Tuesday, February 24, 2009
The December data for the Case Shiller housing price index fell at a somewhat faster rate than in previous months, but the message remains clear: housing prices are rapidly adjusting downwards. I posted comments on the seriously lagging nature of this index before, and this chart contains the same assumptions I've used in the past to try and get a picture of where housing prices might actually be today. In short, I'm guessing that real housing prices by this measure have fallen a little over 35% from their high; in real terms, they are about where they were during the 2001 recession.
The faster prices reach levels that clear the market—and anecdotally they appear to have done this in at least a few markets around the country, most notably in California—the quicker this recession will be over. One key to restoring confidence will be the perception that prices and the economy are not going down a black hole, that there is some solid support developing. The bottom shouldn't be too far away. After all, the vast majority of people are still working, there is more money out there than ever before, and mortgage rates are just about as low as they have ever been for the majority of borrowers (i.e., those looking for mortgages that fall within conforming limits).
Posted by Scott Grannis at 8:39 AM