New Jersey Real Estate Report

From the Wall Street Journal:

The Biggest Housing Losers
May 12, 2008

You may not know it, dear reader, but Congress is playing you for a sap. During the housing mania, you didn’t lend money at teaser rates to borrowers who couldn’t pay, or buy a bigger house than you could afford. You paid your bills on time. As a reward for that good judgment and restraint, Barney Frank is now going to let you bail out the least responsible bankers and borrowers.

The Massachusetts Democrat’s housing bill passed the House Thursday, and it makes us wish we had splurged like so many others. In the name of helping strapped home buyers, Mr. Frank is giving lenders a chance to pass their worst paper onto Uncle Sugar. If both borrower and lender agree to participate, lenders can accept 85% of the current appraised mortgage value and in return get to dump up to $300 billion of those loans on the Federal Housing Administration (FHA). Guess which loans they are likely to dump?

Looking at the details in Mr. Frank’s 45-page first draft of this bill, FIS Applied Analytics estimated that taxpayer losses could reach as high as $27 billion, more than four times Mr. Frank’s estimate. The next draft, clocking in at 72 pages when it passed Mr. Frank’s committee, was miraculously scored by the Congressional Budget Office at “only” a $2.7 billion cost to taxpayers.

CBO lowballed it in part because it assumed that most people eligible for this assistance will not apply for it. It is true that some lenders may be wary of taking a 15% haircut off the top, but watch out if bankers and borrowers do take the taxpayers up on Mr. Frank’s offer. This is especially likely because at the same time that Mr. Frank touts the lowball estimate, he is also making mortgage servicers an offer they can’t refuse.
…
The plan seems to get more generous by the week, at least if you’re an ally of Mr. Frank. The monster he brought to the floor Thursday runs to hundreds of pages. State governments receive authority to issue $10 billion in tax-exempt bonds to subsidize home purchases and to help subprime borrowers refinance.

In a sop to builders, Mr. Frank also expands the low-income housing tax credit, and he creates a new refundable credit for certain home buyers. To help defray the cost to the Treasury, Mr. Frank raises taxes on multinational companies by delaying a scheduled reform. A law set to take effect this year would expand firms’ ability to claim foreign tax credits and thereby avoid double taxation. Mr. Frank would put it off for another year.
…
We can only imagine what else is buried in this tome, which deserves a Presidential veto. But the worst problem remains its invitation for bankers to dump their biggest losers on taxpayers. The Frank plan appears to take care of everyone in the housing market, except the renters and homeowners who lived within their means.

Preliminary April sales and inventory data for Northern New Jersey (GSMLS) is in. Please note that this data is subject to revision.

The first graph plots the unadjusted sales data (closed sales) for the counties listed. Please note the lower bound of the graph, it is set to 500, not to zero. I do this to emphasize the seasonal nature of the Northern NJ market.

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The second graph is another view at the sales data for the full year. Please note that this graph does cross at zero.

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The third graph displays only April sales, 2001 to 2008 YOY.

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The fourth graph displays an overlay of Sales and Inventory from 2003 to 2007.

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The fifth graph displays the year over year change in inventory on a month by month basis.

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The sixth graph displays the year over year change in sales on a month by month basis.

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The last graph displays the absorption rate (not seasonally adjusted), in months:

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The following map is from Fannie May and displays the change in home prices from the second quarter of 2006 to the first quarter of 2008. Fannie Mae says that New Jersey home prices have fallen 8.1%:

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The following map is from Zillow and displays an estimate of the percentage of recent purchasers (2005-2008) who are “underwater”:

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From Bloomberg:

Bernanke Urges Action to Slow Jump in U.S. Home Foreclosures

Federal Reserve Chairman Ben S. Bernanke, seeking to end the worst housing slump in a quarter century, urged the government and mortgage lenders to intensify their efforts to avoid home foreclosures.

Bernanke, in a speech in New York yesterday, also reiterated his call for lenders to forgive portions of mortgages for some struggling homeowners. He said proposals should be “tightly targeted” at borrowers at greatest risk of losing their properties, and avoid providing an incentive for defaults.

The Fed chief also backed the idea of having the Federal Housing Administration refinance troubled mortgages, a concept included in Democratic legislation in Congress, without explicitly endorsing the bill. His remarks indicate a gap with the Bush administration, which has preferred to rely on industry-led efforts.

“Realistic public- and private-sector policies must take into account the fact that traditional foreclosure-avoidance strategies may not always work well in the current environment,” Bernanke said in remarks to a Columbia Business School dinner.
…
As the housing recession deepened, officials in Washington have offered a number of different proposals. Foreclosure filings rose 57 percent in March from a year earlier, according to Irvine, California-based RealtyTrac Inc.

“Conditions in mortgage markets remain quite difficult, and mortgage delinquencies have climbed steeply,” Bernanke said.
…
Bernanke did note that accelerating foreclosures may push home prices down further, hurting the broader economy and threatening the financial system. He anticipated the foreclosure rate will increase this year after such proceedings began on 1.5 million properties last year.

A quarterly Fed survey yesterday showed the share of banks making it tougher for companies and consumers to borrow approached a record last month in the aftermath of the subprime mortgage collapse. The Senior Loan Officers’ Survey found a net 70 percent of banks increased their loan rates over their cost of funds.
…
Bernanke warned that “to be effective, such programs must be tightly targeted to borrowers at the highest risk of foreclosure.” Qualification guidelines could be set, such as identifying an amount of debt compared with income, or the extent to which the home value is below the mortgage amount, he indicated.

“Finding the right balance — particularly the need to avoid programs that give borrowers who can make their payments an incentive to default — is difficult,” the Fed chairman said.

From the Wall Street Journal:

Banks Toughen Terms on Loans
Both Consumers And Businesses Feel the Impact
By SUDEEP REDDY
May 6, 2008; Page A3

In a blow to an already wobbly U.S. economy, banks are imposing tougher lending terms for consumers and businesses across the board.

The Federal Reserve’s survey of banks’ senior loan officers, one of the most closely watched gauges of lending practices, found that the credit crunch is widening. The proportion of domestic banks tightening their standards was at or near historical highs for almost all loan categories, including credit cards and student loans.

The survey, conducted in April, showed that demand for loans weakened in most categories, though not as much as in the previous three months.

The lending pullback comes as the economy slows to a crawl. The banks’ hesitancy to lend could restrain consumer spending as well as investment by businesses that depend on borrowing.

About a third of the 56 domestic banks surveyed in April reported raising their standards for credit-card loans over the past three months, up from just 10% in January. Banks are being tougher on credit-score requirements and are reducing credit limits on card loans. In addition, 44% of banks, up from 30% in January, tightened standards for other consumer loans.
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Banks continue to get more restrictive in their real-estate lending as the housing bust adds to their losses. About 70% of banks said they tightened standards for new home-equity lines of credit over the prior three months. Roughly half of the banks said they tightened terms on existing home-equity lines of credit over the past six months because of home prices falling below their appraised values. Most lenders also cited loan defaults and a change in borrowers’ financial circumstances for tightening terms.

More than 60% of banks tightened standards on prime mortgages, up from just over half in January and 15% a year ago. At least three out of four said they tightened standards for nontraditional and subprime mortgages in the past three months. For commercial-real-estate loans, about 80% of banks tightened their lending standards.

According to the National Association of Realtors, the answer is no, it has always been a good time to buy…

…even during the darkest depths of the Great Depression. Unemployment was nearing 16% and approximately 8 million Americans were unemployed. Banks were in turmoil, with roughly 2,000 banks failing in 1931, including the New York Bank of the United States (the largest bank failure in the history of the nation at the time). You might think that in the midst of the worst economic downturn the world had ever seen the Realtors might would show some restraint.

Nope, it’s a great time to buy a home!

From Bloomberg:

Wall Street CEO Chorus Is Singing Out of Tune

It’s become fashionable in certain circles — primarily among administration types and Wall Street chief executives whose banks are losing gobs of money — to say that the worst is over for the subprime/housing/credit/economic crisis in the U.S.

Whether they express their optimism in baseball terms (“in the eighth inning or maybe the top of the ninth”), as a percentage (“maybe 75 percent to 80 percent over”) or in the form of a timeline (“closer to the end than the beginning”), these faith-based predictions contain the audacity of hope.

I mean, where’s the evidence? Let’s start with Public Enemy No. 1: housing. For all the false claims of a bottom in the last two years, real residential fixed investment, as it’s called in the gross domestic product accounts, keeps registering increasingly larger declines. In the first quarter, residential investment fell at a 26.7 percent annualized rate, the ninth consecutive quarterly decline and the biggest since 1981.

Home sales and prices continue to plummet. Until buyers step in to absorb the glut of homes on the market, compounded by foreclosed properties dumped on the market at a time when credit availability is constrained, it’s hard to see why home construction should pick up anytime soon.

The deterioration in the value of a household’s main asset has sapped consumer confidence and spending. Spending rose 1 percent in the first quarter, the smallest increase since the 2001 recession.
…
The financial strains will eventually abate, but the effects from the credit channel will linger, taking their toll on the real economy.

“Phase Two of the crisis is coming from rising unemployment, rising commercial real estate vacancy rates and falling profits,” says Paul Kasriel, chief economist at Northern Trust Corp. in Chicago. “This will precipitate problems in credit card, auto loan, commercial real estate and high yield corporate debt. We are in the eye of the hurricane right now.”

Even the eye isn’t looking so great.

From the WSJ:

HOUSE TALK
Another Full Year Of Housing Pain?
By JUNE FLETCHER
May 1, 2008 3:55 p.m.

Don’t look for the housing market to improve until the daffodils bloom next spring.

For home sellers, the continuing pain means that that homes likely won’t sell unless they are well-kept, priced below the competition and are marketed aggressively. Adding incentives like seller financing or lease-options can help bring in buyers who are having trouble getting conventional financing.

The latest S&P/Case-Shiller Home Price Index shows that new and existing home prices fell 12.7% in February from a year earlier.

According to economists who convened at the spring construction forecast conference of the National Association of Home Builders in Washington, D.C., last week, the trend will continue until early next year, dragging down prices.

The consensus view was far gloomier than a few months ago, when housing economists predicted the bottom would be reached in late summer or early fall. But now the U.S. is in a mild recession, although it hasn’t been officially declared, and the pain is spreading to more parts of the country, according to the association’s chief economist David F. Seiders. “Foreclosures keep getting worse,” he said. “Where in the world does it stop?”

Foreclosures push homeowners out of their homes and simultaneously ruin their credit, making it difficult for them to become owners again, he said. The drop-off of demand from these owners, as well as would-be buyers who don’t want to purchase while prices are still falling has become a “diabolical feedback loop,” he said.

Home builders have put the brakes on building — total annualized housing starts are down 34.5% to 1.035 million in the first quarter of this year and will likely stay at under 1 million until the middle of next year. But demand is still too weak to absorb this pace of building, according to Mark Zandi, chief economist for Moody’s Economy.com. It would take 11 months at the current sales rate to sell the new homes now on the market.

Mr. Zandi expects three quarters of the country’s major markets to experience new and existing-home price declines. In places that have been losing jobs, prices could drop as much as 40% from their peaks. “The coast is not clear,” he said.

Eric Belsky, executive director of Harvard’s Joint Center for Housing Studies, noted that declining home prices, which eroded the equity of many homeowners, “caught people by surprise.” He expects to see more households doubling up in shared homes as job loss, foreclosures and the credit squeeze continues. “People are being forced to sleep on floors,” he said.
…
Economist James Glassman, a managing director of J.P. Morgan Chase & Co., said that the current quagmire is partly due to creditors overreacting to the subprime-mortgage crisis, leaving only good savers with enough cash able to buy homes. But overall, he said, the American economy is sound, and the crisis will eventually subside as credit becomes freer and home prices stabilize. “The wheels aren’t coming off the wagon,” he said.

From Bloomberg:

Economy in U.S. Probably Expanded at Slowest Pace in Five Years

The U.S. economy probably grew in the first quarter at the slowest pace in five years as consumer and business spending faltered and the housing slump deepened, economists said before a government report today.

A 0.5 percent annual pace of growth from January through March, the smallest gain since the last three months of 2002, is the median estimate of 80 economists surveyed by Bloomberg News.

“I’d probably call it a recession,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “It’s a pretty bad environment that is unlikely to get better any time soon. The consumer is on very shaky footing.”

Spending by households, the biggest part of the economy, probably grew last quarter at the slowest pace in 13 years as job losses mounted, food and fuel prices surged and property values tumbled. Federal Reserve policy makers are forecast to cut the benchmark interest rate today to limit the downturn.

The Commerce Department’s report on gross domestic product, the volume of all goods and services produced, is due at 8:30 a.m. in Washington. The economy grew at a 0.6 percent pace in the last three months of 2007.

From the AP:

Fed expected to cut key interest rates one more time

The Federal Reserve, which began the year aggressively fighting a severe credit crunch and economic weakness, may push the pause button after delivering perhaps one more quarter-point cut in interest rates.

Fed Chairman Ben Bernanke and his colleagues were to wrap up a two-day meeting Wednesday and financial markets widely expected that the discussions will end with an announcement that the Fed will cut a key interest rate by a quarter-point.

That would be the seventh reduction in the federal funds rate since the central bank began battling against the credit squeeze and the growing possibility of a recession last September.

The Fed delivered two three-quarter-point moves and one half-point cut over an eight-week period from mid-January to mid-March that represented the central bank’s most aggressive rate cuts in a quarter-century.

However, the central bank is expected to respond with a less aggressive quarter-point move at this meeting, in part because the financial turmoil seems to have eased and because there are growing concerns about inflation.

While there is some thought that the Fed might decide to forgo a rate cut, most analysts believe that the greater likelihood is a quarter-point move.

From the Allentown Morning Call:

Five good reasons to be a renter

No risk. Owning a home can be a risky business, and there are no guarantees that it will be a good investment. Lots of people who got in over their heads with subprime loans (high-cost loans made to people with spotty credit histories) are learning the hard way that homeownership at any cost can be a losing proposition. When you rent, someone else accepts the financial risks, while you get to enjoy the peace of mind.

Cheaper. When you consider the cost of being a homeowner — mortgage payments, association dues, property insurance, property taxes, repairs, maintenance and upgrades to protect your home’s value — most of the time, renting will be cheaper.

Flexibility. A big home mortgage can keep you stuck in a job (or two) that you hate. When you are not tied to that kind of debt, you have the freedom to quit your job and move to another area. Or keep your job and move to another place. Or quit your job and start your own business. See? You’ve got flexibility.

Landlord. Owning a home is not all joy and sunshine when the roof starts to crumble, the furnace goes out or the plumbing springs a leak. When stuff happens (and it will, trust me), a renter calls the landlord. When you’re not worrying about fixing toilets, you have the time and freedom to do what you want.

Get out of debt. Homeowners who are up to their eyeballs in the costs of owning a home often struggle with paying down credit card debt because they’re so strapped for cash. And the temptation to keep adding to that debt because of all the costs to own a home can be great. Renters, on the other hand, have the opportunity to get really serious about getting out of debt because of all the reasons I just mentioned.

If you are a renter, sit back and count your blessings. Be grateful that you are among roughly 30 percent of American households for whom renting a home for now makes a lot of sense. And during these months and years that you are living more cheaply than you would be if you had a big mortgage, get into the savings habit. Save all you can so that when the time is right for you to buy, you’ll have a nice, fat down payment. That way, chances are great that you’ll take on a mortgage payment that is on a par with the rent you’ve been paying.

Now that’s an American dream!

According to S&P Case Shiller, NY Metro Area home prices are down 6.6% in the past year, and down 8.05% from the peak set in June of 2006:

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From Standard and Poor’s:

Steep Declines in Home Prices Continued in February 2008 According to the S&P/Case-Shiller® Home Price Indices (PDF)

“There is no sign of a bottom in the numbers,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Prices of single family homes continue to drop across the nation. All 20 metro areas were in the red for the February-over-January reading. In addition, 19 of the 20 MSAs are still reporting negative annual returns. The monthly data show that every one of the MSAs has now declined every month since September 2007, marking six consecutive months. On top of that, remained steep the declines have with eight of the 20 MSAs and both composites reporting their single largest monthly decline in February.”

From MarketWatch:

Home prices fall record 12.7% in past year, Case-Shiller say

The decline in U.S. home prices quickened in February, with prices down a record 12.7% in the past year for 20 key cities, according to the Case-Shiller home price index released Tuesday by Standard & Poor’s. “There is no sign of a bottom in the numbers,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s. Prices in 19 of the 20 cities have fallen over the past year, with prices in all 20 cities falling month-to-month for six straight months. The biggest declines were in Las Vegas and Miami, with declines of more than 20% in the past year. Prices in Charlotte, N.C., are up 1.5%.

From Bloomberg:

S&P/Case-Shiller U.S. Home-Price Index Fell 12.7%

Home prices in 20 U.S. metropolitan areas fell in February by the most on record, pointing to an imbalance between supply and demand that shows no sign of ending.

The S&P/Case-Shiller home-price index dropped 12.7 percent from a year earlier, more than forecast and the most since the figures were first published in 2001. The gauge has fallen every month since January 2007.

Prices will probably keep sliding as foreclosures push even more properties onto the market just as stricter lending rules limit the number of qualified buyers. Shrinking home values have contributed to a slowdown in consumer spending that may already have tipped the economy into a recession.

“We’re going to continue in this abyss for a while,” said Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Inventories are getting worked off but it’s a slow process. Sales and prices will go down.”

Prices dropped 2.6 percent in February from a month earlier, after a 2.4 percent decline in January, the report showed. The figures aren’t adjusted for seasonal effects, so economists prefer to focus on year-over-year changes instead of month-to-month.

The index was forecast to drop 12 percent following a 10.7 percent drop in January, according to the median estimate of 14 economists surveyed by Bloomberg News. Estimates ranged from declines of 12.6 percent to 11 percent.

The group’s 10-city composite index, with a history back to 1987, fell 13.6 percent in the 12 months ended in February, also the most ever.

From Reuters via CNBC:

Home Prices Tumble Again; ‘No Sign of a Bottom’

Prices of existing US single-family homes extended their slump in February, with 17 of the 20 measured regions posting record annual declines, according to the Standard & Poor’s/Case Shiller home price index Tuesday.

The composite month-over-month index of 20 metropolitan areas fell 2.6 percent to 175.94 in February from January, for an annual drop of 12.7 percent.

S&P said its composite month-over-month index of 10 metro areas slid 2.8 percent in February to 190.58, for an record annual decline of 13.6 percent.

Eight of the top 20 metro areas, as well as both composite measures had their biggest monthly declines in February, S&P said in the release.

From Bloomberg:

U.S. Foreclosure Filings Double in First Quarter

U.S. foreclosure filings more than doubled in the first quarter as payments rose for subprime adjustable mortgages and falling home prices left property owners unable to sell or refinance without losing money.

Almost 650,000 properties were in some stage of foreclosure during the quarter, or 1 in every 194 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of foreclosure data, said today in a statement. The number was 112 percent above a year ago. Nevada, California and Arizona had the highest rates.
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“This country needs a cleansing,” billionaire real estate investor Sam Zell, chairman of Equity Group Investments LLC, said yesterday at the Milken Institute Global Conference in Los Angeles. “We need to clean out all those people who never should have bought in the first place, and not give them sympathy.”
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Government attempts to slow the flood of defaults “could be simply deferring another flood of foreclosures,” Saccacio said in the statement. “That could extend the length of time it takes the market to recover from this downward cycle.”
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“That whole process has to be liquidated,” Zell said.
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California had the most filings at 169,831, and the second- highest rate at one for every 78 households. Arizona had the third-highest rate, one in every 95 households. Florida was fourth at one in 97.

The foreclosure rate was one in 110 in Colorado, one in 166 in Massachusetts, one in 202 in Maryland, one in 265 in New Jersey, and one in 550 in New York, according to the report.

From the AP:

Homes facing foreclosure more than doubled in 1Q from 2007

The number of U.S. homes heading toward foreclosure more than doubled in the first quarter from a year earlier, as weakening property values and tighter lending left many homeowners powerless to prevent homes from being auctioned to the highest bidder, a research firm said Monday.

Among the hardest hit states were Nevada, Florida and, in particular, California, where Stockton led the nation with a foreclosure rate that was 6.6 times the national average, Irvine, Calif.-based RealtyTrac Inc. said.

Nationwide, 649,917 homes received at least one foreclosure-related filing in the first three months of the year, up 112 percent from 306,722 during the same period last year, RealtyTrac said.

The latest tally also represents an increase of 23 percent from the fourth quarter of last year.

From the WSJ:

The Brighter Side of Housing
Amid Downturn, ‘Unaffordable’ Is Within Reach
By JAMES R. HAGERTY
April 24, 2008; Page D1

And now for the heartwarming side of the housing bust: It’s helping some people buy homes that they couldn’t afford a couple of years ago.

Michelle Dudley for years commuted 50 miles each way to her job as a civil servant in Anaheim, Calif., because she and her husband, Don, didn’t feel they could afford a home near her office. This week, though, the Dudleys moved into a three-bedroom house in Anaheim that they recently bought for $390,000, down from the original listing price of $445,000 in November. Similar homes in the area were selling for as much as about $600,000 two years ago, says Erin Eckert, an agent for Redfin, an online real-estate brokerage that represented the Dudleys.

Still, many potential buyers are holding out for better deals. The Wall Street Journal’s quarterly survey of housing-market conditions in 28 major metro areas points to continued downward pressure on prices in much of the country.
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Kevin McCleary, a computer-security consultant, remained a renter through the housing boom even though he could afford to buy, because he believed prices were reaching unsustainable levels. In October, though, he and his fiancée finally decided to buy a foreclosed home in Herndon, Va., and negotiated a price of about $443,000. The same home sold in 2005 for $645,000. “I don’t believe we hit it at the perfect time,” Mr. McCleary says. On the other hand, he says, “we were just tired of putting our lives on hold.”

During the boom, home prices rose far faster than incomes. Home prices as measured by the S&P/Case-Shiller national index shot up 74% in the six years through 2006, while median household income rose 15%. (Neither figure is adjusted for inflation.) Now prices in many areas are adjusting back toward more affordable levels, a process that could take several years.
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Economists at Goldman Sachs say home prices are likely to level off by late 2009. They also point to improving affordability. Goldman’s chief U.S. economist, Jan Hatzius, says the share of a typical family’s income needed to pay mortgage payments on a median-priced home averaged about 17.5% from 1993 to 2003, before jumping to 26% in 2006. The figure now has fallen to 20% and is likely to keep declining as home prices fall.

Mr. Hatzius estimates that average U.S. home prices have fallen 15% since the second quarter of 2006 and projects they will fall an additional 10% before stabilizing late next year. But he also sees a risk that home prices will fall further, particularly if the foreclosure problem proves worse than already expected.

Goldman estimates that foreclosures will add 1 million to 1.5 million homes to the for-sale market this year, compared with less than half a million a year before 2007.

From First American CoreLogic:

First American CoreLogic Releases Febuary 2008 LoanPerformance House Price Index

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Philadelphia, PA CBSA
3-Month -1.47%
12-Month -1.14%

Edison, NJ CBSA
3-Month -1.36%
12-Month -4.67%

New York-White Plains-Wayne, NY-NJ CBSA
3-Month -0.80%
12-Month -3.34%

“Thirty-three states now show year-over-year real estate declines according to this latest LoanPerformance HPI release,” said Mark Fleming, chief economist for First American CoreLogic. “However, on a quarter-over-quarter basis, there are now thirty-eight states with decreasing property values,” added Fleming.

Three years ago, during the peak of the housing bubble, I went out on a limb and offered up my forecast on where New Jersey home prices would go. That number was down 30%, and it caused quite a stir. The analysis was simple one, based on historical home prices, incomes, and rents. Home prices had risen dramatically when compared to household income. This left us with three possible outcomes, incomes would rise to bring the ratio back near historic levels, home prices would fall to restore those levels, or we had undergone a paradigm shift and the old ratio was no longer valid. When I looked at historic price to rent ratios, the pattern was the same, homes were commanding prices far and beyond what their rent rolls would infer. The same three outcomes existed here as well, rents would increase to make up the gap, home prices could fall, or else “it really was different this time.”

There was no magic, no crystal ball, no black box, and no esoteric finance. The concept was simple, how could home prices rise faster than the incomes needed to support those prices? Surely we’d hit a point where no one would afford to buy a home. The same applies to rental prices, at what point would it no longer make financial sense to hold on to an investment property? Or the opposite, rents so low that no one would consider investing in real estate. Landlords were subsidizing renters and were not being compensated for their risk.

I digress, neither the forecast nor the analysis was the point of this, it was the reaction. Hell hath no fury like a homeowner scorned. I was called crazy for even suggesting the possibility that home prices might fall 30%, it simply wasn’t possible, it couldn’t be possible. I was a bitter renter, or worse, a housing terrorist for suggesting such things. What did I know? I was just some idiot bubble blogger trying to crash the market.

My my, how times have changed.

From the WSJ:

Yale’s Shiller: U.S. Housing Slump May Exceed Great Depression

Yale University economist Robert Shiller, pioneer of Standard & Poor’s/Case-Shiller home-price index, said there’s a good chance housing prices will fall further than the 30% drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15% since their peak in 2006, he said.

“I think there is a scenario that they could be down substantially more,” Mr. Shiller said during a speech at the New Haven Lawn Club.

Mr. Shiller, who admitted he has a reputation for being bearish, said real estate cycles typically take years to correct. Home prices rose about 85% from 1997 to 2006 adjusted for inflation, the biggest national housing boom in U.S. history, Mr. Shiller said. “Basically we’re in uncharted territory,” he said. “It seems we have developed a speculative culture about housing that never existed on a national basis before.” Many people became convinced that housing prices would increase 10% annually, a notion Mr. Shiller called crazy.

From Bloomberg:

U.S. Existing Home Sales Fell in March; Prices Lower

Sales of previously owned homes in the U.S. fell in March as loan restrictions and the prospect of further price declines kept buyers away.

Purchases dropped 2 percent, less than forecast, to an annual rate of 4.93 million, from 5.03 million in February, the National Association of Realtors said today in Washington. The median sales price fell 7.7 percent from a year earlier.

Defaults on subprime mortgage loans have led banks to tighten borrowing rules, while home values are decreasing as foreclosures add to the glut of unsold properties. The housing slump, now in its third year, is one reason some Federal Reserve policy makers are concerned the U.S. is heading into a recession.

“The declines will persist through 2008,” Avery Shenfeld, senior economist at CIBC World Markets Inc. in Toronto, said before the report. “To see a consistent upturn in sales and prices, we’re going to need to work through the slump in housing and the crisis in the credit market. That will take time.”

Resales were forecast to fall 2.3 percent to a 4.92 million annual rate, according to the median projection of 72 economists in a Bloomberg News survey. Estimates ranged from 4.8 million to 5.08 million.

Sales fell 19.3 percent in March compared with a year earlier. Resales averaged 5.67 million in 2007.
…
The number of homes for sale at the end of March increased by 40,000 to 4.06 million. At the current sales pace, that represented 9.9 months’ worth, up from 9.6 months’ worth at the end of the prior month.

The median price of an existing home dropped to $200,700 from $217,400 a year earlier.