Home Prices Plunge. Steepest Decline Since WWII !
Author: Charles Feldman • URL: http://www.thefeldmanblog.comDecember 28th, 2007 •
The sky might not be falling, but home prices certainly are and in more parts of the nation than ever before.
From October of 2006, home prices fell a whopping 6.1 percent. Most troubling, the declines happened in 20 of the largest metropolitan areas, and in many of those, the declines were much steeper.
In Miami, Florida, where on a recent trip I could not help but notice how many new condo buildings were under construction or about to open, home prices have fallen 12.4 percent from last year. There a numerous reports that people who had put down payments on some of those new condos are asking for their money back. This could be really bad news for the developers who might not be able to pay off the loans that were needed to get their projects off the drawing boards.
In Los Angeles, prices are down 8.8 percent from last year. Things have gotten so bad, in fact, that many real estate agents are turning to other occupations to make a living; applications for new licenses are, not surprisingly, down.
And, even in New York, home prices are down 4.1 percent from last year. That figure would no doubt have been much higher had it not been for the anomaly of a booming condo market in Manhattan where Europeans ,flush with new found wealth courtesy of the decline in value of the U.S. dollar against the Euro, are driving up prices.
But, prices in the rest of the city are down.
These figures, by the way, come via Standard & Poor’s/Case-Shiller indexes as reported by the New York Times.
Lest there be any doubt that these housing woes are the direct result of the subprime mortgage debacle, consider this: just for the month of October, home prices slid 1.4 percent, and that marks the fastest decline in some seven years!
Want more truly scary stuff? The current decline in housing prices is, according to the Times report which quotes Yale economist Robert J. Shiller, creator of the home prices indexes, “greater than at any time since 1941, when the housing market was faltering at the start of the American entry in World War II.”
The ripple effects of the subprime mortgage mess have already tightened credit markets;contributed to the demise of the all-business class airline, Maxjet;forced the early retirement of a number of bank CEOs; dampened the Christmas spirit at many major retailers; and caused stock markets to rise and fall and rise again at alarming rates.
And now, the bad news: By some expert predictions, home prices may drop as much as 30 percent by the time this mess is resolved, if it is resolved?
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Tags: home prices, standard & poor's, stock markets, subprime mortgages
Joshua Dorkin
Charles Feldman
Ted Karsch.
Troy Schuricht
Anwell Tsai
Richard Warren
Jim Watkins
Home prices won’t be getting any better anytime soon, because of the number of foreclosures that are still out there. We need to start creating more jobs which in turn would allow more people to pay their mortgages, cars, and vacation. These are all things that help the market move in a positive direction.
How do companies export jobs, and then later complain that they are hurting because their profits have dropped. Well I think that it is pretty self explanitory that when you take jobs from those that buy your stuff, then the next step is that you will eventually start to struggle because no one can afford your product.
Our corporate world needs to keep in mind that in order to maximize profits we need to have people working that want that product. Not pay someone else less money that doesn’t want to buy what you are selling.
Ha ha ha. very nice stat, Merry Christmas
I agree that we’re declining, however, some markets are actually appreciating. I believe what we’re seeing is a shift of people moving from higher end homes to less expensive homes, as the loans are not readily available for them to get into. Most don’t have the downpayments now required by most lending institutions, so they’re forced to downsize. This shifts the median price range down as well, and the newspaper writers are thrilled. I DO believe prices will flatten out, and then begin to increase like normal, don’t you? Or do you believe our prices are going to drop forever? At some point, there has to be a bottom…
Good post, btw…
Nice article and good, “eye opening” stats.
But, my only point of contention is your closing:
“And now, the bad news: By some expert predictions, home prices may drop as much as 30 percent…”
I guess one could also look it as good news for us REI’s… the money is made when the market becomes ripe with buying opportunities. For the record, I had been one of the bears from the beginning. I posted on June 5, 2005 an article explaining how I felt the market was headed down and what a landlord looking to accumulate properties and survive the market should do… I was a little early in my prediction, but not by much! See: http://howtobuyrentalproperty.blogspot.com/2005/06/does-this-real-estate-market-scare.html
For us investors, a big part of our profit is determined by the price we have purchased the property… I can’t help but think of the wealth this could create for those who buy SMART and are in for the long haul.
Happy New Year!
Steven Boorstein
Landlord Business Insider