What Median Home Prices Would Look Like If the Bubble Never Happened

Discussion in 'Economics' started by commoditiestrdr, Jan 29, 2008.

  1. commoditiestrdr

    commoditiestrdr Commodities View

  2. commoditiestrdr

    commoditiestrdr Commodities View

    So do you think it's safe to say that real estate has 35% more to sell off
  3. empee


    well, it will probably overshoot to the downside as well!
  4. duffman


    There is definitely more room on the downside. Incomes rising due to inflation and low cap rates (which imply a higher income multiple than the past average) will keep it from being that large of a drop. It will be interesting to watch it happen.
  5. This kind of historical linkage does not mean a whole lot. The US dollar has plummeted, so houses priced in $$$ is distorted. The same goes for, gold, etc. For example, do interest rates track with the market or with median income? How about the tech bubble? GDP? Imports? Saving rates?

    What has been the china factor? Is median income a good measure? Or is savings rate better (not)? How about wealth effects?

    Usually, the price of houses is closely tied to prevailing interest rates, not income. Affordability indexes might be a better indicator.

    Then there was the occasional bull markets in the stock market., etc. I am sure someone somewhere has done similar things, but often, there is delinkages.
  6. I think it depends on locale. A good way to narrow the scope is to focus on a state-by-state basis.

    I live in San Diego, and the pessimism here is unbridled. The low-end, mid-end, and high-end markets -- all HAVE taken nasty haircuts from the peak and continue to remain in the barbershop for the foreseeable future.

    It's a well-established fact that mixing broadly diverse RE markets together to calculate median year-over-year declines is meaningless. The scope has to be narrowed. San Diego County's 13% decline means nothing. I've been casually shopping for a new home in the high-end markets, and from the samples I've seen on MLS histories, there has been a sweeping 25% drop from the peak overall (rough calculation of mean). Some of these properties have been relisted to erase the price drops that have been made public.

    I've been going to open houses EVERY weekend, sometimes at the same houses. In the high end, there's very little interest. About half of the houses I've seen, the realtor is the only one there. One house I went to, the $1.3 M house was open for viewing, but not even the realtor was there! We helped ourselves to a tour of the place, and only when we were about ready to leave, the realtor came back from her coffee break. Other houses have a trickling of casual passerbys, but they don't say anything. They just silently survey the house, thank the realtor, and then leave.

    It's pretty grim out there.

  7. According to the rate or metric used, the dow should also be at 1200. Nice conversation piece.. thas bout it.

  8. I'm not sure where you get the idea that incomes are rising, but that's definitely NOT the case in CA. Incomes across the board are stagnant, with many lucky enough to even keep their jobs. If the spillover from credit implosion gets worse, the situation might change for the worse.

    No one knows how deep this thing will go. Believe it or not, we are now emerging back into a sustainable credit system. Banks are hoarding cash, and risk is priced to the extreme. I believe the credit card industry will be next in line for industry-wide contraction, as delinquency rates spiral out of control.

    To see the effects of the healthier credit system, the bad debt has to be flushed out of the system. This means only one thing: more foreclosures, more delinquencies, more write-downs. This will all take time.

  9. bellman


    interesting, if these crises are managed properly, could that process not curb inflation and effectively increase the value of the dollar? and yet everyone is terrified.

  10. commoditiestrdr

    commoditiestrdr Commodities View

    I live in the northeast the median price is about 260k for a home....the median should be about 148k.

    What I don't understand is how will the market correct. Anybody that bought a home in the last couple years will take a huge loss if they sell.

    Basically nobody will sell. The only way to get the market down is for these people to go into foreclosure.
    #10     Jan 30, 2008