How Far to a Housing Bottom?

There's an extraordinary amount of doom and gloom out there with projections of untold trillions of dollars yet to be lost due to declines in home prices, but are we really that far from a bottom? This new home sales data from the Census Bureau indicates that we are not.
A little undershoot would put the botom about 10 or 15 percent below current levels, not the 20 or 25 percent that seems to be the conventional wisdom these days. If similar data for existing home sales can be located, a new chart will be whipped up.

Comments

[Steven Hansen:]

just an observation that if there is a demographic shift as well as a deflating bubble, the housing prices will not return to its statistical norm. i also would bet on a 15% further fall but there is so much voodoo economics going on - nothing would surprise me.

Jan 20 03:27 AM

[Sanjeev Sharma:]

Thank you for this graph. I agree with this analysis.

Jan 20 03:39 AM

[Crude Oil T...:]

You will know the bottom in housing is near when the government is flattening homes. They did it to farm fields and hogs during the depression. Look at how many are in such bad shape, just watch it's coming,

Jan 20 08:05 AM

[ArnoldCountry:]

Only time will tell... regardless, it is not the bottom that is the problem but the period of time we will be at bottom. Historically, that has been for several years. It does seem like we are getting to that bottom. It just seems the perception that once we hit bottom good times return. That is far from the truth. Stagnation is just as bad.

Jan 20 08:36 AM

[Perki:]

I believe this was simply a bubble due to easy financing in some areas, and when you remove the "bubble" housing prices will return to the past trend. It is already happening.

When you look at Case-Shiller data by metro area, those that went up the most, are going down the most, but stilll back to 2002 pricing.
Note that regional variations in home prices are great, but a common factor is a return to each geographical areas home prices of 2002-2003. See tinyurl.com/7hovj6

Jan 20 08:39 AM

[nobull:]

You seem to forget we are in the era of great deleveraging now. Assets will continue to be sold and continue to be devalued for a few years to come.

Jan 20 09:12 AM

[nobull:]

Also, why does your chart show prices going UP in 2008?

Jan 20 09:14 AM

[forest:]

A housing bottom means NOTHING. Do not believe the pundits, housing will not be our savior. This is a crisis of DEBT and deleveraging. It may have started with housing loans, but stabilizing home prices are not our savior.

Jan 20 10:44 AM

[User 99586:]

Housing generally goes up as a percentage(with inflation)...you should be using a log chart-on a log chart a fixed line indicates a fixed percentage increase. The only thing that is going to put a bottom under this is if banks and builders no longer have houses to sell-the average homeowner will wait until hell freezes over before accepting a huge drop in their house value, whereas a bank or builder will cut prices as far as necessary to move the property.

Jan 20 10:47 AM

[Urbane Gori...:]

**ONLY** 15 or 20% ... How'd you like a cut in pay like that? jegan ;-)

Jan 20 06:42 PM

[silver-bullet:]

One of the bane of owning a property is taxes. And its going higher every year even when markets are down.

I think the next bubble is big government.

Jan 20 11:53 PM

[John Lounsbury:]

A problem for housing goiung forward is demographics, as pointed out by The hand, and the historically large number of second homes and "investment" homes built up over the past 10 years. These are factors that weigh against just returning to historic "norm" and could take us below what we have been considering "trend lines".

Tim - - - You wrote: "A little undershoot would put the botom about 10 or 15 percent below current levels, not the 20 or 25 percent that seems to be the conventional wisdom these days."

This statement indicates just how bad the situation is when a 10 -15% drop implies good news. jegan was clearly thinking of this in his comment.

Finally, several others have made projections recently in the range of 10 - 15% lower, although others have made projections of 20 -30% lower, as you mention.

Jan 21 12:59 AM