That astonishing piece of information comes from the researchers at the think tank Capital Economics. It follows Tuesday's news from Case-Shiller that house prices fell again in March, as the double dip gets worse.
Writes Capital Economics' senior economist Paul Dales, "On the Case-Shiller measure, prices are now 33% below the 2006 peak and are back at a level last seen in the third quarter of 2002. This means that prices have now fallen by more than the 31% decline endured during the Great Depression." This is on a National basis...here in South Florida our price declines are even steeper....over 50% from the top reached in late 2005. We are now back to prices not seen since 1999-2000. (italics mine).
Capital Economics says the latest double-dip in housing should come as no surprise. It's very much following a pattern seen in the early 30s, when a brief recovery also petered out. The same has also happened in other big housing busts around the world, the think-tank says. It believes prices are going to fall even further before we hit rock bottom, maybe sometime next year. Last year, the 'experts were saying 2nd or 3rd quarter of 2011 would be the bottom...next year, they'll move their 'predictions' again. These 'experts' should ask someone actually IN the real estate business their opinion. I have been calling a 'sawtooth bottom' possibly by 2015; and that's only if all other housing factors (interest rates, loan qualification standards, mortgage interest deduction, etc) stay the same!
Is there a silver lining? There is if you have a long enough time-line.
If you can get the financing, housing is now cheap. At many price points, renting is more expensive than owning. Capital Economics calculated that housing is now the cheapest it's been in thirty-five years.
With mortgages rates still at all time lows, and inflation creeping in, housing here can be a good deal. But you'll have to be patient to see the biggest rewards. Capital Economics says, back in the Depression, it took 19 years for house prices to recover to their previous peaks....and it will likely take longer this time around.
Now, I'm no Harvard trained economist, but my understanding is that during inflationary periods, having fixed rate debt is a benefit...you're paying back your debt with cheaper dollars. And this is the theory behind what Fed is going to do to pay off OUR debt!
So, what does this mean for you?
If you're a seller considering selling soon or within the next few years...sell now...be the NEXT home to sell.
If you're a buyer...make sure that you have a very good reason for buying (and there are still many good reasons) and a long enough time horizon to ride out the value fluctuations ahead.
If you'd like to further discuss the implications of the current market economics for your specific situation, just call me on my direct line, 561-602-1258.
Thanks for reading,
Steve Jackson
