David in D

Lumber's Decline Likely Means Predictions of Housing Bottom Were Premature

I'm not convinced that the presupposition that lumber prices will be a forward looking indicator for home price stability is accurate. It is possible that you could have declining inventories of existing and already constructed new houses, which in turn produces possible price-stability, while still having major homebuilders on the sidelines.

In other words, I think its possible that lumber prices will not preceed house price stability but possible occur simultaneously with stability.

Thoughts?

Housing Bubble: The Sequel

Sean, there will be no 2nd housing bubble. $8K is nothing in terms of what has been lost. Only in very price depressed areas (with homes selling at $80 to $120 K) will you see this help.

How Much More Will Housing Prices Decline?

I think we have much further to fall than 8-10% based on many factors not accounted for in the post. Even if I do limit my analysis to the data presented in the post, your calculations are incorrect.

Price to Rent ratios bottomed at approximately 0.97 on the graph (let's just call it 1.0) the graph reflects 1.3 at the end of the 3Q 2008 off from 1.75 at the high. (1.75-1.3=0.45, 0.45/1.75-1.0=0.60). Therefore, based on you own data, to the end of Q3 6/10s of the drop has occured. Total drop = 19.1% 1/.6 = 32%. Therefore, based on your own data, total drop is roughly 13% from the bottom.

I for one, think we have even further to go... probably in the range of 18% -- definitely not 8-10% and probably not 13%.

A Sign That Housing Is Approaching Bottom

For the sake of the economy, I wish you were correct. But I think you are mistaken. We are no where near the bottom for housing. Expect 1% per month drops in prices for the next 12-18 months. Then, we MIGHT, be at the bottom.