Wednesday, June 08, 2011
An interesting post at Calculated Risk discusses the impact of "negative equity" on the housing market. The problem is much greater in some places than in others. The implication is that the beneficiaries of the housing bubble were not evenly distributed -- in certain states, pre-crash sellers presumably made huge profits. Those same states were then disproportionately responsible for the costs of supporting the financial system during the financial crisis. While one might expect that these extreme regional differences would be fodder for a national "conversation" about the extent to which state laws, regulation, and banking practices exacerbated the bubble, that is unlikely to happen because neither political party would benefit from it.
Headline and story today:
Shiller predicts further home price declines up to 25%
While other people expect home prices to bounce along the bottom for a while without going up much, Robert Shiller is inclined to be more pessimistic.
There is room for home prices to decline another 10% to 25% in real terms over the next five years, according to Shiller.
Speaking at a Standard & Poor’s Housing Summit in New York on Thursday, the Yale University professor and co-founder of the S&P Case-Shiller Home Price Indices, noted that the current downturn is the biggest ever in U.S. history in terms of the peak to trough housing price collapse.
After adjusting for inflation, home prices were not down so much even during the Great Depression, according to Shiller.
If you believe this and apply to the graph in the lede link, there will be blood.
For my day job, I've spent a lot of time looking into what happened with mortgage origination and mortgage securitization in recent years. It's unbelievable what's already hiding in plain sight. It'll cost us a decade, maybe a generation.
"Forget it Jake, it's Chinatown"