The Housing Chart That's Worth 1000 Words

Subject: The Housing Chart That's Worth 1000 Words Fri Feb 27, 2009 6:04 pm

Here's the big problem with almost all the current rhetoric about the housing crisis: It presumes that the goal should be to get house prices rising again. The problem with that idea is that, even after a 25% decline, house prices are still way too high.

Even if there is a government mechanism that could stop house prices from plummeting and artificially pump them up again, therefore, it would just postpone the inevitable.

Below is the Robert Shiller chart that makes this crystal clear (produced by the New York Times and taken from this excellent article by James Quinn). And below the chart is what James Quinn thinks about it.

The Housing Chart That's Worth 1000 Words F5786041

James Quinn (from The Burning Platform):

As Congressional moron after Congressional moron goes on the usual Sunday talk show circuit and says we must stop home prices from falling, I wonder whether these people took basic math in high school. Are they capable of looking at a chart and understanding a long-term average? The median value of a U.S. home in 2000 was $119,600. It peaked at $221,900 in 2006. Historically, home prices have risen annually in line with CPI. If they had followed the long-term trend, they would have increased by 17% to $140,000. Instead, they skyrocketed by 86% due to Alan Greenspan’s irrational lowering of interest rates to 1%, the criminal pushing of loans by lowlife mortgage brokers, the greed and hubris of investment bankers and the foolishness and stupidity of home buyers. It is now 2009 and the median value should be $150,000 based on historical precedent. The median value at the end of 2008 was $180,100. Therefore, home prices are still 20% overvalued. Long-term averages are created by periods of overvaluation followed by periods of undervaluation. Prices need to fall 20% and could fall 30%. You will know we are at the bottom when the top shows on cable are Foreclose That House and Homeless Housewives of Orange County.

Instead of allowing the housing market to correct to its fair value, President Obama and Barney Frank will attempt to “mitigate” foreclosures. Mr. Frank has big plans for your tax dollars, "We may need more than $50 billion for foreclosure [mitigation]". What this means is that you will be making your monthly mortgage payment and in addition you will be making a $100 payment per month for a deadbeat who bought more house than they could afford, is still watching a 52 inch HDTV, still eating in their perfect kitchens with granite countertops and stainless steel appliances. Barney thinks he can reverse the law of supply and demand by throwing your money at the problem. He will succeed in wasting billions of tax dollars and home prices will still fall 20% to 30%. Unsustainably high home prices can not be sustained. I would normally say that even a 3rd grader could understand this concept. But, instead I’ll say that even a U.S. Congressman should understand this.

http://www.businessinsider.com/the-housing-chart-thats-worth-1000-words-2009-2

Subject: Re: The Housing Chart That's Worth 1000 Words Mon Sep 21, 2009 6:06 pm

*BUMP*

For the benefit of zero...

:Cheers:

Subject: Re: The Housing Chart That's Worth 1000 Words Mon Sep 21, 2009 9:32 pm

CovOps wrote:: *BUMP*

For the benefit of zero...

:Cheers:

thankyou.

good article and they are right.

I think uncle sam is trying to correct it to his best interest.

seems real concerned about the "downward spiral" and is at the last looking to slow down housing prices decline to prevent spiraling.

once it spirals...........

uhhh oh.....

the comments under the article are as good as the article.

started with the merger of travelers an citi group right? Clinton signed in the grahmm/whoever act levied requirements on lending institutions to lend in undesirable areas and in return the restrictions were lifted on insurance, investment companies etc. allowing them to merger.

result was lots of people getting mortgages that shouldnt have them, mergers creating "too big to fail" corporations, derivitives and outlandish leverage that could never be covered, and if i am not mistaken the sec was not allowed to regulate credit swaps or derivitives (not sure if i remember the name of that law).

A BIG MESS. LOL

So now they worry about the great and feared downward sprial as credit contracts, deflation takes hold, money is frantically added to the system to make up for the credit that is contracting.

I do recall that house prices were increasing a lower than average for a while back in the eighties i think????
But to argue the increase we had since two thousand was any type of correction would be absurd... Not so sure they should return to 98 or 7 levels either it seems they were stagnant for a while so a little higher increase could be a make up from a couple decades back.

kind of makes you wonder if the housing bubble was purposely instigated to help fund the iraq war and fed, local, state govt.s since the increase in realestate taxes paid, increase in economic growth may have help the funding in some way. A nd maybe the bubble just got out of hand and they didnt know what to do. Rolling Eyes

Subject: Re: The Housing Chart That's Worth 1000 Words Mon Sep 21, 2009 9:39 pm

Quote :: maybe the bubble just got out of hand and they didnt know what to do.

And they still don't...

Evil or Very Mad

The Housing Chart That's Worth 1000 Words

The Housing Chart That's Worth 1000 Words

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