Dr. Housing Bubble 08/03/08

[Crewleader]

A Lost Decade of Housing Equity: Los Angeles and Orange County will hit a Housing Price Bottom in May 2011 seeing May 2003 Prices.

The California housing market is facing a major calamity. In April of 2007 California reached a peak median price of $597,640 only to see those gains erased in the following year. By June of 2008, the median price in California is hovering at $368,250, a drop of 38.38% with no signs of slowing down. This is data gathered from the California Association of Realtors. Seeing a statewide drop of nearly 40% in one year may be a tempting incentive for people to jump back in the market. I’ve recently gotten many e-mails about people asking about a market bottom and whether they should be buying today.

This bottom psychology has also taken hold on Wall Street. There seems to be a new campaign of getting people to jump back in with both fists with the idea that things are hitting a price bottom. This is a mistake. Just because something has become radically “cheaper” in relation to a peak price does not make it worth the current price. There has to be some underlying economic valuation that justifies the price. After all, the recent job report saw unemployment spike up to 5.7% and we also saw our 7th month of continued job losses:

http://www.doctorhousingbubble.com/a-lost-decade-of-housing-equity-los-angeles-and-orange-county-will-hit-a-housing-price-bottom-in-may-2011-seeing-may-2003-prices/

[jwirr]

1. Read your posts all the time - have a question: Is there any low-income

housing programs that we can trust anymore? I have been to the MN Housing Finance Agency site and the only indication of how they are faring in this mess is that they have connections to Fannie Mae. I have worked for housing programs in my state for years - just want to know what is happening with the government programs I worked to support.

[NMDemDist2]

2. this was the kicker for me (my emphasis added)

My guess is even after hitting a bottom, we may see a lost decade similar to Japan where prices simply move sideways for years. Given how our current government is trying to prop up institutions that should collapse, we are going to divert resources to organizations that clearly have mismanaged their own balance sheets. Money that can go elsewhere to improve the overall ability of our society to be competitive in research, infrastructure, and science. This money will now be spent on propping Fannie Mae and Freddie Mac and giving tax breaks for people to buy homes.