Notice all the news stories that report lower housing prices as a bad development? Here's some sort of financial industry figure complaining that the prices of housing keeps dropping. Aren't lower prices supposed to be good? Bright spots are low prices, not high ones.
Month-over-month home prices fell in all 20 markets during January and are now at late 2003 levels.
"There are very few bright spots that one can see in the data," said David Blitzer, chairman of the index committee at Standard and Poor's. "Most of the nation appears to remain on a downward path, with all of the 20 metro areas reporting annual declines, and nine of the MSAs (metropolitan statistical areas) falling more than 20% in the last year."
All told, prices have plunged 29.1% nationally since they peaked during the second quarter of 2006, according to Case-Shiller.
This all sounds like good news to me. The forecast is for even bigger bargains.
Brett Arends of the Wall Street Journal says housing prices are still too high to be bargains.
Even today, prices overall have only reverted to levels seen in late 2003. Yet by that stage the bubble was already well inflated. You would expect a crash of this scale to retrace its steps much further. To find pre-bubble prices you have to go back to about 2000 – when values overall were about a third lower than they are today.
It's true that mortgage rates, now at 4.5% to 5%, are currently very low. But relying just on that is far too simplistic. Rates were also low from 2003 through 2005 – as many pointed out, disastrously, at the time.
So we are waiting for the real bargains.
|Share |||By Randall Parker at 2009 March 31 10:50 PM Economics Housing|