Have housing prices bottomed? If not, when will they?



Barry Ritholtz at the Big Picture Blog has recently chimed in on that question, and in response Calculated Risk chimed in.



Barry posted this projection in Case Shiller 100 Year Chart







click on chart for sharper image



Based on the Upward Slope of Real House Prices Calculated Risk does not think home prices will fall as Barry suggests.

I've argued that "In many areas - if the population is increasing - house prices increase slightly faster than inflation over time, so there is an upward slope for real prices."







Sure - house prices could overshoot to the downside. But the projection on the first graph of close to 25% in further real price declines is probably excessive. Right now the real CoreLogic HPI is less than 5% above the trend line (it could overshoot), and the Case-Shiller national index will probably decline sharply in Q1 too and not be far above the trend line.



Japan Nationwide Land Prices





Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors says that "South Florida is working off of a totally new economic model than any of us have ever experienced in the past." He predicts that a limited supply of land coupled with demand from baby boomers and foreigners will prolong the boom indefinitely.





"I just don't think we have what it takes to prick the bubble," said Diane C. Swonk, chief economist at Mesirow Financial in Chicago, who was an optimist during the 90's. "I don't think prices are going to fall, and I don't think they're even going to be flat."





Gregory J. Heym, the chief economist at Brown Harris Stevens, is not sold on the inevitability of a downturn. He bases his confidence in the market on things like continuing low mortgage rates, high Wall Street bonuses and the tax benefits of home ownership. "It is a new paradigm" he said.

When was the US Housing Peak?

Where Are We Now?

Flashback October 27, 2007

The following charts are from a friend who goes by the name "BC".







click on chart for a much sharper image



Housing Starts 1959 - Present







click on chart for a much sharper image



Those looking for a housing bottom anytime soon are likely to be disappointed.



Note that the current boom has lasted well over twice as long as any other. If the bust lasts twice as long as any other, 2012 just might be a rather optimistic target for a bottom.

New Home Sales

Housing Starts

Humorous Look at 2008 Bottom Calls

Donald Luskin at SmartMoney is making a case that Housing Prices Near or at Bottom Today home prices have fallen so much, mortgage rates are so low, and personal income is so high — that homes are more affordable today than at any other time, ever — with mortgage payments on the average home eating up about 40% of income.



With houses more affordable than ever before, why should we expect prices to fall much further from here?



Let's put it in concrete terms — jobs. Since the housing market started coming apart two years ago, jobs in the housing sector — broadly construed, to include everything from bricklayers to mortgage brokers — have already declined by over 1.5 million. That's about 1% of the whole national labor force, and it takes housing employment back to where it was in 2000 before the so-called "housing bubble" even got started. Which begs the question: How many more jobs are there to lose in this sector?