Property Owners Lost $3.3 Trillion in 2009
The Housing market took quite the hit in 2008:
“The U.S. housing market lost $3.3 trillion in value last year and almost one in six owners with mortgages owed more than their homes were worth as the economy went into recession, Zillow.com said.
The median estimated home price declined 11.6 percent in 2008 to $192,119 and homeowners lost $1.4 trillion in value in the fourth quarter alone, the Seattle-based real estate data service said in a report today.
About $6.1 trillion of value has been lost since the housing market peaked in the second quarter of 2006 and last year’s decline was almost triple the $1.3 trillion lost in 2007, Zillow said.”
Funny, I kept hearing that prices never go down in real Estate.
I’ll dig up a chart on this later . . .
>
See also
New York City Foreclosures
http://www.ritholtz.com/blog/2009/02/special-report-new-york-city-foreclosures/
Source:
U.S. Property Owners Lost $3.3 Trillion in Home Value Last Year
Dan Levy
Bloomberg, Feb. 3 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=aE29HSrxA4rI&
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February 3rd, 2009 at 7:30 am
My wife and I were looking at the latest numbers today…the loss in home value is gathering steam, surely…
I couldn’t help but notice that the figures for today and yesterday for imports and exports is very troubling…worldwide…
Note that Korea had a 32 per cent decline in both imports and exports..this Swiss came in today in the same category down 7 per cent in imports and down 13 per cent in exports…
This tells me that the decline in spending by the various world populations is gathering steam…I think this will be hard to stop…you are buying less of someone else’s stuff and they are buying less of yours..
http://www.rttnews.com/CorpInfo/EconomicCalendar.aspx
pages 1 and 2.
February 3rd, 2009 at 7:41 am
The last two thoughts from Doug Noland’s weekly comments this week are worth echoing as the right and left pretend they actually know how to fix the problem using our scarce resources :
“The entire notion of the government and Fed manipulating market prices should have been discredited by now. Granted, in past crisis the Greenspan Fed was too successful at manipulating the cost of finance and dictating the behavior (expanding leveraging and risk-taking) of the speculating community. It may have worked miraculously more than a few times, but that entire “Monetary Process” has now collapsed. To be sure, we will not come out of today’s mess by inflating financial claims. Various forms of financial Keynesianism will do no more than create phantom recovery and the need for only greater inflation not far down the road.
Extraordinary government interventions were necessary to stabilizing the financial system. But attempts to stimulate quick economic recovery and the rejuvenation of assets prices come with great risks. There is no resurrecting the old boom. The focus should instead be on supporting the financial and economic systems toward a path of much less dependency on Credit growth and the asset markets.”
February 3rd, 2009 at 7:53 am
This is not true. It makes for great headlines but it simply is not true. Right now the S&P 500 is at
800 and change. IF EVERYBODY who owns it sells at the same time how many will actually receive
800 and change? Only a very very small fraction. The rest will get next to nothing.
The whole notion of housing ‘losing’ trillions is ridiciulous, a complete fiction. We need a better, far more objective and accurate way now and going forward to define the ‘market’ price for anything for the sake of accuracy. How can anyone make an investment decision on a non-existent number?
February 3rd, 2009 at 7:59 am
Buy then, and be priced in forever!
February 3rd, 2009 at 8:00 am
Forgot to mention – it’s contained!
February 3rd, 2009 at 8:03 am
Well, if people start facing reality, the economy is going to do much worse.
Let’s say you’re 40 and want to retire at 65 with your house paid off and a retirement fundof at least 300K (in 2008 dollars), you’ll need to save at least 10K per year. As more and more people do the math and realize that their house and market returns won’t be doing the heavy lifting anymore, they’ll be saving even more. If they can!
And I don’t want to think about the impact of this on the economy.
February 3rd, 2009 at 8:08 am
Barry,
This is the new line.
“If you hold it long enough, you never lose money in real estate”
Sound familiar?
February 3rd, 2009 at 8:12 am
danm,
I hope people aren’t using those numbers.
Most people don’t have a pension now and how confident should a 40 year old be in social security? Then if you factor inflation into it (we will have inflation again in the next 25 years) your 300k isn’t going to do anything for you. For most people that haven’t saved until age 40, retirement at age 65, a comfortable one, is a pipe dream.
Rule of thumb is you can take 4% from your accounts without running a great deal of risk of running out of money. On top of that you said retirement fund so let’s say that’s a 401k right?
You are talking about a 65 year old with a home that is paid for with a gross income of $12,000.
Some retirement.
February 3rd, 2009 at 8:37 am
Why is everyone a bunch of whiners? Things aren’t that bad.
February 3rd, 2009 at 8:38 am
joro is apparently channeling Phil Gramm.
February 3rd, 2009 at 8:48 am
$3.3 trillion gone, in just one year, in just one market. Anyone who thinks hyperinflation is in the cards due to $1 or $2 trillion of government deficit spending is not seeing “The Big Picture”.
February 3rd, 2009 at 8:48 am
well it’s not happening everywhere . . . . a house just down the street from me is in escrow and based on what the buyer paid, my house is still worth more than what I paid for it in 2006! it’s all about location and not all houses are the same, even when the sq ft, bedrooms and baths, size of lot are all the same, one house a few blocks away can have a totally different value . . . . the statistics never consider condition or location.
February 3rd, 2009 at 8:53 am
“Funny, I kept hearing that prices never go down in real Estate.”
VH-1 has a show running now called “Tool Academy”. I think David Learah missed his calling as he’s not on the show.
February 3rd, 2009 at 8:55 am
ben22:
I think the retirmenet of the last 20-30 years will end up being a blip in humanity. First of all, the system was built in the 60s when life expectancy was much lower. The system will crack under its won weight.
I think most people won’t be able to retire but they domn’t realize it yet… they look at their parents and think: “Well they weren’t top pros and they got a good retirement.”
I think the ones who will be the most psychologically affected are the Boomers (45+) making over 60K per year. They should be saving 20K and their mortgage should not be over 100K. They probably should not even own a car! They waited longer to have their kids, so instead of socking away money in their 50s, they’ll be paying for their kids’ education.
The reality now is that 40% of people are forced into reitrement: layoff, sickness. How many do you know around you actually take ALL these variables into account?
I’ve tried to approach the subject with friends and family and I can’t even get past 1 variable without being ridiculed. I’ve also been told that I should learn the art of arguing so that people actually want to listen. Apparently the trick is to keep your number of arguments low (less than 3). So basically, you can never get to the big picture because you can’t ge past the first argument.
The second trick is to give people hope (lol)!
And the only ones who listen are already converted.
Amen.
February 3rd, 2009 at 9:18 am
@danm My spouse said the exact same thing to me: learn to persuade, not preach.
The other night I did just that at a victory party for O. (Why, I have no idea since I didn’t vote for him).
Since here were mostly politically interested people there, we got into many discussions and by the end of the evening several asked if I would run for office, they’d like to vote for me.
I said I didn’t think so. Why, they asked. I said, well how many incumbents did you vote for this time?
They all voted along the democratic party line, returning the same old career politicians to office. I said how can you do that when entrenched democrats were as much at fault as republicans in creating this debacle. If I can’t convince you of that fact how am I ever going to convince complete strangers that THEY are the problem, not the politicians, that they have the power to get rid of the corruption at the top. Complete silence.
February 3rd, 2009 at 9:26 am
danm: A prophet is without honor in his own country. They won’t listen til they lose their shirts. And then it’s really too late.
I’m not too happy that the Feds are gonna give away tons of tax dollars in a vain attempt to support housing prices because, as we have heard ad nauseum: “To fix the economy, you first have to fix housing.” As if asset prices finding their own level is not a fix.
February 3rd, 2009 at 9:45 am
Mike in Nola
True true. This whole preoccupation with “fixing credit” and “fixing housing” is such a fool’s errand. The issue is individuals unable to service their debt. That’s it. There’s no way to fix such a thing. The best thing they can do is focus on the overall economic conditions. When the overall economic condition improves, individuals will once again buy shit they don’t need and banks will feel like lending again.
February 3rd, 2009 at 9:48 am
a trillion here, a trillion there…pretty soon we’ll be talking about real money
February 3rd, 2009 at 9:48 am
danm,
You are correct. The concept of planning for one’s retirement is still nonsense to most people here but many of them won’t figure that out until it is too late.
I remember talking to a family member about this over the holiday and I was responded to with “well, all I know is Penn State is going to the Rose Bowl so I’m happy”
Sad state.
Why should you need to persuade, or argue for that matter, with someone about savings for a long term goal. I personally wouldn’t take the time to try to reason with someone that wants to act like a child.
@Flipspiceland,
Joe Biden is the VP. enough said.
February 3rd, 2009 at 10:15 am
As if asset prices finding their own level is not a fix.
—-
It’s pretty obvious why they are targeting asset values. Most of the wealth in North America is in the hands of 55+ and those are the leaders!
Most of this wealth is in real estate.
Real estate tanking is good for the young and terrible for the elderly. They need this asset to stay overvalued so they can fund their reitrement with it!
Everybody seems to think that future generations are going to be loaded with debt but I can’t help but think that no, Boomersd will end up paying for most of it. Why?
Most of the wealth is in housing, so to eat, retirees will have to sell their overpriced houses to transfer this wealth into their portfolios. If the younf have no money, how will they be able to afford it? Easy: prices will come down.
Historically, it’s always been the ones who can’t work who suffer during times of crises. 55+ maybe?
And to keep those assets overpriced they can try and print their way into this, all it will do is devalue their savings. No matter how much you print, you still have the same working population with the same capacity. And the best positioned in times of inflation are the young.
I’m not saying that the quality of life for the young will get better than it is today but that Boomers will end up paying the largest % of the cost of this correction.
February 3rd, 2009 at 1:34 pm
@Mike in Nola Says: February 3rd, 2009 at 9:26 am
A prophet is without honor in his own country. They won’t listen til they lose their shirts. And then it’s really too late.
A national act of passive aggression. They are sticking it to the prophets out of spite
February 3rd, 2009 at 1:37 pm
I’m surprised no one caught it Barry,
The title is wrong. It should read:
Property Owners Lost $3.3 Trillion in 2008….not 9
February 3rd, 2009 at 1:52 pm
@How the Common Man Sees It – Maybe BR was thinking how it would read next year .
I just noticed that Daschle withdrew – http://edition.cnn.com/2009/POLITICS/02/03/daschle/
Glad too see it . I hope that President OBama is looking for a replacement for Geithner .