Deep Depreciation

Our American Homes. They All Fall Down -- Much Further.
Apply Linear Logic. Home Prices Abandon Value. Karma Runs Away.

By Michael David White. 336 words. Two minutes to read.

A simple explanation of the future of home values based upon broad sound fact is never a bad place to start. So let's revisit an educated guess based on the best data – the Case Shiller index. What is really happening out there? If you review the trend line, and the math, the number is surprisingly bad. It says property values will fall more than 40% from TODAY'S LEVEL (please see chart “THE INDEX TODAY”).

So what do you do about numbers which appear impossibly bad? Maybe running for the hills makes sense? It’s also obvious that if you can sell your home, and you don’t really want to keep it, then you should sell it. And if you are thinking of buying a home, it’s better to make renting your first priority. Wait to see where values stabilize. If prices are already at their bottom today, you will lose very little appreciation which today’s buyers achieve (should they be so lucky).

There may be some who would like to shoot the messenger, and call this reading pessimistic. Remember such an argument suffers because math is neither pessimistic nor optimistic. Math is right or wrong. And data is either right or wrong. Check the math. If there are errors I want to correct them. If you have better pricing data, or more positive reasonable assumptions then the Case Shiller chart, please send them along.  My opinion is that any guess on future values should begin with this chart.

The peak-to-bottom number is also worth reviewing. The total loss in property values, when we hit bottom, is estimated to be greater than 60% (please see chart “INDEX AT PEAK”). If chart one and two are reasonably accurate, the implication is that mortgage investment holders will continue to experience enormous losses.

The recent positive movement in the stock market is divorced from and blind to the future which these charts foretell. One or the other is wrong.

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