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Home Prices Tanking at Accelerating Rate

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January 30, 2008 – Comments (5)

Yowch, the Case-Shiller numbers show home prices in the 10-and 20-city indexes taking around 8% year over year, and that's only for as far back as November. You gotta eyeball the PDF.

Remember, unlike some other home price data, this index strains out the effects of rehabs, additions, etc., so it's a much more accurate gauge of the price appreciation (depreciation) of the same home.

5 Comments – Post Your Own

#1) On January 30, 2008 at 11:37 AM, floridabuilder2 (99.33) wrote:

did you see NVR's report today... one NVR is the best company as I have stated many times on CAPs, just look at their GM, SG&A, they still make money, no inventory, blah blah blah....

However, they said DC (where you live) had a huge amount of cancelations vs. the rest of their markets... 46% to be exact....

The builders say that cans are related to tightening mortgage credit... yes partly... what they aren't saying is that as prices fall, the appraisal falls and no one is going to give you a loan over appraisal... so as they slash and burn prices, they are in effect ensuring that future home prices in that community will go down, because appraisals always are based off of the last 3 sales of similar home... it is an endless cycle until you stop slashing and burning sales prices...

I love builders they are such idiots....  eating the goose that laid the golden egg.... 

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#2) On January 30, 2008 at 12:39 PM, TMFBent (99.81) wrote:

I'll have to take a look, thanks FB.

Your comments on raising conforming loans and the fact that no one's got the down payment anyway have got me thinking. Been ponering more and more how all these "loan freeze" plans are just a way to help the banks, not the homeowners who can't pay. Let's be honest, so many of them could barely afford the teaser rate. Since they put nothing down, their best move is to ditch the place. Sure, they wreck their credit for a few years, but that's coming anyway if they can't pay, so better to ditch now than later.

Anything the politicians and banks do to keep them in means the suits are taking a smaller loss than what they'd get with the walk-out and foreclosure spiral. However, I don't think they can stop it, no matter what they try, because too many couldn't afford and were depending on refis on a rising home value to save their bacon. Who's gonna refi someone with 0-5% equity on the original purchase price when the home is now worth 10-15% less than that?

Crazy times ahead, I suspect.

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#3) On January 30, 2008 at 12:50 PM, QualityPicks (24.91) wrote:

Sometimes I wish people didn't use dramatic words like "prices are tanking", "firesales", "slash and burn prices", etc, because I then go and check the prices in my area, and I get dissapointed they still are pretty high. Sure, they've come down 15% or maybe 20% in many instances. But that is nothing since they cuadrupled in the last 10 years.

Then, all the dramatic news and phrases used to describe the housing market put our government on high alert, and they feel they have to do something NOW!

C'mmon! prices are only down a bit. Say it. No need to alarm anybody. Let people sing in la la la land until prices are really down a significant amount (say, 50% from the top). Then shout it out!! the sky is falling!! :) :)

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#4) On January 30, 2008 at 2:58 PM, ByrneShill (76.36) wrote:

QP: The actual %age of depreciation is irrelevant imho. In the long run, RE prices will go where they have to go, which is, as far as I know, a slight premium over renting a comparable unit.

You have to remember that not only prices are going down, but inflation is going up. So that -8% YoY, added to a 4% inflation, means RE has gone 12% under (even more if you count what really counts, like food and gas).

Which brings us to 2 possibilities:

1-House prices crashes to where they should be (rent equivalent+ premium) within a year, or at least very fast. This is the optimistic scenario mind you.

2-The Fed keep lowering the FF rate, getting closer an closer to 0% every passing meeting. Inflation creeps up. Nominal house prices don't fall off the cliff, but inflation-adjusted, they tank. It takes forever (a la japanese markets), but after 10-20 years, the result is the same.

I think Helicopter Ben is aiming for #2, but in the end it's gonna look like 1.5 or so.

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#5) On January 30, 2008 at 6:16 PM, TMFBent (99.81) wrote:

I think you'r right. Wish we could just grow up and pull off the band-aid and get it over with.

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