Property Values Set to Fall 43% From Current Depressed Level

Property Values Set to Fall 43% From Current Depressed Level

Price Trends / WAR OF THE WORLDS: If you use a 20-year time horizon, and assume prices will return to the trend line, then our residential property bubble will bottom after values fall over 40% from current levels (see above (c) aka “(Y) – (Z)” aka “Loss Today to Bottom”). I make no predictions. I do watch numbers. The chart shows a catastrophe of falling real estate values loaded up on top of our current catastrophe in real estate values.

No one would question these numbers absent The War of the Worlds. The War of the Worlds is the United States Government versus aggregate borrower income. Uncle Sam is funding every new mortgage – high, low and in between (see chart below: the blue and red are government-backed loans). It takes very little imagination to see the world of real estate prices vaporizing without government support. If that support was lost, values would crash down faster than a big rock dropped into a shallow puddle.

War of the Worlds: The US Government is the Mortgage Market

While the federal government has deep pockets, at some point the persons who take out the mortgages will have to pay them. At that point the market should follow the pattern described above by the trend line. Reality bites. Prices for real estate are ultimately determined by our income, and if the trend represents a match of income and price, then the trend line is the picture of our future.

For a more complete picture of future residential values, please click here for “10 Key Charts To See Before You Buy A Home”.

Michael David White is a mortgage broker in Chicago.


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15 thoughts on “Property Values Set to Fall 43% From Current Depressed Level

  1. Rob Chadwick

    “I make no predictions”? Then why is the title of your article, “Property Values Set to Fall 43% From Current Depressed Level”?

    If you look at a broader, inflation adjusted trend, you’ll see that inflation adjusted housing prices are now edging close to their 40 year trend line.

    Data sources:
    Latest quarterly, median, existing, single-family home price provided by the National Association of Realtors.
    Trailing house price index data provided by Standard & Poors (1987-Present), the Federal Housing Finance Agency (1975-1986), and Freddie Mac (1970-1974).
    Inflation data provided by the Federal Reserve Bank of Cleveland (1977-Present) and the Bureau of Labor Statistics (1970-1977).



  2. R Kinz

    Real money or inflated money? A few years of 12% inflation pills by the fab fed and we will be just about even… not in real dollars, but in inflation bucks. So, buy now at a 4.5% mortgage, trim the trees, shine the stainless and sell for a profit when Coke is $5 a can. You WILL make inflation bucks, regardless of the charts.

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  6. Nice article, can you do the same graph and subtract California, Arizona, Nevada, Michigan and Florida?

    I have no data to support, but from what all I see if we subtract out the big 5 losers in this mess, I bet you see the rest of the country very close, if not at the trend line.

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