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1. "House prices always go up".
You wish. First, according to the S&P/Case-Shiller indices for May 2007, house prices are currently falling in 15 out of 20 major metropolitan areas in the US. Second, US house prices since World War II have endured several periods of decline in real terms (see the graph on our home page) - it's just that in the past inflation was often sufficient to avoid declines in "headline" prices. Third, many regional markets have in the past seen lengthy declines in both real and "headline" prices. For example, according to the S&P/Case-Shiller indices, nominal house prices in Los Angeles fell by 27% from June 1990 to March 1996. MORE..... |
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This graph shows US house prices, adjusted for inflation, since World War II. The graph shows that for most of the post-war period, house prices simply kept pace with inflation. The 1998-2005 boom was quite unprecented - and has left house prices at perilously high levels. If house prices were to revert to historically normal levels, prices in real terms would fall by over 40%, making for the biggest real-estate bust in history.
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Week of November 25th, 2007
• Housing is Hitting the Unemployment Ranks.
Although the housing industry accounts for only roughly 6% of US employment, it has accounted for over 46% of new jobs over the past 5 years. Now those jobs are shedding fast.
• Ground Zero of the Real Estate Bust.Using Colorado case studies, Time provides a nice overview of how subprime loans and wall-street have shaken the foundation of the housing market.
• Foreclosure Looms - What Can You Do? With foreclosure rates on the rise, homeowners have few avenues to pursue to avoid loosing their home.
• This Old Foreclosure. Rising foreclosure rates may not spell bad news for everybody - home buyers may be able to benefit by buying foreclosed property at a discount, if they're careful.
• Bush Moves to Aid Homeowners. Bush seeks to reduce the number of homeowners going into foreclosure with a number of measures, including allowing the Federal Housing Administration to guarantee loans for delinquent homeowners. |
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