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Michael David White has seventeen years in real estate as both lender and owner. He has purchased and sold more than 275 properties for his own account. Mr. White, the CEO of The New Mortgage Company, originates residential mortgages from his office in Chicago’s Loop financial district. He is... More
My business:
The New Mortgage Company
My blog:
New Observations
  • Property Values Set to Fall 43% From Current Depressed Level 0 comments
    Nov 1, 2009 11:52 PM | about stocks: RWR, RWX, IYR, ICF, VNQ, FRI
     
    clip_image002
    Price Trends / WAR OF THE WORLDS: If you use a 20-year time horizon, and assume prices will return to the trend line, then our residential property bubble will bottom after values fall over 40% from current levels (see above (c) aka “(y) - (z)” aka “Loss Today to Bottom”). I make no predictions. I do watch numbers. The chart shows a catastrophe of falling real estate values loaded up on top of our current catastrophe in real estate values.
    No one would question these numbers absent The War of the Worlds. The War of the Worlds is the United States Government versus aggregate borrower income. Uncle Sam is funding every new mortgage – high, low and in between (see chart below--the blue and red represent government-backed loans and the private market is the yellow and green). It takes very little imagination to see the world of real estate prices vaporizing without government support. If that support was lost, values would crash down faster than a big rock dropped into a shallow puddle.
    clip_image004
    While the federal government has deep pockets, at some point the persons who take out the mortgages will have to pay them. At that point the market should follow the pattern described above by the trend line. Reality bites. Prices for real estate are ultimately determined by our income, and if the trend represents a match of income and price, then the picture of the trend line is the picture of our future.
     
    Michael David White is a mortgage broker in Chicago. 
    Themes: Bailout, bank crisis, Bank losses, banking crisis, banks, financial, Financial Crisis, housing, modification programs, mortgage crisis, negative equity, plan orange, property values, real estate, TARP Stocks: RWR, RWX, IYR, ICF, VNQ, FRI
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