Home prices post record 18% drop – Dec. 30, 2008
by Tom on January 2, 2009
in house prices
Home prices posted another record decline in October, falling 18% compared with a year earlier, according to a closely watched report released Tuesday.
The 20-city S&P Case-Shiller index has posted losses for a staggering 27 months in a row. In October, 14 of the 20 cities set fresh price decline records.
Home prices post record 18% drop – Dec. 30, 2008.
Tom here – A couple of thoughts:
- This is from October – we’re in January. It will be interesting to see how November and December compare.
- 14 of 20 set fresh price decline records. That’s not a good sign for the health of the market.
We’re out in San Diego having a phenomenal time with friends. Posting will continue to be light until Tuesday, January 6.
Have a Good New Year!
It certainly seems to me that we’ll absorb the oversupply of homes when the market is allowed to correct itself – which means prices falling far enough to restore reasonable cap rates and other signals of affordability. In my opinion this means that prices have a long, long, long way yet to fall.
I certainly understand that a lot of foolishly overextended baby boomers are upset to see their “investment” plans come a cropper, but the simple truth is that the fact that you accumulated a lot of “money” through real estate doesn’t mean that you’re entitled to keep it.
When 1600 sq.ft. homes in Van Nuys, CA cost somewhere in the neighborhood of $225k again, we may be somewhere near the bottom. There’s a long way to go to get there – perhaps as much as another 50%. Of course this is a local (and even in some cases, block-by block) function, but still… prices must fall a good bit farther, especially given the deflationary cycle we’re in now.
Falling real estate prices are a GOOD thing. The current deflation, if it is allowed to run its painful course, will set the stage for new economic growth. Let’s stop intervening in every market because a few formerly rich people are crying.