Economics

House Prices Dropped 18 Percent Last Year

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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."

Whole story here.

Reason's Matt Welch, committed renter, talks fluctuating house prices and more here.

Reason on "The Politics of Sky-High House Prices."

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  1. “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?

  2. 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.

  3. 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.

  4. 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.

  5. I just want my condo on the cheap dammit!!! Stop with the damn stimulus!

  6. 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.

  7. 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.

  8. since no one can get a loan

    Speak for yourself, peon.

  9. Ouch. My fannie is sore.

  10. 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.

  11. 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.

  12. 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.

  13. 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.

  14. 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….

  15. 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.

  16. 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?

  17. 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.

  18. 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.

  19. 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.

  20. 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.

  21. I bought in 2002, sold in 2006. The house went up 25% in value over that time. Gotta get in on the party early.

  22. 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.

  23. 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.

  24. 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.

  25. I guess he gets to drink coffee now.

    “Second prize is a set of steak knives. Third prize is – you’re fired.”

  26. 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.

  27. 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?

  28. Selling your house for $15 isn’t normal. But on meth it is.

  29. Recently I heard a comment about housing being what amounts to be our version of industrial policy. That seems to be about right.

  30. 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).

  31. and now I’m presently surprised again.

    RC’z Law.

  32. 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.

  33. 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.

  34. Whoa! That was longer than I thought. Sorry Gillespie.

  35. 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.

  36. 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.

  37. That’s funny, my tax assessment went up $58,000 for last year. Someone at King County isn’t getting the word…

  38. whats that from Naga?

  39. 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.

  40. 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.

  41. 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.

  42. Kolohe, Phoenix isn’t limited by anything.

  43. 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.

  44. 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.

  45. 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.

  46. 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?

  47. 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.”

  48. Brad,

    Sales prices.

  49. 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?

  50. Pro Lib,

    I will keep it in mind my friend. Gotta get ready for work now. Later.

  51. 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.

  52. “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.

  53. 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.

  54. 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?

  55. I have nothing to add to this, I just want to say that I’m learning a lot from reading these comments.

  56. Oh, prices went insane in greater Boston, too, John, let me tell you.

  57. “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.

  58. 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.

  59. 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.

  60. 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.

  61. 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.

  62. 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.

  63. I just want to say that I’m learning a lot

    pre-emptive strike

  64. “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.

  65. 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.

  66. 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.

  67. 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.

  68. 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?

  69. 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?

  70. 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.

  71. 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.

  72. 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.

  73. 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.

  74. 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.

  75. 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!

  76. 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!

  77. 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.

  78. 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.

  79. 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.

  80. 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.

  81. 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.

  82. 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.

  83. 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.

  84. @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…

  85. 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

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