washington, D.C..

  4. Oh wow, my lunch-shutdown mind read that as a list of three. And yes, I’m quite aware that Miami is in Florida.

  5. Let me guess… my real estate tax rates will increase just a tad bit faster than they decreased during the bubble times.

  6. Merry Christmas, Your House is Worth Less Than It Used to Be

    Actually, mine has gone up $1k in the last 13 months, at least according to the appraisal I had done so I could refi in about 45 minutes.

  7. The whole list is here.

    Is there a link missing?

  8. Unfortunately for California, the treasury can only print money, and not brains.

  9. Oh wow, my lunch-shutdown mind read that as a list of three. And yes, I’m quite aware that Miami is in Florida.

    Well, one of them is a city in Florida.

    Football fans know this stuff.

  10. You know what really sucks? Your Miami Beach condo is worth half what you paid for it and the rest of your cash was invested with Bernie Madoff.

  11. At least in DC, the Case-Schiller index defines the DC metro area as a ridiculously large area. It goes out to West Virginia and down past Manassas. If you’re looking in many nicer areas of DC (NW), and close in NOVA and Maryland suburbs (Alexandria, Chevy Chase), the prices are still holding up or even rising. But that also means that some of the outlying areas are getting hit even harder than the index is showing.

  12. If you buy a house as a home, then it doesn’t matter much if the value goes up or down. It’s still your home. It’s only an investment as a side effect. Treat it that way.

    p.s. I love falling house prices. As a renter looking to buy, this is great!

  13. Bakersfield? Bakersfield?

  14. Your Miami Beach condo is worth half what you paid for it and the rest of your cash

    Luckily, I have neither.

  15. So prices are falling in the top 10 most overpriced markets? Gosh, that’s horrible.

  16. Is there a link missing to the rest of the list?

    I’m looking to buy in the coming 6 months, possibly within 2 months, and am in a major metro area. I’d definitely like to check out this information more.

  17. Quick- start the printing presses! Put on another shift; if we can just stoke the furnace of inflation, evrything will be okay.

  18. Merry Christmas, Your House is Worth Less Than It Used to Be

    Oh hey, I know – let’s open the borders and flood the country with immigrants! That would create more demand and raise housing prices. Sure, it might cause some overcrowding and attendant problems for the average citizen, but since when have they ever been important? At least, the speculators, incompetant bankers, and crooks wouldn’t have to take a loss. Of course, the price of labor would probably drop and no one would have enough money to actually afford a high-priced house. But maybe they could pool their resources and put two or three families in a house built for one. Or maybe they could get a loan, and if they default, maybe the taxpayers could bail them out. Oh, wait…

  19. I’m looking to buy in the coming 6 months, possibly within 2 months, . . .

    The trough will be late 2009 or early 2010. Maybe even later for some over priced areas.

  20. Prices going down are a two edged sword. I live in the Washington suburbs, and my townhouse is worth half of what houses went for 2 years ago (I bought it 15 years ago, so I am still above water). But I am looking to retire back to Fresno. I looked at Fresno home prices 2 years ago and I just couldn’t understand how they could be so high…duh, fraud. I view myself as better off with home prices going down – it gives me greater flexibility as far as moving back to California (if it doesn’t fall into the ocean, and taxes don’t reach 97% of income).

  21. Remember when California was the place of dreams? When it was the place where the future was made? Now it looks like California is slated to be the next rustbelt.

    The destructive power of socialism never ceases to surprise me.

  22. My intuition was right all along.

    I knew people and heard of situations where people were buying 1500 sq-ft houses in Cali for $800,000.00. All I could think of when confronted with this insanity was: you stupid fuck!

    Well, all those stupid fucks are getting their due.

  23. My bother-in-law built his house in Manhatten Beach about 10 years ago for approximately $1.0 million. Last year he was bragging that his last appraisal pegged his home at $2.4 million. The SOB “only” increased his equity by $920k rather then $1.4 million? Cry me a river.

  24. Oh hey, I know – let’s open the borders and flood the country with immigrants!

    Uh, ok. I don’t know if immigration is your hobby horse or something, but don’t spout off non-sequiturs like the homeless shouter guy on the corner.

  25. “I knew people and heard of situations where people were buying 1500 sq-ft houses in Cali for $800,000.00. All I could think of when confronted with this insanity was: you stupid fuck!”

    Yeah, but it was so worth the look on their faces at the cocktail party when we told them we bought an 800k house. They were all jealous and envious and thought we were rich.

  26. Yeah, Jim, I acted like I was jealous, ’cause I didn’t want to ruin the party and all, but between my clenched teeth, I was muttering, “Jim, you stupid fuck!”

  27. You know what really sucks? Your Miami Beach condo is worth half what you paid for it and the rest of your cash was invested with Bernie Madoff.

    As long as you aren’t Jewish, you should be fine either way.

  28. So, the message is don’t move to Cali, unless you have to, for at least another 2 years?

  29. I just checked Silicon Valley(Mountainview) on Zillow and it looks like prices are holding up pretty well there, so not all of California is tanking.

    San Diego surprises me though. We’ve got a pretty significant high-tech job base, less traffic and better weather than the Bay Area. Yet our home prices always fell way behind them. Sure, our city government is a corrupt joke, but come on, it’s San Diego!

    Sacramento, Stockton, Riverside and Bakersfield? Come on, who didn’t see that coming?

  30. “OK, we’re just gonna go ahead and put all this on the Extreme Home Makeover account.”

  31. Isn’t this a bit disengenious on Reason’s part? Reason rightly castigates Greenspan and Congress for pumping up the housing bubble over the last 10 years. If it was wrong to pump it up, why is deflating worthy of so much scorn? This is just returning to its natural value. It is also the return of affordable housing. More than that, it is the free market correcting itself. Yeah, it sucks for the people who are losing money, but sometimes the market is like that. Other than lamenting the idiotic government policies that caused housing prices to get that high, I don’t see where Reason should be too upset about this. Whining about it makes it sound like it is a bad thing and maybe Congress ought to do something about it. Yeah, lets see if we can get Congress to propup real estate values. That will work.

  32. I just checked Silicon Valley(Mountainview) on Zillow and it looks like prices are holding up pretty well there, so not all of California is tanking

    It’s the “Google Effect”, as those non-Googlans in Mountain View call it. In an effort to spend all that cash investors are throwing at it, Google is paying its employees extraordinarily high salaries. I think the majority of the world’s Teslas are parked in their employee lot. So of course, the prices of Mountain View homes are being bid up as well.

  33. kinnath,

    the trough has already occured in some places, like Louisville KY. We are in it/coming out of it. I would say, still in it.

  34. Nick,

    The “fixed” link goes to the same place as the other link. So you dont have a link to the whole (not just bottom 10) list?

  35. Yeah, I gotta go with John on this one: While the collapse of the bubble is having some painful consequences, there are silver linings. For libertarians, it means prices are coming closer to a sustainable equilibrium rather than an artificial high pumped up by bad policy. For liberals, it means that houses are now actually affordable for ordinary people. And for people like me, half-way between liberal and libertarian, it means that the market will hit bottom right around the time that I have a down payment saved.

    What’s not to love?

  36. How is this surprising at all to anyone?

  37. For liberals, it means that houses are now actually affordable for ordinary people.

    Odd how I never hear a liberal actually say that.

    . And for people like me, half-way between liberal and libertarian, it means that the market will hit bottom right around the time that I have a down payment saved.

    Saving your own money to increase property holdings via a volnutary transaction? Sounds 100% libertarian to me, t.

  38. And I hereby award myself an R C’z Law for “volnutary transaction.”

  39. john: i didn’t see this posting as being upset, actually.

  40. “john: i didn’t see this posting as being upset, actually.”

    I saw it as that, but I can never quite see through REason’s snark.

  41. Ten worst housing markets for whom? Me? Maybe. (I’m living in market #3; bought in 2004, 20% down and 30-yr fixed; house is worth almost 35% less now, so I’m “upside-down”; no desire or need to move or sell, however.)

    Ten worst for lots of other owners? Probably.

    Ten worst for first-time buyers? Probably not.

    “Worst” is in the eye of the beholder.

  42. John, the anger is warranted, because “but for” the government artificially creating this bubble, assets would have increased at a respectable rate.

    “boom/bust” is not inevitable, despite what the Austrians say. Steady State Economics is possible; it’s Congress’s interference that causes booms and busts.

  43. The Angry Optimist | December 22, 2008, 2:31pm | #

    Oh hey, I know – let’s open the borders and flood the country with immigrants!

    Uh, ok. I don’t know if immigration is your hobby horse or something, but don’t spout off non-sequiturs like the homeless shouter guy on the corner.

    No, it’s not my particular hobby horse, Angry Optimist (or Ayn Randian, or Druckmiller, or whatever.) Nor is it a non-sequitor, either. Yaron Brook over at the Ayn Rand Institute proposes opening the borders for the purpose of propping up housing prices.

    As for “homeless shouter guys” standing on corners – there’s likely to be a whole bunch more of them come this time next year. The inflation and recession of 1981 and ’82 was responsible for the huge increase in the homeless back in the eighties and nineties. Did we really get out of that recession (depression?) or did we just mask its effects with cheap labor from south of the border and cheap consumer products from China and the rest of Asia? All so that the financial and political elite can keep on with their inflation scam. It’s all going to happen again – wait and see.

  44. and when I say “steady state”, I mean growing steady-state.

    Did we really get out of that recession (depression?) or did we just mask its effects with cheap labor from south of the border and cheap consumer products from China and the rest of Asia?

    I am having trouble figuring out how getting things (labor and goods) more cheaply is somehow a “mask” for not “actually” getting out a recession. Do you consider technology to be an “artificial” mask as well?

  45. “John, the anger is warranted, because “but for” the government artificially creating this bubble, assets would have increased at a respectable rate.”

    Very true. There are lots of reasons to hate the government. They are not the only ones responsible for the bubble though. People took collective leave of their senses and started beleiving that prices could rise forever. Those things happen occasionally. The correction in price is what wakes people up.

  46. People took collective leave of their senses and started beleiving that prices could rise forever.

    The world would have been a better place, if all of us, in a fit of benevolence, grabbed a friend by the shoulders who was about to buy the $800K, 1500 sq-ft house in Cali, and simply told him he was a stupid fuck.

  47. The world would have been a better place, if all of us, in a fit of benevolence, grabbed a friend by the shoulders who was about to buy the $800K, 1500 sq-ft house in Cali, and simply told him he was a stupid fuck.

    Hey, when I was working in a loan department in a deposit bank, I had a whole parade of yokels come through and tell me that a 5.5 30-year was “too high for their purposes”, which was home-flipping. They walked down the street to DiTech and got an ARM with an intro rate of 2.5, thinking “Hey, I can dump this before the ARM adjusts.”

    Yeah, you do that, kid.

  48. Ha! TAO, then you had to say, “Lost another one to Ditech!”

    But I appreciate that you did try to help the poor, lost, souls. But, they were determined to find the road to hell.

  49. I don’t really see this as all that bad a thing.

    Still, it’s somewhat misleading to group these by State, or even city. Los Angeles, for example, is a huge place. Parts of the county (and Bakersfield and Riverside, etc.) that were developed most recently seem to be doing the worst. On the other hand, in my corner of L.A. prices have stabilized so that they’re merely exorbitant, not insane like they were a couple years ago. An my house is still worth quite a bit more than what I paid in ’99.

  50. I am having trouble figuring out how getting things (labor and goods) more cheaply is somehow a “mask” for not “actually” getting out a recession. Do you consider technology to be an “artificial” mask as well?

    It’s a mask in the same sense that the pilfering of a few pennies from an overflowing piggy bank is more likely to go un-noticed than when the bank is nearly empty. In 1982 this country was on the verge of economic collapse due to years of inflation, political meddling in the economy, and fiat money. As I said cheap labor and cheap consumer goods saved us from that – as did the technological revolution that you mention. But the cost of living sure hasn’t come down, nor has the purchasing power of your money risen. And instead of working forty hours a week at one job with full benefits many people found themselves working two or three jobs at sixty hours a week with no benefits. But everyone has a cell phone and there’re computers in all the schools, so it’s all good. Well…it is if you don’t mind the fact that the country is in hock to the tune of ten or twelve trillion or so.

  51. Jim | December 22, 2008, 2:32pm | #

    “I knew people and heard of situations where people were buying 1500 sq-ft houses in Cali for $800,000.00. All I could think of when confronted with this insanity was: you stupid fuck!”

    Yeah, but it was so worth the look on their faces at the cocktail party when we told them we bought an 800k house. They were all jealous and envious and thought we were rich.

    I’d be a lot more envious if you told me you’d SOLD a 1500 square foot house for $800k.

  52. I’d be a lot more envious if you told me you’d SOLD a 1500 square foot house for $800k.

    Given the way the Fed is pumping the printing presses lately someone may actually be telling you just exactly that in a year or two.

  53. If you’re looking in many nicer areas of DC (NW), and close in NOVA and Maryland suburbs (Alexandria, Chevy Chase), the prices are still holding up or even rising.

    Downtown condos in Lowell and in Boston are holding their value, too – which is especially weird, because the condo market tends to have higher peaks and lower troughs than the house market. The further out you get, the worse things are, until you reach the sticks, where home prices never bubbled to begin with.

    During the summer, people were theorizing that this was the result of gas prices.

  54. Odd how I never hear a liberal actually say that.

    That’s because the drop in house prices has been accompanied by a deep recession, which has done more to hinder the ability of lower-income people to afford homes than the dropping prices themselves have helped.

    The other effect is the greater demand for rental housing, which is also squeezing lower-income people.

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