All Forum Posts by: Robert Simpson

Well said Jon.

I would just add one note.

Demand can losely be defined as the number of buyers within a given market that are willing and able to purchase goods or suvices, in this case houses.

At least around here, fear has substancially reduced the number of buyers that are willing to buy a home.

Those still willing to buy now find it difficult to afford since banks now require silly things like down payments and proof of ability to repay.

I think prices still have a ways to come down in So. Cal. before Demand for home sees a strong recovery.

Thanks for the comments guys!

Rob

Good point, condo's in Southern Cal. were the first thing to crash and they took the hardest hit.

For those of you who have been on the CME. Please be advised the the index is updated on the last Tuesday of every month. Today they released the data for the month of Dec. 2007 and, on a national level for th 4th quarter of 2007.

National index 3rd quater 2007 = 180.31
National index 4th quarter 2007= 170.64
Point difference = 9.67
Percentage drop over 4th qt = 9.67/180.31 = 0.0536 or 5.36%

Another way of saying that is: On a national level, home values for the forth quater of 2007 fell at an anualize rate of 21.45%.

Yes, REI. The purpose of the Case Shiler index is to look at base pairs of maintaned, but unmodified SFD's. The purpose is to look how market trends affect the value of an "unchanged" home over time.

I must admitted to some trepidation over deffending the work of the premiere macroeconomist of or time when dealing with the housing issue.

Please be advised that he was the only one to "call the bubble" when he explained "a history of home values" in 2005. Please look into his book called "irrational exuberance".

Please also be advised that when one includes things like new homes in an index, things like seller insentives can vastly effect the real value of the home.

For "Makessence",

Yes, history will repeat itself. But the question that I am looking at is: How quickly home values will reach levels more in line with historic Values. For instance, in the Japanese Bubble in the early 1980's, prices droped sharply for a year or two until the government steped in to stabalize them. This resulted in flat home values for a decade.

I can't attached a study of how Japanese prices reacted from 1980 to 2005 or so because it is 1.45MB. This is good resent history with this title:

[b]FEDERAL RESERVE BANK OF SAN FRANCISCO
WORKING PAPER SERIES
Asset Price Declines and Real Estate Market Illiquidity: Evidence from Japanese Land Values[/b]
I can forward this in depth study of how the Japanese maket played out to anyone who requests it.

Yes, history will repeat itself, but the devel is in the details. Home prices will fall from here, but, how far? for how long? and when they will start back up? have to many variables to predict with certainty.

I'm not a guru, but I do my home work.

Robert Shiller for God!

Opinions are like ********. We all have won. I hope I'm not seen as the latter. :D

Oil is next and some other commodities. If Merill Linch is correct about a 25% drop in housing prices nation wide, a recession is a given and a depression becomes more likely. (25% is far greater than I had epxected and I think thats a bit high for nation wide, but it is possible within the Shiller model.)

If the housing reforendom next week is as negative as expected, look to start shorting oil and other commodities required for production of goods.

Less damand for goods leads to less production leads to cheaper commodities. $80 oil will again become possible again if global recession becomes likely.

Here is a graph of the national inex for the Case Shiller home price index.

This is graphed against inflation. A small bubble is clear in the late 80's and early 90's. That was very small relative to the present bubble.

This is the best data available. Case shiller is accepted as the most accurate index out there.

Here is some data from the Case Shiller home price index. I have plotted a graph for a few of the cities including Portland and Seattle.

In looking at the graph, prices will fall until they get closer to the infaltion trend line. This is the histoic level for prices since the end of WWII. Yes, they have veried up and down since that time relative to the trend line, but have been tied closely to it.

Hope you like it!

Hey, now that I have this attachment thing going, here is a copy of the data you can get. I have done a little graph work for a few of the cities.

The data for the case shiller home price index is available from the Chicago mercentile exchange:

www.cme.com/trading/prd/re/housing.html

Case shiller date is available through the chicago mercentile exchange at:

[url]http://www.cme.com/trading/prd/re/housing.html

Data is available for 20 major U.S. cities.[/url]