No, we still have 300 miles and two potty breaks, now shut the hell up and play with your rocks I bought you or so help me I will sell you to some locals at the next Wisconsin bar for two shots of whiskey!
..or so I see myself saying if I were ever to have children.
In any case, it doesn't look good for housing prices because vacancy rates for both rentals AND homes have gone up.
This directly affects the primary driver of value for housing; rents. With so many vacancies, the amount you can rent those properties out for has gone down. This drives the value of those properties down and until we stop building housing or governments top pursuing affordable housing plans ain't nobody's property going to be going up.
So buckle in and get comfy. Lot more miles to go before we "are there yet."
This reminds me of what Milton Friedman wrote about the Great Depression. Federal Reserve and the government did everything wrong. Instead of stopping the rapid decrease in money supply caused by bank failures, they tightened interest rates and let all banks fail.
ReplyDeleteToday it's the same with housing. Instead of stopping the decrease in the value of housing, they still directly or indirectly increase supply of housing (or they temporarily prep up demand with tax rebates). I can already see what will happen. Banks will go bust, consumers won't get credits anymore, thereby demand for housing will be further reduced. That will make housing prices absolutely crash, which will lead to even more banks going bust. There are already first signs that consumer credits are getting to feeling the crunch, too.
In the last months, some people have already unbuckled themselves cause they think the worst is over. Oh man, they are going to fall so deep!
Home prices have been dropping extremely rapidly in the most overbuilt areas. California and Nevada had an increase in home sales in the last quarter, year over year. Arizona's home sales were down 4% year over year, but that's a huge improvement over the 41% nosedive the previous quarter.
ReplyDeleteIn both Arizona and California, the inventory of existing homes is down dramatically and approaching the historical average. Permits and starts have been negative, year over year, for four consecutive quarters so there won't be any new home supply.
There will likely be more foreclosures, but all that will shake out by the end of the year.
So by the end of 2008, we should see the bottom of house prices in most of the western states. There are a few other states with troubles ahead from declining economies and overbuilding, but the price drops should be relatively mild.
States like California, Arizona, Nevada, and Florida are prone to overbuilding in good times. It's a cycle repeating itself every ten years.
Rumors of the demise of the US are greatly exaggerated. I'm more worried about social security and medicare breaking us.