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The "Current Housing Recession is Rivaling the Great Depression’s Real Estate Downturn [and] Will Easily Eclipse It In the Coming Months"
Zillow's Stan Humphries said:
The length and depth of the current housing recession is rivaling
the Great Depression’s real estate downturn, and, with encouraging
signs fading, will easily eclipse it in the coming months.
During the Great Depression, home prices fell 25.9 percent in five years. The U.S. housing market is now down around 25 percent from its peak in 2006.
As housing price expert Robert Shiller pointed out in September 2008:
Home
price declines are already approaching those in the Great Depression,
when they plunged 30% during the 1930s [i.e. over a 10-year period]. With prices already down almost
20%, it's not a stretch to think we might exceed that drop this time
around.
As I wrote in December 2008:
In the greatest financial crash of all time - the crash of the 1340s in Italy .... real estate prices fell by 50 percent by 1349 in Florence when boom became bust.
How does that compare to 2001-2007? The price of Southern California homes is already down 41% [that was before the first-time homebuyer credit,
Hamp and other governmental programs temporarily boosted prices].
Southern California hasn't fallen as fast as some other areas, and we're
nowhere near the bottom of the market.
Moreover, the bubble was not confined to the U.S. There was a worldwide bubble in real estate.
Indeed, the Economist magazine wrote in 2005 that the worldwide boom in residential real estate prices in this decade was "the biggest bubble in history". The Economist noted that - at that time - the
total value of residential property in developed countries rose by
more than $30 trillion, to $70 trillion, over the past five years – an
increase equal to the combined GDPs of those nations.
Housing bubbles are now bursting in China, France, Spain, Ireland, the United Kingdom, Eastern Europe, and many other regions.
And the bubble in commercial real estate is also bursting world-wide. See this.
In addition, the percentage of Americans who owned houses during the 1930s was much lower
than today, which means that a larger portion of the public is being
hurt from falling home prices today as compared to the Great Depression.
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Your free association reads the way I'm pretty sure I sound when I try to explain to the unaware around me exactly what my concerns with everything we talk about on ZH: Schizophrenic.
Hmmm. Median income at $50K. Until a majority of product in a typical area can meet this affordability metric; housing prices will continue to fall. Even with low interest rates, increasing homeowner insurance and property taxes will dictate a median price of no greater than $100-125k.
I think Dr. Housing Bubble, in one of the posts at his site (link on the left under "Zero Hedge Reads") has said that the historical average of reasonable pricing is that the average home price should be around 3 times the average income, so maybe up to 150K.
....that's 3 x average household income....and rental property valuation at 10 x monthly rents. Both are right close to where the ratios were 20 years ago.
I think that rental number is 100x monthly rent. Rent $800./mo. = $80,000 price. Would be nice to find some 10x properties, maybe Detroit?
Everyone who reads or comments on anyhting GW has to say should realize he has been posting columns questioning whether OBL was behind 9/11. This is not a matter of free speech. This is blatantly offensive and akin to questioning the holocaust or other historical facts. HE should be banned from the website and he owes all family members of those kiled an apology.
did your mommy read you comic books about flying jihadists when you just a little scout?
First of all, your comment is off-topic, just like comments about the Gulf are off-topic in economic posts.
Second, WATCH THIS. more...
Third, this is old (so some links may be broken), but important:
Isn't it disrespectful to the victims of 9/11 and their families to question the events of that day?
No. Many of the families of the victims question the official story and are demanding that the truth be disclosed. The same is true of many dying heroes - the first responders who worked tirelessly to save lives on and after 9/11 - and are soon to become victims of the 9/11 attacks themselves.
Disrespectful to the VictimsA common tactic that 9/11 apologists use for changing the subject away from 9/11 truth is to claim that questioning the official version is "disrespectful to the victims and their families".
In fact, half of the victim's families believe that 9/11 was an inside job (listen to this interview). Many family and friends of victims not only support the search for 9/11 truth, but they demand it (please ignore the partisan tone). See also this interview.
Soldier on, George.
I was in New York on 9/11, I would like to spit on that Bubba guy.
anyone wishing to kill the debate is a shill and/or government agent. i'm not convinced it was an inside job, but i'm not convinced that it was not. who is this clown to suggest any doubters of the 'official story' should stand down?
is he unfamiliar with the Gulf of Tonkin Incident?
Thank you, a thoroughly American approach.
thanks, GW. i'll take that as a compliment to mean "American" as a spirit of independence and free thought that was once possessed by individuals in a Constitutional Republic of Laws protecting life and property.
sadly, "Amerikan" means something very different these days.
Even the FBI's official website does not put the blame on OBL. Unplug yourself from the MSM and educate yourself before you start taking offense that someone is making an effort to educate you.
What kind of idiot believes that OBL had anything to do with 9/11? That op was orchestrated in Florida (Wall St. bankster paradise), not some cave halfway around the world.
Get long IYR and be rich !
Using averages makes things look better than they really are in some areas. Real estate is down 50+% in South Florida and in Naples on the West Coast. We are back to 1996 levels in a lot of areas and a supply of foreclosures to last five years.
But, but, didn't Lawrence Yun say just last week that there's all this pent-up demand for housing?
LOL
Housing demand is not only pent-up, it's hog-tied, sedated and encased in concrete.
an entire website dedicated to showcasing his lies. Will he be hung for treason in the coming insurrection?
http://lawrenceyunwatch.blogspot.com/
Yun is paid to point out to you that the sun is shining, as you stand looking up from the bottom of a roofless latrine.
The Economist magazine wrote in 2005 that the worldwide boom in residential real estate prices was the biggest bubble in history, adding that total value had risen by $40 trillion in the previous 5 years. Makes total sense then, doesn't it, that starting in 2005, the credit default swaps market, previously too small to merit tracking by the Bank for International Settlements, exploded over the next 3 years, into a $60+ trillion dollar hedge against the bursting of that bubble.
But, of course, NO ONE could have seen this crisis coming.
You cannot possible be correct. As we all know, the real estate bubble only occurred in the U.S. and was solely the result of government regluation of the housing market (FNMAE, FREDDIE) and people like Barney Frank and Chris Dodd. Well, at least that's what I hear on Fox....
No one with any responsibility for it will acknowledge seeing it coming, although they knew the risk was there. Fleece, plead innocent, repeat.
Homeownership was paltry during the Depression. Most people rented.
45% to 47% from 1920 to 1930.
Breakdown by state:
http://www.census.gov/hhes/www/housing/census/historic/owner.html
Thanks ... added to the post.
Not in my home state of Oklahoma. Everyone owned small farms.Between the Dust bowl and the Great Depression, everyone lost everything and I mean everyone and everything. I know people that walked 1500 miles to California to pick peas in camps and were treated like dirt for stealing jobs, My grandfather let a family hand milk 80 head of cattle f just to get milk and butter. He died a millionare but if you looked at him you thought he was penniless. He was the only person I knew who actually cashed in on the Zippo lighter lifetime warranty(carried it so long he wore a hole in the case). He plowed cotton with mules by moonlight, only to watch prices collapse to 10cents a pound and could not pay to have it picked. Gave the whole field away to two brothers who picked at 10cents until it rotted.Took until 1960s/30 freakin years and an oil boom to ever get back to a semblance of normal. Older people around here still do not spend a freaking dime, and laugh at anyone buying stocks or borrowing money. I guess this helped our younger people out somewhat, we never experienced any major bubble prices. Try to get more than 200K out of a house here no matter how big and you better be ready to wait for an out of stater to come. Always been like that.I really don't think most on this board know what they are wishing for or just how bad it can become. Back then people helped other people. Those soup lines you see pictures of were local businessmen feeding hungry people with their own money, Not the Gov't. Today they will step over a woman getting raped in NYC and look the other way. Just look at the lazy 99er comments here are ask yourselves who will help feed, house or cloth someone now.
RE: "I know people that walked 1500 miles to California to pick peas in camps"
And just like some my people who left NC in 1850 and walked to CA in search of gold, to those today who complain about a lack of jobs and homelessness, well, aside from the crippled and mentally ill, I say hardy, "Fuck You!" Pick up a broom and start sweeping someone's driveway. Offer to fold someone's clothes at the laundromat. Gather beer cans in a stolen grocery cart and haul them to the recycler. People in the country don't know a thing about hard times. But it's coming. There's a storm a-brewing, and I only pray that when it gets here we still have enough humanity in the lot of us to beat off the legions of zombies and deadbeats.
cowdiddly,
I was raised in rural Arkansas so I know what you are talking about. "A penny saved is a penny earned."
During the war, you could get $1 to $1.50/hundred. A year or two after the war, prices were up to $3.00/hundred. I could get 250 lbs/day and thought $7.50 was pretty good. After about age 15, I moved on to construction for $0.75 because it was not seasonal and my father had the local lumber and construction co..
Just how did that cotton picking work for school children?
Split Term. The school year ended ~first of June and was followed by 6 weeks of vacation. Then everyone went to summer school for ~6 weeks/2 months(different years) then school started again in November. The practice was started during the war. There was no air conditioning of course but the kids got accustomed to the heat. What I never got accustomed to was the long lines to the water fountain at recess. Often, by the time we got a drink, it was time to go back to class. But that was Wartime and the period immediately after the war.
I enjoyed picking cotton because pay was preportional to output. did not chop cotton because it was tedious and only paid by the hour.
WOW ! I absolutely loved your story / comment ! What a story, what a man, would have loved to have met him.
To get a better picture of how insane things were and how bad they still are in the real estate market I recommend clicking on the Dr. Housing Bubble link on the left of this page, among the site's listed as those that ZH reads.
Dr. Housing Bubble's focused on southern California and some of the case studies are breathtakingly surreal. Little 1,000 square foot homes on 5,000 square foot lots in sketchy neighborhoods, okay as first time home buyers' material, going for $800,000 or more at the height of the bubble and banks trying to hide these now $200,000 homes in the shadow inventory. Words are inadequate to describe some of the cases he cites.
Love that Doctor Bubble. He's now talking about the wisdom of rent versus buy in SoCal. Hard to disagree with his 5 reasons.
www.doctorhousingbubble.com
I agree with this conclusion. I made my own estimations and came to scary results. Assuming 0% inflation (perfect world) rent fee must be twice as high as credit rate to balance the equation. Why so high? Most people overlook some factors like: very high buying fees and ownership taxes, home structure aging, maintenance costs, and so on. Additionally, in scenario where some comparably "save" capital investments (PMs?) make gains much bigger that inflation, owning homes means loosing capital.
Most people try to buy some real estate when rent and credit rate are equal. This is liquidity constraint and bet on inflation in wages (!). But, does it happen? If not, all home buyers are doomed by MSM propaganda and social pressures.
No imagine, people in Australia buy homes paying credit rate twice as high as rent rate ! It is four times to high!
In the past, no one home owner has payed a credit REALY back, they all get it easy by inflation in wages. That's why they are so many homes to rent so "cheap". But future will be much harder. Because rent fee is constrained by real income and can't rise, prices must fall.
Schiff is talked rent v. buy for years. I ALWAYS knew I was right when I argued that renting = freedom. I never should have listened to that woman!!!
People laughed at John Templeton five years ago when he predicted we would soon have an opportunity to buy real estate for pennies on the dollar. It's a pity he didn't live long enough to have the last laugh at the pump monkies.
He was alway so correct with his forecasts...one of which also called for a 25% drop in our standard of living....he may miss the mark on that one,being overly optimistic.
I'm no economist - WAY WAY far from it - but in my head it's more like 50%. Here's why - in our fractional reserve system we know leverage "works" at 12:1. The lid blew off at 30:1. So we're headed back to 12, and 12 is less than half of 30, so I see GDP growing at best at roughly half of what it was doing prior. If that was 3%, then we'll see 1.5%, or if your wages and standard of living mimic GDP, then you can expect HALF.
But I think we'll better off for it after all the kicking and screaming is done. Who needs all this shit anyway?
And when that opportunity it comes, you have reached a high level of understanding when you realize that even at those prices, there will be no buyers, since no one will have money.
We can only ignore reality for so long. Go ahead and print Benny, you are fighting a losing war.
Factors contributing to downward pressure on real estate:
- Boomers downsizing into coffins and urns (ie, demographics)
- rising unemployment rates
- increasing duration of unemployment
- shadow inventory
- clouded titles & uncertainty of ownership
- overturn of centuries of property law precedents
- unwinding of trillions of dollars worth of derivatives written on top of mortgage loans
- excess inventory and builders continue to build
but I'm sure the Harry Wanker knows what he is talking about ...
And all of the Shadow Inventory is still waiting in the wings. That's going to take another hit on prices.
The Banks are zombies, ready to go. Unemployment is basically flat. New jobs aren't being created fast enough. The 99'ers are about to fall off the dole. Commodities are up, income isn't, and Consumer Credit is falling.
What amazes me is that people still want to buy houses, and think we're at the bottom. If it wasn't for the U.S. Taxpayer funding 90% of all new loans by propping up Freddie and Fannie, we would've fallen a lot farther by now.
All markets are different, but I think it's safe to say that the low end has adjusted down to maximum pain.
Mid to high end still has a way to go. And they are on the move. Fraudclosure is an attempt to jumpstart buying again because the market went silent. Almost completely silent. Spooky.
Notice the time frame of fraudclosure. Just before we saw the first substantial jump in commodity prices. They will bring it back into full swing when the inflation panic has set into the psyche.
Mid to high end has to fall substantially before the game can start again.
3 years is my guess. Value has to brought back into the market so let's get that out of the way now, ok chairman?
I'm interested in hearing more about your theory on the timing of fraudclosure. I have been hapring on this personally - as in with my property on the line personally - for two years now. I don't really care why or when it's seen the light of day but I hope it burns these motherfuckers a new one. You, on the other hand, seem to think it's a politcal tool?? How? Now bashing, ya, am really interested to know.
90%? Probably closer to 99% by now.
Martin Armstrong shows a 26 year real estate cycle - peak in 2006 - trough in 2032
but the Harry Wanker says real estate is getting better so I'd go with the Harry Wanker's take on things
I work in residential real estate development and construction in the Northeast. Let me tell you: the house is still on fire, and there are still people in there who will not get out alive. Lots of people.
Banks won't lend on it, and are getting out as quickly as they can, and some aren't making it out of the burning house either.
The only mortgages are from the GSEs, and some pockets of credit unions, small community bansk etc., not enough to fuel a revival. It is, quite simply a catastrophe that will not go away anytime soon, even though periodically it disappears back under the rug of the national attention span before popping up again. If you're not in the business, you might think no news is good news. It's not. The news is bad, getting worse, and it is fugly.
Thanks NZ good to hear from you : It is good to repeat that:
No news (from MSM) != { good news } ;
Let's not forget that 30% of households have credit scores under 620, and 1 out of 5 Americans are unemployed.
well.. its old news..
real news are WHERE'S THE BOTTOM???
well there wont be any bottom until income per capita grows..
problem is .. last 10 years avg income is FLAT and that before inflation..
so does anybody think next 10 years gonna be better ??
alx
unlikely at best, except in inflated Bernanke dollars.
Is any1 factoring inflation in the house price, during the past 5 years t he 'real' inflation was like 10%+ at least