Wednesday, January 03, 2007
three graphs about housing
here we can see that new home sales bottomed sharply in 1981-82 and again in 1991, and that starts also did so in 1982 and 1991 (as well as 1975).
in looking at these graphs, we can see immediately that ofheo registered real price declines in 1979-1983 and 1989-1994 -- and that the final collapses in starts and sales occured not at the end of price declines but in the heart of the downtrends, which lasted some several quarters thereafter.
as one continues to monitor starts and sales -- both now falling sharply and probable to revisit and even break lowest lows before all is said and done as the greatest debt bubble in modern history disntegrates -- this will be something to bear in mind. yours truly managed to sell his 3-bedroom condo in summer 2006 (after nine months on the market) and has a rental contract out until november 2007. it seems highly improbable that prices will have found anything like a bottom in four quarters from today -- or even quite probably eight.
if one had to speculate as to where a reasonable endpoint for price declines would be, drawing a trendline on the ofheo real prices graph through previous troughs to today would indicate a current trough level of 126 or so -- meaning that, at 183, prices are in real terms some 45% overvalued from an area where housing might be considered at or near the bottom of its trend.
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