Skip to content

Property Values Set to Fall 43% From Current Depressed Level

November 1, 2009

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.

*****

My thanks to the following aggregating sites for carrying: “Property Values Set to Fall 43% From Current Depressed Level”.

IMPLODE: http://ml-implode.com/viewnews/2009-11-02_PropertyValuesSettoFall43FromCurrentDepressedLevel.html

Mark Martinez Show: http://markmartinezshow.blogspot.com/2009/11/prepare-for-another-housing-collapse.html

Mortgage News Clips: http://mortgagenewsclips.com/2009/11/03/affecting-affected-by-mortgages-defaulting-43-more-to-drop-mortgage-audits-fn-delinquencies-foreclosures-home-appraisals-profits/

Seeking Alpha: http://seekingalpha.com/article/170526-property-values-set-to-fall-43-from-current-depressed-levels

15 Comments
  1. Rob Chadwick permalink
    December 28, 2009 12:30 am

    “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.

    http://mysite.verizon.net/vzeqrguz/housingbubble/

    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).

    Comments?

    -Rob

  2. DRAKE permalink
    November 27, 2009 10:46 am

    So, is now a good time to Re FI,say from 6.5 to 4.5 or what?
    At $2,000 + $400 for an inspection or should I wait?

    • November 27, 2009 6:52 pm

      Only persons with a very high tolerance for risk should be purchasing real estate now. Which translates into: Don’t buy real estate. Thanks for the note. mdw

  3. R Kinz permalink
    November 13, 2009 10:03 pm

    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.

  4. November 3, 2009 3:14 pm

    Thanks Michael. I’ll be posting on this later.

    – Mark

  5. November 3, 2009 9:33 am

    You should use a log scale…

  6. November 2, 2009 9:38 am

    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.

Trackbacks

  1. Conservative Property Index Predicts We Are Less Than Half Way Through Fall «
  2. Property Values Set to Fall 49% From Bubble Peak to Long-Run Average «
  3. Affecting & Affected by Mortgages: Defaulting, 43% More to Drop, Mortgage Audits, FN Delinquencies, Foreclosures, Home Appraisals, Profits

Comments are closed.

%d bloggers like this: