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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
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New Observations
  • Values Have Dropped Less Than 25% of the Fall Required To Reach Trend 0 comments
    Nov 11, 2009 10:27 PM | about stocks: DMM, FNM, FRE, FRI, ICF, ITB, IYR, RWR, RWX, UMM, VNQ, XHB

    PRICE TRENDS / WAR OF THE WORLDS (Part 4): Property owners nationwide have lost only one dollar for every four dollars they can ultimately expect to lose on their home.
    The good news according to the leading data series issued by the United States government is that prices have only fallen 6 percent. If you are a homeowner, you are wealthier than you knew. The bad news is you still have three dollars to lose for every one dollar which has already been lost.
    The total projected fall from the Federal Housing Finance Agency (FHFA) “All Transactions Index”, which begins in 1975, shows a peak-to-trend fall of 27%. Since prices are 6% lower by this measure, prices must still fall an additional 23% from today for prices to revert to trend.
    The assumption built into these estimates is that prices in the years 1975 to 1999 advanced at a typical rate. A trend line was generated to the present based upon that 25-year period. The chart depicts the divergence of the trend established from 1975 to 1999 and the actual prices recorded from 2000 to 2009.
    The FHFA prediction of a total fall of 27% is far less than the total fall of between 49% to 60% predicted by Case-Shiller. Based upon the four data sets reviewed in the last few weeks (see summary below), we can estimate a total fall of between 27% to 60% from the bubble top to the long-term trend. The average of the four indexes projects a total fall of 41% from the bubble high to the trend bottom. 
    Looking ahead from today, the average of the four indexes predicts that property values will fall 26% from our current price levels.
     
    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: DMM, FNM, FRE, FRI, ICF, ITB, IYR, RWR, RWX, UMM, VNQ, XHB
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