Saturday, October 04, 2008

Bubble, bubble, toil and trouble...

And if you're curious about the data all the way back to the 1890's: My best guess, given the historical data, is that we're still nowhere near the bottom of the housing slump. Currently houses are averaging over $200K. Historically, when there is a boom then slump of this sort, houses settle down to slightly above the previous equilibrium, which would be around $145K in today's dollars. Given the height that housing reached (over $270K for the average home), this means the price of homes will have declined by almost 50% when it's all over. And because the boom wasn't evenly distributed, the bust won't be evenly distributed either -- for example, houses that sold for over $1 million in San Diego at the height of the boom might end up selling for only $200K when it's all over, or an 80% drop, because San Diego's housing price run-up had that sort of rise to it.

What does this all mean? Well, it means that the problems with housing are far from over. Especially in non-recourse states like California where you can simply walk away from a home and all the lender gets is your home, and can't come after you for any remaining money you owe. The upside is that in three or four years, I may actually be able to afford to buy a home in California...

-- Badtux the Housing Penguin


  1. you are so right about the unevenness of this whole housing problem

    florida, nevada, california and arizona are all severely hit for many reasons, one you mentioned and the other being speculation - especially in nevada and florida. that was a double whammy as it also hurt people who bought in the same developments even more.

    but here in NYC it is odd - housing pricing have declined overall - but manhattan has defied all expectations -- and this is a place that sees the highest prices in the country.

    there are very few foreclosures - rental turnover remains low and prices rose 8% overall (but sky high prices can drive average prices in skewed directions) -- what saved NYC was the co-op market - and the fact there are NO subprime mortgages - no fancy ones.

    my bldg requires 20% down - no exceptions. only certain ARMs are allowed and nothing fancy. i have a 30 year fixed at 5.8% and feel lucky. i dont think i would lose any money on this place.

    but the effect of wall st. is going to be felt on the high end condo market -

    we have not seen the worst yet -- this bill is going to fail miserably. it will not do what they say it will do (and they know it).

  2. I don't know if you've seen it, but there was a video on the intertubes called "real estate roller coaster". I remember watching it sometime last year and thinking, that doesn't look like too much fun.

  3. Badtux, check in over at skippy's, Cookie Jill is concerned about you :)

  4. Here's why some of us love the City Attorney-- brother of Gary Aguirre

    SUNDAY, OCTOBER 05, 2008 10:54:00 PM Countrywide clients find new life in settlement

    "This is definitely a home run," said San Diego City Attorney Mike Aguirre, one of the many city officials suing Countywide Financial Corp. over its alleged predatory lending practices.


Ground rules: Comments that consist solely of insults, fact-free talking points, are off-topic, or simply spam the same argument over and over will be deleted. The penguin is the only one allowed to be an ass here. All viewpoints, however, are welcomed, even if I disagree vehemently with you.

WARNING: You are entitled to create your own arguments, but you are NOT entitled to create your own facts. If you spew scientific denialism, or insist that the sky is purple, or otherwise insist that your made-up universe of pink unicorns and cotton candy trees is "real", well -- expect the banhammer.

Note: Only a member of this blog may post a comment.