Walstmnky

Well, I was of the opinion since summer of 2007 that housing prices in general in US were too high.

I thought that perhaps 25-30% depreciation would be a good entry point, i.e., a house in the midwest going for $325K at the peak could be had at $225-$250K.

Well, I am starting to think that the way things are going, a house that was selling at the peak at $325K will go for $75K in a worst case scenario.

There are a few simple reasons:

1. Houses are overpriced relative to wages and other assets,
2. There is a one-time dramatic shift in credit risk, i.e., kiss good-bye to times w/ 20% downpayment. I truly believe that we might enter into a risk era, in which a 50% downpayment is required,
3. Fear factor, i.e., people will be afraid to buy for the fear of price reduction,
4. Change in mentality as housing becomes a cost vs. investment.

There is a slew of other reasons, e.g., more bank failures, massive recession we are about to face, price deflation across the board, and possible re-pricing of equity markets, etc, etc.

Be prepared for the time when you take one-years worth of salary and buy a really nice house. In cash.

BTW, New York City real estate market will plummet like a rock. - Thu Oct 9 2008, 20:42

The housing prices are getting slammed beyond the wildest dreams of the housing bears. Interest rates are on the rise, banks are laying eggs right and left, corporate credit and credit in general is in crunch (for the 3rd or 4th time) AND commodity prices are on the rise.

I think falling prices an instillation of fear into the consumers (and homebuyers) is going to make things even worse. We might see 50% drop from peak to bottom, on average, in most metro markets, and 15-20 years of stagnant housing prices.

It is going to get truly ugly. - Sat Jun 28 2008, 23:09

[[You should read the book "Buyers Are Liars, And Sellers Are Too" it's a great look at the mind of both the buyer and seller and helps you to see their reasoning for how they behave. I have an approach I use called the urgency to buy. It just lays the reasons to buy vs. the loss of not! If you use that basic approach and see how this "economy" is effecting them personally. It normally takes away their fears and removes the grip of what the "NEWS" has over sensationalized them too.]]

But the reality is that it is never urgent to buy.

Suppose you say that now, April 2008, is absolutely the right time to buy and it is urgent.

If you say the same thing next month, that makes you a liar.

In fact, the opposite could not be far from the truth. When searching for most goods, the longer you search, the more likely you are to find a better deal. The only time this breaks is during irrational bubbles, when it is in fact buying early is the best outcome. Unfortunately, most people end up as losers during bubbles.

I can make a very good argument why it is better to buy in 6 months than now. In 6 months the prices are going to be lower than today, in most of the country, for most properties. - Wed Apr 23 2008, 10:07

Thumbs up for Jordan's original question. One of the most active and discussed threads in this forums. - Sun Apr 20 2008, 11:41

Lastly, I think some of us buyers are put off by seller's asking price and unwillingness to consider offers below asking. We offered $405k on a asking price of $410k and the seller counted with full price. We laughed and moved on. Last I saw, the house was still on the market for $389.5k.

You should offer again $350K. Put a footnote in the bottom (offering price reduced by $5K to account for past stupidity). - Sun Apr 20 2008, 11:37

>> Population is going up.... Home buying population is not. Draw your own conclusions.

Agreed. And not only that, but the builders built and built and built like there was no tomorrow.

The homeownership percentage in the total population shot up dramatically. Unsustainable. - Mon Apr 7 2008, 21:06

Lucas, sorry to take a position that is aligned with the banks, but if you are getting into a $500K loan, I think a 10% down is a reasoable prerequisite. Believe me, lenders have learned their lesson, and you should learn a lesson that many borrowers are now learning the hard way.

Heck, I think banks should required at least 20% down, and in some places like California they should require 25% - even 35% down. When you start thinking in terms of putting YOUR OWN 25% or 30%, you will start being very cautious.

If you don't have even a 10% downpayment, you have ABSOLUTELY no business buying a house, not in California with the big boyz, not even in some little midwestern town where median price is $175-$250K. Face it, It's good for everyone: you, the lender, the market, the economy. On top of that, being in your 20s you probably have not seen a major economic downturn, and possibly have limited skills with dealing w/ the consequences, e.g., layoffs, etc. I know it is illegal to discriminate on the basis of age when issuing loans, but company can always find a different angle, e.g., length of credit history, length of steady employment, etc.

If you scan this thread, there are plenty of people w/ $100K or more in downpayment, and even they are nervous about buying now. You should be very, very careful.

My sister is 25 and she has already saved $40K for a downpayment during the 2-2.5 years that she has been employed. Every day she sends me listings of "awesome houses" (that are slightly or significantly out of her price range, and significantly overpriced in my opinion) that she wants to buy, and I point out to her that she can't afford those.

She already agrees that compared to May '07, September '07, and even Dec' 07, those same types of houses have declined in LISTING prices significantly, and that sale prices are significantly lower as a percentage of list price. I just tell her to be patient, and wait. Just like in poker, you gotta bet when the time is right.

And the time is not yet right.

So you are doing the right thing by taking option 2. Believe me, in the next 6, 12, 18 months you will see better and better deals come across, and the meantime, build your assets. - Thu Mar 27 2008, 12:49

Looking at some of the anecdotal evidence provided by some of the buyers (e.g., Chris a few posts below, and others, either throughout this thread, or elsewhere on Trulia), it appears that it's not just a bad time to buy, it is downright an AWFUL time to buy.

I am 100 w/ NewportFiji in that RE prices are not as agile, and upward or downward trends continue for some time. Recent data (both from S&P Case Shiller and NAR) only indicates price declines have accelerated. In other words, things are just getting worse.

As for the anecdotal reports of the RE agents that 14 offers were received on the same house, why don't you put the information of the house, so the rest of us can do our own analysis to determine if the price was right or not. Sure enough, there are bound to be one or two houses out of a few thousand that due to the circumstances of the seller, are hugely discounted relative to all other houses. That, by itself does not imply either of the following: (a) houses are priced right, and (b) a house very similar to the one that received 14 offers will not be available for a lower price in 6 months.

I am also in agreement w/ Fiji about the possible length of the housing "crisis" (or should we call that a "much needed and justified correction"?) is bound to be much longer and more severe than the one in the early-mid 1990s. Now, that's not to say that some buyers won't budge early and buy houses before the bottom is reached. Everyone has their own reservation price, and when the price becomes right, each buyer will decide to make the move.

Unfortunately for the sellers, the market, the builders, and the economy as a whole, the vast majority of the buyers don't yet think the time has come. - Thu Mar 27 2008, 11:43

Usually, when FED hands out money, it take only treasuries or similar assets as collateral. Now, for the second time, they are taking credit-bearing assets as collateral.

The hope is to stabilize the credit prices.

See Paul Krugman's interpretation of what FED is doing to the markets:

http://krugman.blogs.nytimes.com/

"What’s Ben doing? (Very wonkish)"
"A cartoon model of the crisis (more serious wonkery)", - Tue Mar 11 2008, 11:49

Yev: if I may ask:

(1) what are you looking for (area / bedrooms / sq. feet, etc)?
(2) what is the price of what you are looking for now? AND
(3) at what price would you considering entering the market for what you are looking for? - Fri Mar 7 2008, 15:31

{{{ Hi all and TGIFriday!

Here is a an article describing the atmosphere of the National foreclosure market. Thoughts?
~ jordan

Web Reference: http://articles.moneycentral.msn.com/Banking/HomeFinanc... }}}

Hi Jordan, the article brings up a good point, but I disagree with the thesis of the article (foreclosure 'crisis' is overblow).

True, the rate of FC among ALL homeowners is still low, but then the rate of foreclosures among price borrowers goes up, that directly affects the mortgage rates. No wonder mortgage rates have spiked (both in absolute terms, and expressed as a spread over the treasuries). When the rates on new mortgages spike up vs. the treasuries, companies like Thornburg get into material default. That, in turn, scares investors even further. Liquidty in the market dries up.

You want to read good, fresh-off-the press stuff about foreclosures, see this:

http://calculatedrisk.blogspot.com/search/label/Foreclosure

I will say this: my current view on the housing market compared to say 3-4 months ago is a lot worse now. I was advising some relatives to purchase in May-July 2008 timeframe, now I am thinking that waiting until 2009, maybe even 2010 will be prudent. Just imagine what will happen to house prices if fixed rate mortgages head to 8-9%.

Also, half of the staff writers at msn finance don't know what they are talking about.

Bill Fleckenstein who is their resident bear has been rated as the worst stock market prediction picker by third party web-sites (check his standing among the guru grades here: http://www.cxoadvisory.com/gurus/). I am surprized MSN has not taken his job away yet.

Their strategy lab professionals routinely get beat up by amateurs. Sometimes, when their results look good it is because they carry cash instead of investing fully in their hypothetical portfolios,

Most of their gurus have no accountability. They start article after article about how to use their stock screens, and never go back and review how their strategies did,

In fairness, there are some people on MSN money who know what they are talking about.

- about stocks, economy, etc, read Jim Jubak's articles, watch his videos and analysis. He has amazing insights and intuitions,
- about personal finance, etc, read Liz Pulliam Weston. - Fri Mar 7 2008, 15:29

[[Also it's important to stop equating a rate drop by the Fed with lower mortgage interest rates. Fixed-rate mortgages track 10-year treasury bonds, not the Fed's short-term lending rate. Fixed rates have been going up just as the Fed has been cutting their target rates. There's more to mortgages than ARMs, and a drop by the Fed actually has very little to do with the kind of mortgages I and a lot of buyers would want right now.]]

Agreed. Mortgage rates can be decomposed as similar treasury rate plus perceived risk. Traditionally, the risk spread for prime mortgages has been low, but recently, that risk is growing. I think the spread between the agency bonds and similar treasuries are at a historical high.

But let's not forget that lower fed rates mean lower short term rates, which means lower ARM rates. I know, taking cheap ARMs is what got many people into trouble in the first place, but don't underestimate the nearsightedness of the consumers. Did it once, will do it again. - Wed Mar 5 2008, 14:10

Sylvia, with respect to your post below, and the importance of the emotional value of the house, I have some thoughts:

1. Perhaps the emotional value had a bigger weight in people's decision to buy a home and hold onto it 15-20 years ago, but these days, it appears to be less so (see: intentional foreclosures). The mentality of people is more focused on actual returns than intengibles,

2. People w/ homeownership experience assign a lot of value to various intangibles, e.g., their ability to make changes to the house. Someone used to renting probably assigns less value to that. Also, w/ time, the value of ownership grows,

3. W/ respect to the balance / supply imbalance, there are sellers that HAVE to sell, but I don't find any fundamental arguments to classify a buyer as one who HAS to buy. If someone relocates and you label them as a buyer who HAS to buy, don't forget that the same person HAS to sell their current home. So that's a wash. I think there is a huge supply - demand imbalance,

4. 24c on a dollar? As much as many cautious, conservative buyers hope to see that happen as a reward of their patience, prudency, and conversative approach to "investing in a house", I'd hate to see that happen. It will be worse than the Great Depresssion, - Tue Mar 4 2008, 14:31

John, that's a bold prediction re: those areas. 25c on a dollar? Wow!

If that happens, there will be major disruptions in the housing and financial sectors, and the entire economy. "25c on a dollar" will have major effect on CRE prices. When the CRE bubble pops, we are set for another ride downhill. - Tue Mar 4 2008, 11:05

[[[Good question, it takes less than a minute to find out ... ]]]

Your minute is up. Do you have the answer?

J/K

I was asking if there was a reliable / quotable study that provided such data. - Thu Feb 28 2008, 13:31

John, I have seen some of the reports you mention to support your hypothesis (home owners lose their home to foreclosure because their homes are worth less than they owe on their mortgage, and feel no need to continue making payments.)

I am wondering if you have any studies correlating FICO scores to the "intentional foreclosure" occurence. It would be interesting to see to what extent people care about their credit-worthiness when deciding to intenationally foreclose, and how much an excellent / very good / good credit might have to do with the decision to foreclose.

I know that some of the verbiage in the news or company releases might say that the phenomenon is across all credit grades, but 1 or 2 intentional foreclosure for excellent credit folk does not translate to a pattern.

A little off-topic, but since Shiller index came up again, I want to mention it. Jim Walker has started a thread about the Case-Shiller index, asking for Trulia reader's predictions of the National Index number. We had 3 people providing opinions on the Feb numbers for Q4 of 2008, but I think the prediction is still going-on, now for the May numbers for Q1 of 2008. If anyone wants to participate, jump in. Simply search for keyword "Shiller" in and look for question titled:

"What do you think the Case - Shiller index for 4th Quarter 2007 and 1st quarter 2008 will be?"

Thanks. - Wed Feb 27 2008, 13:43

Jordan, good news for California:

[[[Here is a recent news article on California housing affordability....]]]

considering the same model / definitions were used, it is definitely an improvement.

But someone has got to question the definition of affordability and the numbers chosen. This is the type of reporting / research style that basically deals a huge blow to the credibility of research coming from all *AR organizations (NAR, CAR, whatever).

1. First conclusion states that 33% of households (earning at least $82K a year) qualify for an entry level house ($411K). An entry level house is defined as one that is priced at about 85% of the median house price.

So richer households, the ones in the top 33%, can afford a house that is at the 60th percentile or below? Seems like a fishy comparison of affordability, doesn't it? I don't know what the level of house-ownership in CA is, but the top 33% is unlikely to be shopping for such an "entry" house. If anything, the bottom 33% is likely to be shopping for such a house. How many of them can afford the $411K house?

2. $2740 / mo payment with a $82K income? That means 39.9% of income goes to housing payments. Wow, hardly affordable for a household w/ 2-2.5 members (especially one w/ 2.5, i.e. a little kid).

3. 6.21% ARM? Are they kidding? Ok, the $411K loan can probably fit into something in that range, but an ARM? Not to mention that the interest rates now are higher than those covering the study period, something that undoubtedly helps boost the results of the reportin in favor of "affordability".

Again, I'll give CAR the positive in the findings: that compared to the same period in 2006, the 2007 numbers show more affordability.

BTW, if you check the numbers carefully, the report also used the same 6.21% rate for loans above $417K. This is an unrealistic assumption / tactic. Gotta use at least 80-110 bps difference between to separate the sub-417 loans from the over-417 loans. Either use a lower rate for the sub-417 loans, or a higher rate for the over-417 loans. What? Numbers won't look as good? Of course, the conforming loan limits are likely to change, but they could not known that for sure when they did the report. Not to mention thet change is going to be costly.

All-in-all, a strawman argument built on shaky assumptions, definitions, and conclusions.

P.S. Here is the whole report.

http://www.car.org/index.php?id=MzgyODA= - Fri Feb 22 2008, 15:45

I'd like to take a little break from the heated discussion whether buying or waiting is the right decision, and ask the real estate agents a question.

It has been about 15 days since Jordan asked the original question.

Do you think that buyers are still dragging their feet, or has that changed? - Sun Feb 3 2008, 09:35

[[I'm sure anyone can find NAR statistics on the web, they don't keep them secret.]]

Well, is it going to be much different than Case / Shiller index as far as the historical values are concerned? I doubt (if it is, then one of those sources must be junk).

As far as forward-looking predictions and speculations are concerned, NAR info is pretty much propaganda. Their chief economist probably knows deep down in his heart that he is forced to sell bullish predictions. Just read the wording of some of those carefully, you will see.

[[As far as the Shiller report goes: I am not a jump up and down now is the best time to buy a house is a great investment type realtor, but Shiller is at one end of the spectrum. He touches on some good points but he is basically a doom and gloomer. It isn't glass if full vs glass is empty thing, the glass is filled to the middle and the level fluctuates.]]

I agree - that's why I said pick the middle point between NAR and Shiller predictions. The result is still a bearish view of the real estate for the next, oh, 5 years.

[[I actually spoke to my husband last night about selling and cashing out and renting until we can purchase some bargains, but there are too many benefits to owning that we can't enjoy renting and it is actually cheaper for us, now that our mortage is paid off.]]

For you the decision is different. If we were to make an accurate analogy between a buyer in this market facing a decision to buy or wait, then the appropriate actions for you would be to upgrade your current house vs. wait. And you have voted with your feet and waited (maybe you don't need a bigger house, but still). Heck, you even considered selling out. See, how diametrically opposed your position is with that of a buyer? Read between the lines of what you said, words like cashing out, wait for bargains, etc. That means you would cash out if the numbers were right for you, and you would wait until the real bargains show up. By not going after the "bargains" now you have voted with your actions that there are no bargais per se, as far as your threshold for return on investment is concerned.

Someone who is renting now justifies CONTINUING to rent the same was as you justify continuing what you are doing.

BTW, if you were interested in cashing out the equity in your house and did not want to sell your house, there are ways to do that (no, I am not talking about REFI, I am talking about actually giving up some of the equity in your house in exchange for cash today). Just search the web, it's not secret. - Sun Feb 3 2008, 09:17

Tom: I certainly respect your opinion to disagree, and there is nothing to be sorry about.

My opinions could end up being wrong, but I am betting on them by waiting.

For the areas that I am interested in buying, the local association of the realtors publishes very good data: monthly market statistics per town, weekly summaries metro-wide, and monthly metro-wide outlook. So I keep my eye on the data regularly.

I just noticed the snippet about your sister's story in your earlier post. Very informative to give data and statistics some personal perspective. I am glad she had a decent return on her house. But her story is more of a house-as-a shelter story. And if her story is any moral, it is: "don't buy high and sell low", which is kind of what she did. I would hate to be 50% down two years into the mortage (25% in the red against the loan amount)! - Sat Feb 2 2008, 22:08

Some corrections to my original post.

Data points are:

LXXR is the S&P Case Shiller Los Angeles, CA index.

Selected date-value pairs of Index LXXR (Los Angeles Statistical Metropolitan Area):

1. Jan, 1987: 59.33,
2. Jan, 1990: 100.23.
3. Mar, 1996: 73.07,
4. Jan, 2000: 100.
5. Sep, 2006: 273.94.
6. Nov, 2007: 240.

All references to "Jan, 1989" should be "Jan, 1987". Sorry, typo. - Sat Feb 2 2008, 21:22

[[ had said that a home is first and foremost a place for shelter and then down the list a long term investment.]]
Well, when the shelter becomes unaffordable, it tends to be bought less.

[[Therefore for the people that HAVE to buy due due circumstances such as a job transfer ... ]]

I would describe this better as they WANT to buy, not HAVE to buy. But a job transfer is a wash - they have to sell the original house first.

[[will do alright as long as they stay where they are for 7 years. I SAID THIS BEFORE AND WILL SAY IT AGAIN!!! Have a Realtor pull up the last 30-40 years and tell me I am wrong. No one knows where the bottom is until it has passed.]]

I would really like to see that data.

I don't have access to NAR data, but let's look at S&P Case Shiller index which is public, highly cited / followed, and statistically sound.

The Case / Shiller index, called LXXR, has been tracked since 1989, as a monthly index value. Method used is "repeat sales technique", i.e. two consecutive sales of the same house give a data point. Many data points in a metro statistical area are averaged to produce the value of the index.

From Jan 1989, when the index was first tracked in many metro areas, until Nov 2007 (latest value available), we have 251 observation points. These are too many to re-produce here, but you are welcome to check the source in the link provided. I will simply provide notable points:

Index LXXR (Los Angeles Statistical Metropolitan Area):

1. Jan, 1989: 59.33,
2. Jan, 1990: 100.23 - peak reached. Annualized return from Jan, 1989 is 19%,
3. Mar, 1996: 73.07 - bottom reached. Annualized return from jan, 1990 is -5.1%, compounded to -27% over the 6.15 year period.
4. Jan, 2000: 100 - reached the previously attained peak for the first time since Jan, 1999. Return from Mar, 1996: 8.5% annualized. Return from Jan, 1989: less than 4%.

Time to reach the value from the previously attained peak: 10 years. Did someone say 7 years is the longest it takes to recover amt invested in a house? Really?

Let's continue the stats.

5. Sep, 2006: 273.94. This is the recent and ALL-time top reached. Annualized increase from Jan, 2000: 16.3%.

6. Nov, 2007 (last value available): 240. Decrease from the peak: -12.25%. That's peanuts to what is about to come.

Let's use the following as indiciation:

- peak-bottom cycle seen last was 6 years and 2 months,
- the length of the top -- bottom -- top_reached_again cycle (1990-2000) is 10 years,
- avg annual appreciation from 1989 - 2000 is roughly 4%,
- the bubble reached this: 173% in 6.8 years, or 16.3 percent annual.

I would draw the following conclusions:
- the initial fall will be harder, recording month-to-month decrease that is bigger in magnitude then previous time (this already has happened, Nov, 2007 - Oct, 2007 is -3.77%, or -44% annualized,
- the whole top-bottom-top_again cycle might well take longer,
- at some point in the next 4-8 years the price will revert to a point that is consistent with 4% annualized increase. For comparison, if we take Jan-2000 as a benchmark, then 4% increase since then would put the index at 135 vs the 240 that it is today. In other words, the index is showing 75% overvaluation.

If any of the realtors are willing to share NAR data, and I mean actual statistics, I am willing to do similar analysis on that data.

The page provided is to the S&P Case Shiller Index Historical Data. It is an excel document accessible from the link titled: "January 29, 2008: Historical Values" (the index has a 2 month lag, i.e. on last Tuesday of January, Jan 29, the November 2007 values were released). - Sat Feb 2 2008, 21:13

Good article, John. Of course, bits and pieces of the facts and predictions stated in that article have been all over the news in the 6 mos, maybe longer.

With respect to the prediction of the prices in 08, 09, 10, I think we can take 3 types of sources:

(1) Bullish. NAR, etc, would fall in this group. This group says moderate (read: very low or almost flat) growth in 08, a bit better in 09,

(2) Bearish. This business week article would fall in that category,

(3) Doomsday. Shillers predicted 50% drop would fall in here.

I say take the middle road, i.e. prices would decline 25% from here until 2010.

I wish there were prediction (betting markets) for the US real estate market. That way we could truly gauge the forward sentiment of the market w/ respect to the forward prices. - Sat Feb 2 2008, 12:47

WaitingAndWatching:

I just had a chance to read the entire article closely, and there are some great insights offered beyond the numbers and such. For example, page 8 lays out some pretty strong reasons why many buyers are forced out of the market (and will be, for a foreseeable future). Also, it appears that many move-up scenarios (we see a lot of questions on Trulia about those) will not occur as easily. The advice I am hearing from many RE agents here is that moving up right now is a great idea now. I would qualify that with two things: (1)move up if you can sell FIRST (But apparently the lenders might start to REQUIRE that.) And second, moving up equates to taking more leverage, and more leverage in a declining period is a bad idea.

Also, the historical perspective on mortgage delinquencies (page 13) is pretty interesting. It suggests that things have not YET gotten as bad as, say, 1982-1985. So imagine the impact elsewhere in the economy when delinquencies get to that point.

Also, I'd be curious where the last graph on page 14 came from and what the definition of asset includes there (home, car, credit card, business loan??). Now, that is truly scary. Last reported month was November. Since then there has reports issued by AmEx and car loan companies about alarmingly raising rates of non-house loan defaults.

I was pretty bullish on the stock market, having divested myself almost entirely at the end of the year. I started buying again on the previous dips, but I might have to exercise a little bit more patience, or buy with the expectation that decline will be worse. - Sat Jan 19 2008, 11:21

Jordan, notice that I did not express my feelings towards the web page: I did not say I liked it or not. I said, it not convincing. Whether it is the writing style, or the facts, or the sources, or the conclusions reached - I am not sure. But overall, it was not convinving.

As for Watching's link - most of the stuff in that report is public information and I already knew. So there is nothing to like or not like about it. I would like to study the rest of it to see what new information is there and whether it is credible or not. - Fri Jan 18 2008, 18:25

Jordan, the link you provide is not very convincing. - Fri Jan 18 2008, 16:24

if you don't know where to start, etc, perhaps wise to go with a broker. you will pay 1-2 months worth of rent upfront, as a commish.

on the other hand, if you can not afford to or don't want to pay a commission, just try craiglist. go to new york craigslist, narrow your search down to manhattan, then upper west side. then further narrow to apts by owner (you can also try "broker no-fee", but in that case the fee is built-into the rent).

as of sunday, 10:15 pm EST, on craigslist there are at least 100-120 postings for rent by owners in UWS that are less than 24 hours old. - Sun Aug 17 2008, 19:16

>> I am having trouble finding financing, as an investor, with less than 30% down! And strong FICO scores...

What does that tell you about the lenders expectation of what your equity will be worth in the next 1, 3, 5 years?

>> Banks are being extremely difficult now due to the sub-prime crisis

Difficult. Haha. Interesting choice of words. The opposite of difficult would be easy. So you are saying that banks should be easy with their money?

Dude, that's my money in the bank. I want the bank to be as difficult as possible.

How about if the bank were easy with YOUR money and not mine?

If I were the bank, I would want 50% on any investment property in any of the junk real estate areas (CA, FL, NV, AZ). Pay up or shut up. - Sun Aug 17 2008, 19:09

2008 Q1 S&P Case Shiller Natl. Home Price Index Value is 159.1.

I am thinking this one will bottom out around 120. - Wed May 28 2008, 20:09

[[[If the shiller index had increased by a strict 5% compounding rate since 1999 it would be at 143 today. and at 150 at the end of this year. I will predict that is when the index will read its lowest. ]]]

Wow, you are one of the few RE professionals who makes prediction according to that reasoning. I am with you on that, i.e. that the long term prices will be consistent with about 4.5-5% compounded rate.

As to when will the lowest point reach, and how low it would be, I am less sure. But 150 at Q4 of 2008 would be a good point of entry for many buyers, IMO. - Tue Feb 26 2008, 17:47

Good call on the prediction, Jim.

The Natl' index value released today is a tad below 171. - Tue Feb 26 2008, 15:20

Here is a great overview of different housing indices, what they measure, how they differ, and what conclusions can be reached by following each index. That blog article points to at least two other articles which also discuss the same topic. - Wed Feb 20 2008, 09:21

Jim and Sylvia,

here is a "prediction market" view of the Case Shiller index. This is the Metro Composite (CSXR) reported monthly, not the "National Composite" for which you asked in your original post.

The "prediction" prices are calculated from traded options on CME, and put on the same graph with historical values and returns.

http://www.papereconomy.com/CSI.aspx?id=CSXR&exp=2/25/2008|5…

And here is the source:

http://housingrdc.cme.com/

Contracts are available quarterly (Feb, May, Aug, Nov), for the Metro Composite, Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Fran, WDC.

The interpretation of the contract is roughly the following. There is a future equilibrium value set by demand and supply. If you, as an individual trader, believe that the market-determined future value is higher than your own, private estimate, you sell the future (go short the future). Otherwise, you buy the future (go long the future). If you are correct, you will make money, because contract expires at the value reported by S&P on the day the value is made available. - Sat Feb 9 2008, 17:00

Great question Jim.

The index series has quite a bit of auto-correlation in it (that means that the recent history, i.e. most recently observed 5 -6 values have some explanatory power for the next one to come).

Just using that, the prediction is 177. However, the maximum error around the prediction is showing 2.88, so it could deviate that much.

There is a second method to predicting the number, and that's by using the 20 metro series. Because the Oct and Nov 2007 numbers are out for 20 metro-area series, you have 2/3rd of the data that's going to determine the Natl index Q4. While I don't know how the 20 metro numbers relate to the quarterly national one (or how the 20 would be used to generate the natl), a basic averaging shows some explanatory power.

Assuming a Nov to Dec drop that is similar, or slightly worse than the Oct-Nov drop, the prediction for the Q4 2007 natl number comes to 174-175.

I am going to predict a range of 174-175 for Q4, 2007. - Tue Feb 5 2008, 01:34

It's about 2000 kilometers (1200 miles). Driving will take about 20 hours. And flying will take about 2.0 -2.5 hours. - Sun Apr 20 2008, 11:50