Drop Foreseen in Median Price of U.S. Homes

[midnight armadillo]

http://www.nytimes.com/2007/08/26/business/26housing.html?hp=&pagewanted=print

Drop Foreseen in Median Price of U.S. Homes
By DAVID LEONHARDT and VIKAS BAJAJ

The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950.

Economists say the decline, which could be foreshadowed in a widely followed government price index to be released this week, will probably be modest — from 1 percent to 2 percent — but could continue in 2008 and 2009. Rather than being limited to the once-booming Northeast and California, price declines are also occurring in cities like Chicago, Minneapolis and Houston, where the increases of the last decade were modest by comparison.

The reversal is particularly striking because many government officials and housing-industry executives had said that a nationwide decline would never happen, even though prices had fallen in some coastal areas as recently as the early 1990s.

While the housing slump has already rattled financial markets, it has so far had only a modest effect on consumer spending and economic growth. But forecasters now believe that its impact will lead to a slowdown over the next year or two.

“For most people, this is not a disaster,” said Nigel Gault, an economist with Global Insight, a research firm in Waltham, Mass. “But it’s enough to cause them to pull back.”

In recent years, many families used their homes as a kind of piggy bank, borrowing against their equity and increasing their spending more rapidly than their income was rising. A recent research paper co-written by the vice chairman of the Federal Reserve said that the rise in home prices was the primary reason that consumer borrowing has soared since 2001.

more at link

[Gormy Cuss]

1. Dear NY Times writers: Ya think? n/t

[skids]

2. I'm just envisioning...

...streets of empty McMansions with homeless camps on the corners; a few cop cars running up and down the street to keep the squatters out.

I mean unless house values go down a whole damn lot, I just don't see how anyone will be able to afford to even rent when this all gets done tumbling down.

[melody]

3. Yup, buy small, pay off early

Like we did ... thank heavens.

[midnight armadillo]

4. I'm still a renter

I expect to be able to get a decent house in 2 years or so for not too much money. If I'm still employed at that point, that is...a major recession would not be good.

[melody]

5. If you're not employed, you actually can find extremely inexpensive housing in various places

A house I'd have to pay $400,000 for in LA goes for $150,000 in Washington and less than $30,000
in many other areas.