The Economist chart shows an index of home prices. The slope of the index is negative every year after 1990.

Negative year over year changes. Negative trend on absolute price index. Isn’t it basically the same trend reflected two different ways? Am I missing something?

Look at page 22 of this pdf from the Bank of Japan referenced from the wikipedia article.

http://www.imes.boj.or.jp/english/publication/edps/2003/03-E-15.pdf

Garth – um, its from The Economist… heard of it?

Perhaps not as esteemed as “Mises.org” (???) but the chart is the same. just over a longer time period and with a deceiving x axis starts at 400

That image is popular on bubble blogs, but I have never seen any data to match it.

I found this graph, which is closer to what I remember for housing:

http://www.mises.org/images3/Shostak/03-03-2004/4.gif

Here are stock prices:

http://www.econreview.com/events/japan/japan-n225.png

Wikipedia and google are just not very authoritative sources for the japan bubble :(

Oh no, if that’s the case we’re all in deep "chocolate". The dollar hit an all time low today. The U.S. dollars is at parity with the Canadian Dollar. First time in thirty years.

http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-09-20T211936Z_01_N20369170_RTRIDST_0_MARKETS-CANADA-DOLLAR-BONDS.XML

Thiry years ago? Nixon…huh…Cater….huh…Reagan….huh….Bush….not again! The seventies are back.

And if that isn’t enough to keep you awake Crude-oil hit an all time high too!!! $83.32 a barrel!!!

http://money.cnn.com/2007/09/20/markets/oil_record/?postversion=2007092017

You sure did, inflation. If the Fed keeps pumping money out we will certainly see it, either steady and controled or hyper.

My parents bought the house I grew up in for $10,200 in 1960. I just looked it up on Zillow and found a peak bubble value of $325,000. It is in Sacramento so the current zillow price has dropped to $258,400.

There obviously will be a bottom in the Real Estate market some time in the future. I think it will be when inflation takes off. The Bush era deficits, the trade deficit, and the price of fuel combined with the falling dollar and Fed policy will most likely move us into a period of hyperinflation. Real Estate prices will reflect that reality. Of course that $10,200 house that now sells for $258,000 is still the same house and in relative terms my parents and the current homeowners are probably in about the same middle class economic situation. So the price doesn’t matter, it is the buying power of a dollar that matters.

If this continoues and goes to the extreme and say that the government will buy any loans including stated loans and only require interest to be paid indefinately without any requirement to pay off the prinicipal how far are we from the median price-roof? I.e how much interrest can the median home buyer afford? The median King co home is now $500k. With the current 30 year fixed rate at 6% it would cost you ~$2500/month in interrest. Can the median home-buyer take on much more than that? I.e are we already at the roof almost independent of what the government do?

Also, did I miss-calculate something or can you think of any other government measures that could move the prices higher?

Kindof a qualitative perspective… but I think it fits since realestate is also less quantitative and more about ‘feelings’…

Heres a chart from the economist that shows the trend

http://en.wikipedia.org/wiki/Image:EconomistHomePrices20050615.jpg

One local economist recently presented a report on a certain local economy that predicted growth until nearly 2030. Any such prediction is pure fantasy. Predictions five years out are likely unreliable, let alone something twenty years out. But when this economist was told that an accurate forecast was impossible, that didn’t deter him. The customer asked for data twenty years out, and they were going to get it.

In fact, this local economist is often asked his opinion on the local economy, which he always paints a rosy picture of. Every quote from the guy over the last couple of decades says something like “the Seattle economy is going to grow thanks to Microsoft and Boeing!” Duh. I would NOT trust this man to predict the future of anything. A good day for him is when he isn’t urinating in front of people.

To me a Japanese style crash is going to come down 50% plus in the stock market and 60% plus in real estate in about two years from the real estate peak (1989-1991). Then the slow part starts (1992-2006?)

1990 is a little before google ranked anything, and as a result searching google brings up pages of new blogs. I remember more from a great international business class I took in 97 then I have found through google.

I would add that it is somewhat common sense that if you can buy something tomorrow at a lower price than today than it is obvious you would wait. But that is the problem with markets you never know for certain if tomorrow the item will be cheaper. So you try to educate yourself and make a decision based on the information you have. It seems to me that at this point it makes more sense to wait and see how things shake out but if you are happy with your decision than more power to you.

I feel it will be a mistake to sell.

All above is totally correct. If you can afford a place based on fundamentals and you are sure you do not need to move for several years, then buying makes total sense, and it is not an investment. I have owned three places in the past 15 yrs and absolutely beats renting in terms of quality of life. Very well written…

Yep. It sucked to do so (couple of months ago) but I hated renting and love owning. After four years and five moves enough was enough.

Life’s too short. Look if you buy what you can easily afford and plan to stay put for eight to ten years, no sweat. Even The Tim has said this several times.

Prices on things we want out of life go up and down. A house is your home and not an investment. It it makes money, great but as everyone here has repeatedly shown, historically, a house barely beats inflation. Only a moron would not understand that the past five years has been a cheap credit induced bubble that peaked six months ago. Sure some have gone up but a lot have been flat of down for months. So I got some cheap money on an inflated house. Will prices drop 5, 10 or 25%? Who knows. I drove an overpriced car for four years that lost 60% of it’s value. A friend of mine has a car that has tripled in value since he bought it 20 years ago.

I’ve been reading this blog for about a year, spent 6 months looking for the place and could care less if it goes down, figured it would/might. Mine comped at a summer ‘06 price and many out there now are doing the same.

Regardless of the barbs, I’m not an idiot with my head in the sand, just not going to put my life on hold waiting for some magic time to buy.

I’m not saying don’t take it seriously but don’t stress on it. Get a nice place you can afford. If you can’t afford a nice place then wait until the prices drop and then buy. It is definitely a buyers market right now and will be at least for the next year or so.

If renting is a fine lifestyle save the dough and do that. It most certainly cost more to own a house than to rent a house.

Do you believe Seattle is going to see a Japan style crash still, even though there is no Japan style crash in Florida?

I think we should maybe define terms here. When I refer to a “Japan style crash,” I mean a long, slow decline, lasting 10-15 years.

I don’t see how you can say “there is no Japan style crash in Florida” as of right now, barely more than a year into the decline.

How do you define a “Japan style crash”?

From Garth…apologies for the emotional name calling

Your argument is so weak you have to call me names?

Do you believe Seattle is going to see a Japan style crash still, even though there is no Japan style crash in Florida?

At least I am not in Miami

OH GOD, YOU HAVE NO IDEA…I sold my house a year ago in South Beach and moved to Seattle…Thank the LORD, even though I am not overly religious…

As far as a Japan style downward movement, I believe that there will be much more proactive action by our centralist government..i.e. MORAL HAZARD, which began over the last month…

However, the increases in residential real estate values throughout all US metro areas is unjustifiable in terms of fundamentals of what people can really afford. Miami was an extreme example, driven by capital inflows from traditional Latin American buyers, but propelled by New York, Boston, Chicago buyers who wanted a piece of the SoBE lifestyle, then throw on top of it the Europeans…

Seattle did not experience this equation, but certainly there was plenty of local speculation as well as Asian capital…Again, no one can predict how low the Seattle market will fall, if at all, but my point is would YOU BUY TODAY, even of WAMU gave you a 20% down loan…

Again, apologies, but I think sometimes we all miss the bigger picture of what capitalist bubbles are all about and how they tend to mesmerize even the most intelligent minds..

Sleep well..and cheers…

On The Road – I spent a week in Seattle, which is touted to be one of the most secure markets in the country. Well, it is . . . and it isn’t. For sales of existing single family homes, it is on top of the world. And that distinction is due to one reason, and one reason only. Production builders were not in this market. There was nowhere to build huge communities. The Seattle market is primarily an existing home market with a thriving industry catering to renovations of older homes. But the Seattle market did not escape the condo craze. It is certainly nowhere near Miami proportions, but I hear the same thing from brokers and flippers that I hear from Miami, Orlando or Vegas. There are already problems selling and leasing existing condos, without the crunch coming from delivery of all the new stuff going up. More on this for clients, including some great pictures.

On the plus side, Seattle has a robust job market from the technology and biotech industries, as well as a variety of other healthy industries from logging to shipyards. There will be pain in Seattle, but there will also be opportunities for sharp money to step in for condos, office buildings and commercial space.

His production builders point is interesting, and one I have not seen called out before, but I wonder if the real reason KB homes never came to Seattle is more related to Quadrant Homes being fully owned by Weyerhaeuser Real Estate Company which is fully owned by Weyerhaeuser . If I was KB it would seem foolish to try and compete with a company that probably bought the land 100 years ago and can build the houses using the trees they harvest providing cash flow for 3 divisions of the company.

even though there is no Japan style crash in Florida

A “japan-style” crash would be long and slow, wouldn’t it? No need for name calling, but it is a little early in the first quarter to be calling the game over.

Your argument is so weak you have to call me names?

Do you believe Seattle is going to see a Japan style crash still, even though there is no Japan style crash in Florida?

At least I am not in Miami :)

A few actual sales from my neighborhood, these are all foreclosures.
Bubble price $520,000. Sale this month $389,500, on the market 5 months and the only reason it sold that high is that the buyer was from Hawaii.

Bubble price $500,000 sale in January $355,000. The buyer put it on the market the next day for $420,000. It sits empty, and is now on the 3rd realtor, listed at an overpriced $389,000 with 100% seller financing available.

Bubble price $290,000 Sale this month $177,500. This was a REO that was sold through a public auction. The bank repoed it with $249,274 owing.

At the same auction, Bubble price $610,000 High bid at the auction $282,500. This one has not closed and is still listed in the MLS for $356,500.

Another point, the above sale this month at $389,500 will be thrown into the mix to determine the phony “Median Price” number at the end of the month. The fact that THAT PARTICULAR house represents a 25% decline in the real price will be ignored and that sale will help hold the publicized median up at the current $290,000 level. Thus giving the folks with their heads in the sand another chance to pretend that everything is just fine.

We aren’t even close to our bottom yet in Vegas. Seattle may not be hit as bad but the chart posted here a couple of months ago showing a consistant 16 month lag time in Seattle price changes makes me think that the bubble denial folks will soon be proven wrong.

Matthew Gardner, David Lereah, Lawrence Yun, Nicolas Retsinas….they are all trying to sell a bill of goods. Some more directly than others, but salesmen nonetheless.

The whole inflation idea only works if wages increase in a way that expands the total member of people coming into the “housing market.” This means that wage increases CAN NOT BE LIMITED TO THE TOP 10 PERCENT. There can not be more homes than buyers. If wages remain flat or decrease for the bottom 90 percent then fewer people will enter the “housing market” and the inflation of housing prices in the long run will do more harm than good. The dog will have caught it’s tail.

Here are a couple of links:

http://www.epinet.org/content.cfm/issuebriefs_ib196

http://www.bls.gov/news.release/pdf/realer.pdf

A lot of the numbers are from 2000 to 2004, but that also correlates to last run of Fed rates below 4.5 percent. There are also current numbers.

Its like a heroin addict who runs out of money and goes into withdraw. The Fed is supplying the addict with heroin, but less than he was using before, so that he doesn’t have to go cold turkey.

I am no raging housing bull, but many of the predictions here are so foolish that they need to be challenged too. (Mostly from sniglet or softwareengineer)

I read this blog because the discussion is generally more interesting and based on data than any other source I have found.

That’s like me helping a friend to stop smoking cigarettes by giving him an extra pack a day?

Shouldn’t common sense come into play at some point?

I tend to be very skeptical, if not cynical, of the so called expert “economists.” My definition of an expert “economists” is someone who wants you to loss your money first, so he doesn’t have to loss his.

Seattle / CNN- +10.50% / Case-Shiller +9.06%

For the other 20 cities from a percentage standpoint, it is more accurate than any bubblehead predictions I have seen here.

How on earth are the bubbleheads going to get their Japan scale price drops if the bottom is the third quarter of next year and prices only drop 2.9%?

:)

2. higher inflation. There’s probably not a better thing to cushion the housing market than inflation.

http://money.cnn.com/2007/09/19/real_estate/steep_home_price_drops_coming/index.htm?postversion=2007091915

Seattle made the list as #84:
84 Seattle-Bellevue-Everett WA 07Q3 08Q3 -2.9

Would you like to hear that there is no end in sight for the housing slump, or would you rather hear that things are going to perk up really soon?”

I just want to hear the Truth….

We’re living 1984.

I saw someone else describe “froth” as a collection of bubbles placed on top of a sea of liquidity. :)

Would you like to hear that there is no end in sight for the housing slump, or would you rather hear that things are going to perk up really soon?

I did a search at Amazon.com and got 3 pages of results for “Positive Thinking”. It’s all about the “Power of Positive Thinking” and expelling those nasty negative thoughts. Positive thinking is a strength and will bring happiness to your life. Negative thinking is weak, gloomy, depressing and self defeating.

It’s only natural that we (and the media) would have a bias towards news that makes us feel happier and/or less depressed about the situation.

However, most professional economists (ie: David Lereah, Alan Greenspan, etc) are industry mouthpieces. It’s their job to lie to the public. It’s the classic con game that our economy has become. This is no different from Phillip Morris “scientists” claiming that cigarrette’s don’t cause cancer, or Exxon-paid “scientists” claiming that global warming is a hoax.