[leahjhburton]

The Housing Bubble deflation is rapidly accelerating. November New Home sales declined 11.3% from October. This is the largest decline in New Home sales in 12 years. In the West, the bubble is deflating even faster. November New Home sales in the West declined 22% over October.

Median New Home prices also declined 4.1%. November's median New Home price declined to $225,200 from October's $234,800. This information can be found in the following article by AP writer Martin Crutsinger: NewHomeSalesFall

Below is a chart from Briefing.com showing the changes over the last 5 months.


This can also be found at: NewHomeSales

unlawflcombatnt
EconomicPopulistCommentary
_________________
The economy needs balance between the "means of production" & "means of consumption."

[LesLattis]

This comes as no surprise, every economist in America has been predicting this. Zero down, adjustable rate mortgages have made it possible for people with not enough money to buy way too much house. All this was done on speculation that the buyers income would mushroom enough to cover the note when their 3-5 year "easy in" ride was over. Can we all spell out f-o-r-e-c-o-s-u-r-e?
This leads me to sharing my observation that young Americans live beyond their means with reckless abandon. They need to watch Rich Dad, Poor Dad.

[siklop]

I completely agree. It's amazing how many real estate proponents are still trying to say there is no bubble and that home prices will not drop. But their arguments are making progressively less sense as time goes on.

There are many, many buyers who have bought multiple homes using the equity from their previously purchased home to buy another. This is a house of cards that is guaranteed to collapse eventually. The only question is when.

[pharweqto]

McMansions are going to lose a lot of "value". After the drop is over you can snatch some really nice deals from desperate sellers. If you have savings that is... If this thing is as big as some have said it will have effect outside US as well. Speculation is so much fun, and thank god for Federal Reserve.

[BoattyGonm]

In the Greater New Orleans area (includes my city), any house under $150,00 that's available is being snatched up aspeople flee N.O. The market value of my house increased by no less than $20,000 almost overnight which isn't good if the city and parish decides to reassess the properties for tax purposes! My nephew had a house that would have sold pre-Katrina for around $75,000. Post-Katrina, with a tree through the roof, patio awning gone, A/C under water and other damages, he sold the house as-is for $ $89,000. The best part was, he owned the house outright and was able to keep the insurance money and the money from the sale and buy another house outright. Smart kid!

[Kneedycrype]

OK, OK, so I'm bringing it up agasin, but because I Am 76, I have seen these things coming for a long time.

I have never understood how people could beleive, and still do beleive that the housing market ( or for that matter any other hard comodity) could keep rising in value inderfinitely. The people who bought houses for no down, and 99 years to pay were simply "whistling Dixie" These people with high cost houses, and even $40,000 cars, sooner or later would lose everything. and the banks??? suppose they do forgcose. Who is going to be able to buy them back, when everyone is in the same boat??? And the people who will pay $89,000 for a damaged $80,000 house in a place like the ravaged New Orleans, Deserve the downfall, which is certain to come.

[immelawealecy]

OK, OK, so I'm bringing it up agasin, but because I Am 76, I have seen these things coming for a long time.

I have never understood how people could beleive, and still do beleive that the housing market ( or for that matter any other hard comodity) could keep rising in value inderfinitely. The people who bought houses for no down, and 99 years to pay were simply "whistling Dixie" These people with high cost houses, and even $40,000 cars, sooner or later would lose everything. and the banks??? suppose they do forgcose. Who is going to be able to buy them back, when everyone is in the same boat??? And the people who will pay $89,000 for a damaged $80,000 house in a place like the ravaged New Orleans, Deserve the downfall, which is certain to come.

The house is in Slidell, not New Orleans and since it's on the 'high' side of town, it's not likely to flood. But I agree, after they pay $89,000, then repair the house, more than likely the value will have fallen when things are stablized here so the buyer will definitely end up in the bucket.

[aAaBecker]

The point is that for most Americans, their home is their biggest asset.
And in an era of declining paychecks, it has financed their lifestyles.

[BliliBoopsy]

I own two homes, one in an Illinois suburb of St. Louis and another in the Grand Rapids Michigan area. The one in Illinois I have owned for 15 years and have considerable equity built up. When we moved to Michigan we let my inlaws move in so they had a nice home. Because the property levels in Missouri are considerably higher than a comperable house across the Mississippi River people have been re-evaluating and moving to Illinois. Accordingly my house has jumped in price significantly, and since it was well below the national average to begin with this correction won't make much difference. It is 3000 sq. ft. on an acre. In Missouri it would sell for around $250,000, but in Illinois at the start of last year it was valued at $160,000. At the end of the year it is valued at $175,000. SInce I do not owe much on it even if it did go down a little it wont hurt much. Now my new home in Grand Rapids is another matter. I bought it at the height of the market up here. It is comperable size to the house in Illinois and the price was $192,000. It may in fact loose a little but as long as I can afford both and plan on keeping the Grand Rapids home for a period of time I do not see a problem. The people that have the problem are those that have to sell now because they are financially strapped or those that bought homes recently with an eye toward making money with a quick turnaround. If you plan on keeping it the house it will be just like a stock market correction.

[Signabeademia]

The Economist has been printing articles almost weekly about the 'world-wide' housing bubble that appears to have maxed out and appears to be starting the 'deflate' cycle.

Unfortunately, none of these articles are presently available at the Economist's website for linking.

According to the latest article I read (Dec 10th issue), Australia has the biggest real estate bubble going followed by Britain and the rest of western Europe.

The Australian house prices are deemed to be some 45-50% overvalued right now. Britain the figure is 35%, Western Europe is running around 25% while the USA is shown to be 18% over valued with Canada around 15% over valued.

If the markets are purely rational, this is the amount to which housing prices will be corrected in various countries. Theoretically, no one knows if the bubble will pop 'hard' in which case the actual prices fall rapidly, or if the bubble will pop 'slowly' in which case the actual prices may stabilise, but it may take 5-10 years of stagnant prices for natural growth and demand to catch up.

[syptopsygieds]

Economist Dean Baker wrote an excellent article on the Housing Bubble called the "Housing Bubble Fact Sheet." It can be found at:
HousingBubbleFactSheet

Baker describes all of the factors that have caused the housing bubble and why it is not sustainable. Also noteworthy is that consumer spending financed through home equity borrowing totals $200-300 billion annually. This amounts to 1.7-2.5% of our $12 trillion GDP. Loss of this spending alone would greatly reduce our GDP increases. In addition, loss of employment related to the housing bubble could be as high as 5 million jobs.

[q9h9pPne]

I also wanted to post the link to the most recent article (from November 2005) on the Housing Bubble from Dean Baker and the Center for Economic Policy Research. This article can be found at: Will a Bursting Bubble Trouble Bernanke?

[UlceskLialels]

Here's a partial exerpt from a December 16th article from CNN showing anticipated price declines in both 2006 and 2007.



The article can be found at Is the party over

[Rqvtwlfk]

The point is that for most Americans, their home is their biggest asset.
And in an era of declining paychecks, it has financed their lifestyles.

Your situation maybe just that, but that doesn't mean everyone is so unfortunate.

Around here, they can't build homes fast enough and they're going for under 200K. I'm sure those that live in Frisco and pay 1 MIL for a house live in a maxed-out market. The big, liberal cities are in full decline, and the smart ones are leaving. And it's mostly crime that drives people away. The rural areas are this century's suburbs.

[incimisiche]

Here's a correction of the above link to the partial exerpt from a December 16th article from CNN showing anticipated price declines in both 2006 and 2007.



The article can be found at Is the party over

[drugstore]

Here's a correction of the above link to the partial exerpt from a December 16th article from CNN showing anticipated price declines in both 2006 and 2007.



The article can be found at Is the party over

That's pretty grim news. You have to get to number 85 on a scale of 100 before you find a loss. That sure sounds like a major collapse to me. Are there any other parts of your sky falling, that we may want to avoid?

Oh, and you have to get to 93 out of 100 before you get to a 1% loss. God, this is terrible!!!!!!!!!!

[Retapleapse]

Glad you feel better. With many markets increasing at over 20%/year over the past several years, this is not only a slowdown, it's a tremendous slowdown. In Southern California prices had been increasing at over 20%/year since Bush took office. Now they're all expected to decline. That's quite a change.

My sky isn't falling, because I wasn't foolish enough to buy into real estate at the height of the bubble. So now I feel better as well, because I won't go bankrupt from the real estate speculation I didn't partake in.

[Thigmaswams]

I don't feel bad either. The two homes I own are not speculative in nature, I intend on keeping them for a while, and neither are in areas where there has been a crazy rise in prices over the past decade like most of the areas on your chart. Sure some areas are declining, but frankly with what people were willing to pay for homes that wasn't totally unexpected. Feel sorry for those idiots that have no interest loans, or reverse mortgages, god what fool would ever do something like that. For the rest of us who didn't buy a house as a short term get investment the sky is not falling.

[XYTommy]

Glad you feel better. With many markets increasing at over 20%/year over the past several years, this is not only a slowdown, it's a tremendous slowdown. In Southern California prices had been increasing at over 20%/year since Bush took office. Now they're all expected to decline. That's quite a change.

My sky isn't falling, because I wasn't foolish enough to buy into real estate at the height of the bubble. So now I feel better as well, because I won't go bankrupt from the real estate speculation I didn't partake in.

Great Logic! A reduction in the amount of increase is a collapse!

I bought into the Denver market in the early 90s. Watched my money triple in value. We moved down South and are seeing the same thing here. Quadrupled our money in only 14 years. I certainly don't intend to bail on the real estate market. Now all the boomers are retiring and want to get out of the hustle and bustle of the cities. Another good California earthquake like the Northridge one, and we go on another rocket ride.

I'm sorry, but I have very little compassion for the land of fruits and nuts.

[molaunterbizone]

I don't feel bad either. The two homes I own are not speculative in nature, I intend on keeping them for a while, and neither are in areas where there has been a crazy rise in prices over the past decade like most of the areas on your chart. Sure some areas are declining, but frankly with what people were willing to pay for homes that wasn't totally unexpected. Feel sorry for those idiots that have no interest loans, or reverse mortgages, god what fool would ever do something like that. For the rest of us who didn't buy a house as a short term get investment the sky is not falling.

Indeed - good points. Speculative bubbles only ever really hurt the speculators and the stupid (or the imprudent, which is the same thing).

Personally, I saw the bubble 'conditions' coming here in our local market quite a while back, sold fairly high two years ago and then replaced it in the spring of this year as the market had already softened here with a huge boost in supply from new units coming on stream. The net result is that we 'traded up' without spending a nickel (Both the old and the new place are high-rise condos in the heart of the city - about 300 yards apart from each other).

According to The Economist's 'housing price index' Australia and Britain are the most over-priced real estate at the present and the most likely to encounter steep price corrections.