Housing Graph. Case Shiller Index (Inflation Adjusted)

Source: NYTimes, September 26, 2007

NAR Spins Data Once Again

National Association of Realtors: The rebound is always just around the corner! Spin! Spin! Spin! [ It's always a good time to buy!]

Case Shiller Index Way Down; Washington, DC Down Big Time

Price continue to fall in the vast majority of bubble markets across the United States. The tighter lending standards, large inventory, weaker home sales are pushing prices down.

"Values dropped 3.9 percent in the 12 months through July, steeper than the 3.4 percent decrease in June, according to the S&P/Case-Shiller home-price index. The index declined in January for the first time since the group started the measure in 2001, and has receded every month since then.

Stricter lending standards and reduced demand are prolonging the housing slump, now entering its third year. Prices may continue to fall as homes stay on the market longer, economists said. Diminished housing wealth may spur households to pare spending, hurting economic growth.

The housing slump ``doesn't seem like it will go away any time soon,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, who forecast the index to drop 4.1 percent. ``As far as consumers go, this is another sort of pall over'' their ability to borrow against the value of their homes, he said. (Bloomberg 9/25/07)

The Washington, DC area continued to experience price declines. According to the Case Shiller Index the year over year July 2007 price change was -7.2%. With the the monthly price declines accelerating from earlier this year. The housing market is not 'bottoming out!'

See Also: Home Prices Post Biggest Drop in 16 Years (Calculated Risk)

David Lereah Says "They Were Wrong Too!"

David Lereah, the fully discredited, former chief economist of the National Association of Realtors shot back at the housing bears who in his mind were also wrong.

“Even the people that were talking about booms busting, my goodness they were talking about it in 2001 and 2002,” said David Lereah, the former chief economist with the National Association of Realtors. “And they were wrong for four years and they only became right at the end of 2004.” He and his former employer had been criticized for the optimistic forecasts they made during the boom. (NYTimes. September 23rd)

Sure, some of the bears predicted the boom would end much sooner then it did. But, it is also true that many of the bears correctly pointed out that in 2002 some housing markets were already in a a bubble. Just because the bubble continued to grow, does not negate the reality that certain housing markets were already bubblicious.

Question For Ben Bernanke

Last week the Federal Reserve Board had a 50 basis point cuts in the Fed funds. Since cheap debt was a significant contributor to our current economic problems, how will more cheap debt help our economic problems?

Alan 'Froth' Greespan: "We Had a Bubble in Housing"

----------------------------------Excerpt------------------------------------
JIM LEHRER: But you don't feel any responsibility for keeping interest rates low?

JIM LEHRER: Because interest rates were down, it was easier to buy a house?

ALAN GREENSPAN: Absolutely.

JIM LEHRER: And the market boomed.

ALAN GREENSPAN: And the market boomed.

JIM LEHRER: It boomed too much?

ALAN GREENSPAN: Well, yes, I think it did boom too much.

ALAN GREENSPAN: Well, let me tell you. We had no choice. I mean, we're the vaunted Federal Reserve, but this global force was suppressing us. We actually tried in 2004 to get mortgage interest rates up and to put some sort of clamp on the extent of the housing boom, and we failed, because usually when we move short-term interest rates up, which is what the Federal Reserve does, long-term rates go with it. It didn't this time. We tried the same thing in 2005...

JIM LEHRER: Didn't happen?

ALAN GREENSPAN: Didn't happen. Had we done it back in 2002, there's no doubt in my mind nothing would have happened. And as a consequence, we and, in fact, every other central bank could not confront this issue.

And what I'm increasingly beginning to conclude is, when you get bubbles like this, there is no way of diffusing them until the speculative fever breaks on its own. We tried numbers of things, and other people tried numbers of things.

US Dollar Is Eroding Value

Consider this: In 2000, gold was $273 per ounce, oil was $22 per barrel and the euro was worth $.87 per dollar. Currently, gold is over $700 per ounce, oil is over $80 per barrel, and the euro is nearly $1.40 per dollar.

If Bernanke cuts rates, we’re likely to see oil at $125 per barrel by next spring.Inflation is soaring. The government statistics are thoroughly bogus. Gold, oil and the euro don’t lie. According to economist Martin Feldstein, “The falling dollar and rising food prices caused market-based consumer prices to rise by 4.6% in the most recent quarter.” (WSJ)

Bernanke Cuts by 1/2

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.

Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time. (Federal Reserve)

Best of The Bubble Sphere

Greenspan is God (Paper Money)

Northern Run Bank Runs Returns (Calculated Risk)

Special Thread About Tommorow's FOMC Meeting (Housing Panic)

Precipitous Drop in Marin Sales; Tightening Lending Standards Just Starting to Bite (Marin Real Estate Blog)

Chasing The Market Down

8503 2nd ave is located right across the street from the Silver Spring metro station in a desirable location,. Its is 2br, 2.5 bth townnhouse, 1,216 SF . As of September 17th the property [ MLS #: MC6306916 ] has been on the market for 223 days. This is located in the metropolitan Washington, DC area.

Property Bought from Original Owner: 10/13/2005 $661,000

Price Reduced: 02/18/07 -- $699,000 to $689,000

Price Reduced: 03/30/07 -- $689,000 to $680,000

Price Reduced: 04/16/07 -- $680,000 to $669,000

Price Reduced: 05/09/07 -- $669,000 to $659,000

Price Reduced: 06/05/07 -- $659,000 to $639,990

Price Reduced: 08/01/07 -- $639,990 to $629,990

Price Reduced: 08/07/07 -- $629,990 to $619,990

Please note this property was bought originally from the developer for 279,915 on 06/21/2000.

So in about 5 years the property went up 136% for a sale of 661,000 in late 2005. If it had appreciated by 6% a year (compounded) the price would be 375K in 200 late 2005. If that theoretical 6% had continued for another two it would be valued at 421K today. However, the price it is being offered at is 619,000 or 47% more then the 421K value if the value had increased 6% a year for the next 7 years from its original year 2000 price.

The current owner is chasing the market down. The owner keeps lowering the price, but cannot catch up to the falling market (knife).

Lawrence Yun Spins Pending Home Sales

Lawence "spinner in chief' Yun is at it again. He is busy spinning large declines in the National Association of Realtors' index of July pending sales of existing homes.

The National Association of Realtors said its seasonally adjusted index of pending home sales for July fell 16.1 percent from a year ago and 12.2 percent from the prior month.

Lawrence Yun, the Realtors trade group's senior economist, called the problems "temporary," and related to jumbo home loans above $417,000 ..(AP Business 9/5/07)"



The depression was also temporary. The housing market in many parts of the US is undergoing large price declines, falling construction starts and lousy sales. The housing market is not ready to 'bottom out' or 'stabilize.' There will be many more years of this housing bust. Mr. "Spinner in chief' Yun is a paid shill who cannot be trusted.

David Lereah has admitted he was wrong. Can't You?