The Reagan Pony Joke And The State of Housing Prices

The rapid decline in US housing prices since 2007 has made for some persistently depressing reading lately for those inclined to even want to read the news.

Bank failures, skyrocketing deficits, unrelenting federal intrusions into the private sector, job layoffs and a myopic congress are causing national serotonin levels to gyrate. With that in mind I would like to offer up what might be seen as some good news…..maybe.

Housing prices are not dropping as fast as they were before. Does that mean good times are just around the corner? No. But it may mean that the end of the precipitous decline in prices is near which is important because a market that appears to be disintegrating needs to at least see a bottom before it can stabilize. As Henry Blodget notes at Clusterstock:

This doesn’t sound like good news, but it is. Before house price declines can start decelerating, they have to stop accelerating, and it seems we’re finally there.

…..Nationally, house prices are now back to late-2003 levels, down 27%-28% from the peak. They appear to be headed to a total peak-to-trough decline of at least 40%.

Looking at the data I hope, to paraphrase the famous Reagan pony joke, that there is a pony in there somewhere.

A stabilzed housing market may be the only thing that blunts the multi billion dollar fubar that is the Obama mortgage relief plan.

Barack Obama - The O stands for Zero Honesty
Exceeding Expectations
  • If Obama and friends can find a way to prolong this crisis, they will. They still have lots of socialism to force down our throats.
    http://www.rightklik.net/

  • As with the spending spree – they need to get ‘mortgage relief’ passed quickly – as Larry Kudlow points out:

    “In some of the hardest hit areas of the country, markets are already solving the housing problem. Writing on his Carpe Diem blog, University of Michigan professor Mark Perry notes that while California home prices dropped 41 percent in 2008, home sales in the state jumped 85 percent. It now looks like 2008 sales for single-family houses will exceed levels reached in 2007.

    What’s more, the unsold-inventory index for existing single-family detached homes in December 2008 was 5.6 months compared with 13.4 months for the year-ago period. And the median number of days it took to sell a single-family home dropped to 46.1 in December 2008 compared with 66.7 in December 2007. So inventories are dropping, the number of days to sell a home are falling, and sales are rising in the wake of lower prices.”

    Does that mean we shouldn’t do anything at all to help people that legitimately got crunched? No. But it certainly means we shouldn’t, again, run off like headless chickens throwing money at every Dodd, Conrad, and Obama that wasn’t able to finagle sweetheart mortgage deal. And we certainly shouldn’t be ignoring the fact that half of those that cut a deal with their bank are back facing foreclosure in a couple of months.

  • Bob

    Low housing prices are a problem for those who are selling their homes, and discomforting to those of us whose homes used to be a big portion our net worth.

    But the other side of the story (the pony in Reagan’s joke) is that low prices are good news for those looking to buy a home.

    The problem is that not long ago we were using public money and policy to “help” buyers to buy what they couldn’t actually afford, so that now we’ll get to use public money and policy to “help” owners maintain the inflated prices of what they own. Isn’t government grand? As Reagan said, government is the problem not the solution.

  • Mike in Oregon

    Seems to me that much of what Obama does is consistent with his chief of staff’s statement: Never let a good crisis go to waste.

  • JLawson

    Falze –

    Seems to me like all they really need to do is examine the credit history of the applicant. If they’ve got a shitload of credit card debt, lots of late payments on their normal bills and utilities, they need to be handed a little booklet called “Why You Should RENT.”

    If, on the other hand, they’ve simply stopped paying because their houses aren’t worth as much, though nothing else in their credit history shows problems, they need THIS. And a warning.

  • Matt

    The housing market has to be analyzed by looking at more than just housing prices. Prices might be low, but how many units, new or used are being sold compared to past years? It doesn’t matter how great of a deal is if you are broke, you can’t buy.

    In my area everything tied to the housing market has taken a sever hit or just gone away. Realtors are selling slowly, making lower commissions to spur sales. Gimmicks abound to interest buyers, builders and the support industries are closing down. Heavy equipment sales/rentals have mostly stopped. Housing developments have stalled, new projects are not even being planned. The worst is truly yet to come.

  • “Seems to me like all they really need to do is examine the credit history of the applicant.”

    Yup…like they used to do before Clinton and Cuomo monkeyed with the CRA.