Yesterday, we discussed why the Case Shiller Index, which fell 18%, was not yet cause for celebration.

Regular TBP reader Steve Barry created this chart last year which projected forward the ongoing losses for Case Shiller; We first ran this back in December, and it  ran all over the internet (mostly without attribution).

Well, its time to update this. Here is Steve’s most recent version:

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case-shiller-updated
Chart courtesy of the NYT, as modified by Steve Barry

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Category: Credit, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

124 Responses to “Updated: Case-Shiller 100-Year Chart”

  1. call me ahab says:

    Steve Barry- great chart- it appears that house do have to be affordable after all-

    question- is there any adjustments for amenities?- whereas let’s say a house in the 50′s was 3 BR 1 bath 1200 SF- now you are looking at 4 BR 3 baths and 2500+ SF- would it still revert back to the mean even though people are buying more square footage and amenities than they did before?

    I wonder if that gets figured in the mix

  2. cvienne says:

    What strikes me most about the chart is the fact that a casual disinterested glance gives you the following impression…

    1. Owning a home is a good idea about 50% of the time (at the beginning phases of a secular bull phase – we were referring to “equities” here on TBP just the other day and making the same conclusion – I’m sure bonds would pain the same picture)

    2. With the property taxes, insurance, mortgage interest, & casual maintenance costs, it’s a wonder that anyone would ever think that there was VALUE in buying a home if we were NOT in a secular bull…

    3. Since so much of the job creation in this country is predicated on homebuilding (from construction workers, to suppliers, to service industries, on up to lenders, bankers, etc.), I wonder how long it will be b4 jobs ever really come back in this country. Furthermore, even if it does recover, I imagine it will be on a downscaled basis (meaning less things to buy to decorate & furnish a house)…

    I’m sure I have other things to say as well…

  3. Jim C says:

    I look forward to the inflation that will be the resolution of the rest of the decline.

  4. Wes Schott says:

    …thanks again Sir Alan of Bubbles

  5. Bruce N Tennessee says:

    The only real difference today with the past is the massive stimulus and part of this is for home prices. I tend to think Steve is closer to the money than Obama’s team, but that is why they have horse races…

    A couple of OT’s since the salt mine is again full today….

    http://www.telegraph.co.uk/news/uknews/5651825/Benefit-payouts-will-exceed-income-tax-revenue.html

    Britain has put themselves in the wonderful position of having more in benefits to the population than taxes they take in….this is California on steroids…

    “In 2008/09, gross income tax receipts were £152.5 billion. In the same year, social security benefits cost the Exchequer £150.1 billion.

    In 2009/10, the Treasury is expecting to take in £140.5 billion in gross income tax receipts. Social security benefits are projected to be £164.7 billion. ”

    …and since California didn’t balance their budget last night, the costs have gone up greatly since midnight….

    http://www.latimes.com/news/local/la-me-budget1-2009jul01,0,7817109.story

    “A state appeals court panel clouded the budget picture further Tuesday with a ruling that could cost the state nearly $3.5 billion. The judges in the 3rd District Court of Appeal said that since 2007, gasoline-tax funds intended for mass transportation had been improperly diverted by the governor and lawmakers to cover other expenses. The state will appeal to the California Supreme Court, said H.D. Palmer, a spokesman for the Department of Finance.

    Meanwhile, Chiang, who acts as the state’s banker, has scheduled a meeting for Thursday morning of a state board that will determine what interest rate the state will pay on the $3 billion a month in IOUs it will begin issuing to contractors and some of California’s neediest citizens, including the elderly, the disabled and the poor. California last issued IOUs in 1992.

    Doing so again could have serious repercussions. According to Treasurer Bill Lockyer, the decline in the state’s credit rating that is likely to follow IOUs — as it did 17 years ago — would cost the state $3.4 billion in higher interest rates over 30 years, adjusted for inflation.

    Wall Street rating agencies have already warned that they are weighing downgrades to the state’s credit, which would probably take years to recover, Lockyer’s aides said.”

    Three Dog Night had a song a few years back now…and one of the lines was “This is the craziest party that could ever be.” I didn’t know they were partying in Sacramento..

  6. call me ahab says:

    here some NOT so good news-

    “Private Sector Jobs Shrink More than Expected, Down 473,000″

    market expected 394,000

  7. [...] Chart of 100 year home value Jump to Comments Big Picture [...]

  8. cvienne says:

    @Bruce

    “Mama told me not to come” :-)

  9. dead hobo says:

    call me ahab Says:
    July 1st, 2009 at 7:15 am

    question- is there any adjustments for amenities?-

    reply:
    ————
    On paper, the methodology looks solid. It purports to track the same house over time and I think it excludes outliers due to foreclosures. If I am incorrect or incomplete, someone may feel free to correct me.

    Having said that, I have always had a nagging suspicion that the index is flawed and overstates rises and falls, but I’m not smart enough to pin down the exact problems. (Other than it only concentrates on houses in Crazytown and not the Heartland).

    I also suspect that mix is one of the flaws. In good times, less desirable homes would drag it down. In bust times, the most expensive homes would be the ones more likely to be sold and their prices would be declining the fastest … especially in Crazytown.

    I live in the Heartland. My home did not double in value or even approach a significant fraction of that. Nor has it fallen by a massive amount, although it finally has started decreasing. In my case, the value drop has more to do with the recession than the housing bubble burst. The value will go up sharply when jobs and employment allow turnover to be restored.

  10. Steve Barry says:

    Shiller’s chart ended in early 2006…near the height, and I never saw him update it from the original one in his book and in the NYT. I took over, using his own 20 city composite which seemed to be what he based it on. Sure enough, using the 20 city the trajectory remains perfect. Housing has such a downward momentum, it would be quite unnatural for that black line to stabilize and go back up, still way above previous all-time highs. I was very generous not to make that red line projection overshoot to the downside. It shows a bottom possible in 2015. Interesting note: if inflation runs rampant it might soften the low…however if deflation takes hold, it will worsen it.

    Most ironic: Shiller himself sees green shoots in this chart:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aIbMtWW6cVO4

    “At this point, people are thinking the fall is over,” Shiller, co-founder of the home price index that bears his name, said in a Bloomberg Radio interview today. “The market is predicting the declines are over.”

    Home prices in 20 major U.S. metropolitan areas fell in April at a slower pace than forecast, the S&P/Case-Shiller home- price index showed today. Today’s Case-Shiller numbers are the latest sign that that the worst of the housing slump may be passing. Sales of existing homes posted gains in April and May, while housing starts jumped in May from a record low.

    “My guess would be that home prices are going to level off — they’re not going to keep falling,” Shiller said in a separate interview with Bloomberg Television. Still, it’s “hard to predict” a speculative market, and “I am not optimistic that we’re going to see any sharp rebound.”

  11. dead hobo says:

    On a different topic, bad ADP numbers imply a big market pump today. The biggest gains now happen on days when people would otherwise run away.

    On a still different topic, I’ve noticed retail sale prices are stabilizing, but inventories look normal to thin and there are few customers. The June and July numbers should be interesting when released.

  12. cvienne says:

    @dead hobo

    “The value will go up sharply when jobs and employment allow turnover to be restored.”

    The problem is DH, that the Heartland is where we manufacture anything of supposed value in this country (or most of it anyway)…

    Nowadays, the USA does less and less of that and only manufactures worthless debt instruments…

  13. grandrews says:

    Question: how valid is an inflation adjustment when the item you are adjusting (home prices) underlies, say, 30% of CPI. Indirectly, of course, through the magical “owners’ equivalent rent”, but nonetheless tied in.

    Also, it would be interesting to learn what sort of hedonic adjustment is used for quality/amenities that call me ahab comented about.

    Last point: for individuals, local data (if available) probably much more interesting and relevant that national averages.

  14. jc says:

    If they are correct then we are still in the early innings of the Greater Depression. The Wealth effect of this plus all the upcoming foreclosures and bankruptcies, tearing at the fabric of society

  15. Bruce N Tennessee says:

    The ADP report covers only private jobs…the Challenger Job Cut numbers came out today, were better than usual, but I thought the discussion of the coming months was interesting:

    http://www.nasdaq.com/asp/EconodayFrame.asp

    Highlights

    “Jobless claims are definitely turning lower as is Challenger’s layoff count, which fell sharply in June to 74,393 vs. 111,182 in May. June’s total is the lowest since the first months of the recession. The report said the results suggest the worst of the economic crisis has passed and that second-half layoff announcements are likely to be below those of the first half. But it warned that government layoffs are likely to be heavy due to cutbacks at the state and local level. The government & non-profit sector along with autos showed the heaviest layoff announcements in the month. ADP’s count will be posted at 8:15 ET, and if it’s as upbeat as the Challenger report, accounts will be putting aside safety and seeking return for their investments. “

  16. EarlGrey says:

    Does Shiller’s chart account for the fact that houses have been getting much larger and more luxurious than in past years? It seems to me we really have two housing markets, one for big, luxury homes and one for what I would call basic homes. It would make sense that the basic housing market would bottom long before the luxury homes but you won’t see this if you lump them all together.

  17. dead hobo says:

    cvienne Says:
    July 1st, 2009 at 8:36 am

    The problem is DH, that the Heartland is where we manufacture anything of supposed value in this country (or most of it anyway)…

    reply:
    ———-
    Only a few of us are bums and the Midwest isn’t one big trailer park that is getting larger. Some people even have jobs above minimum wage and don’t ask about super sizing ever. People here still make things.

  18. jc says:

    It looks like this doesn’t bottom til prices are back to mid 1990s level, will we be in a situation where almost everybody without a paid off home will be underwater?

  19. Steve Barry says:

    @Earl:

    Well, the chart itself is based on nationwide averages, so it is also an average of home sizes. The fact that people went nuts, building much larger homes than in the past, homes that need to be heated, cooled, landscaped, maintained at greater costs, just makes it more likely the average is unaffordable and has to fall. In contrast, smaller homes could have more demand and rebound sooner…your point makes sense.

  20. call me ahab says:

    dh-

    you have a good point- futures have held up well if not improved since the ADP #’s were announced- some other data coming out at 10:00- so we’ll see if it holds up

  21. cvienne says:

    @Steve Barry

    “Housing has such a downward momentum, it would be quite unnatural for that black line to stabilize and go back up, still way above previous all-time highs. I was very generous not to make that red line projection overshoot to the downside. It shows a bottom possible in 2015. Interesting note: if inflation runs rampant it might soften the low…however if deflation takes hold, it will worsen it.”

    - I agree that it would be more unnatural for the line to stabilize and go back up…Why? Creditworthiness vs. the past 30 years will be onerous…Unemployment, higher by mean standards…You still have option ARMS to deal with, and taxes are going to be much higher…

    -2nd point, I believe DEFLATION will take hold (or, at minumum, more symptomatically reflect the environment), therefore, no softening of low…

  22. Bruce N Tennessee says:

    I do think it will be hard to remove some that have been on government aid all their lives:

    http://www.cnbc.com/id/31652752

    Britain’s Queen May Run Out of Money by 2012

    “The Queen is naturally very thrifty,” the official told the newspaper.

    But accounts show travel expenses for the Royal family rose to £6.5 million in the last financial year, while salaries amounted to £9.9 million, administration £1.5 million, housekeeping and furnishings £700,000, £1.1 million was spent on catering and hospitality and £600,000 on garden parties.

    …….I am thinking with houses soon to be a bargain, she could probably live in a nice waterfront condo somewhere on the west coast….probably wouldn’t even need a maid…

  23. cvienne says:

    @ahab @dh

    Personally, I’m not reading much into any TEA LEAVES with regards to how the market chews & spits out the ADP number today…Why?

    We just flipped the calendar to a new quarter (and we’re coming up on 3 days of BBQ’s)…This is the last chance for the MM’s to get out there and tell all their clients that the S&P is “positive” for the first half, and say w’ve turned a corner, and “see – the market is looking PAST the jobs data”…BS like that…

    Technically, the S&P sold off SHARPLY off a .618 fibo retrace (from the 889 recent low – back to the 956 high)…That number was 930, and is a number I’ve been talking about for more than a week now if anybody is listening…I expect that for a few days we could challenge that number (930) a few more times…I wouldn’t even be surprised if we break it to the upside and get some “shorts” to scramble for cover…

    I’m actually looking for a scenario that it sgoes past 930 (but then misses 956), and wips straight back from a run-up to some unidentifiable number (like 945-948), and comes settling back to 930, then promptly sells off…

    That may happen within the time period of now and next Thursday (July 9th)…JMO…

  24. cvienne says:

    @ahab (part2)

    If you notice…Crude did the same type of move…It sold off sharply after doing a .618 fibo retrace (and going just beyond in an attempt to search & destroy)…

    Now, today, it’s wheeled right back and is TESTING that number…I really think that how crude behaves in the next two days will tell you where the overall market is going…

  25. super_trooper says:

    @Steve Barry,
    why do you think the index will level off at 110? (and not ~80 as seen in the 30s?) Is this reached in 2011 according to your predictions?

  26. The Curmudgeon says:

    Great stuff SB. All I can say is that mean reversion, like most life’s hard cold realities, can be a real bitch.

    Although the data is adjusted to constant dollars, it would be an interesting exercise to examine things based on purchasing power, i.e., for example, how many bushels of corn or ounces of gold would your average 3/2 in 2006 buy relative to, say, 1970. Using the CPI as the dollar deflator misses much of that sort of thing.

  27. call me ahab says:

    cvienne-

    what about this-

    “This has been a government-induced rally,” said Jordan Irving, who helps manage more than $110 billion at Delaware Investments in Philadelphia. “We need to see some real positives coming from internal demand, as opposed to government- related demand, and it’s just not there.”

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aCmsKKqx_Xq0

    my opinion, I don’t think people are rushing to get back in the market- strictly big players making markets and setting price

  28. call me ahab says:

    it’s all a shell game

    “If Geithner’s goal was simply to inject confidence into the system so banks could raise capital, then PPIP really was “the greatest program that never occurred,” as Goldman managing director Scott Romanoff described it, according to The WSJ.”

    http://finance.yahoo.com/tech-ticker/article/272422/Fill-or-Kill-Strong-Case-We-Don't-Need-Geithner's-Toxic-Debt-Scheme

    the TBTF banks thank you uncle sam- you’re the best- it appears TBTF banks now don’t want to sell these assets- because they would have to take a below market price- weren’t these the very same assets in which there was no market and therefore had little value- I guess with all the fresh capital they would rather risk it and hope values improve- but that’s ok- worst case- uncle sam helps them out again

  29. cvienne says:

    @ahab

    I don’t discredit that notion…But of course “who can prove it?”…

    That’s why I’m not getting too wrapped up in day to day noise…

    Instead, I’m trading it rather technically…

    If one wants to make the “government induced rally” case…then for the 2nd half of ’09, if they want to, they can INDUCE a rally back into long Treasury bonds (which would help get mortgage refinancing back down under 5% 30 year fixed, plus help the Treasury with their funding effort, plus, let the banksters profit some more)…

    That’s why I think the rally will TECHNICALLY end pretty soon (somewhere between 930 – 956 on the S&P, and someTIME within the next 7 trading days)…

    I’m going to use ANY strength in commodities during the next week to move into long bonds…

  30. leftback says:

    Great chart, Steve, and many thanks. I am hoping it will reach “80″, just like the 1930s. In any case I will not start looking seriously until we approach 100. Prices are ridiculous in NYC and Fraudfield County, Con Etiquette.

    Agree completely with cvienne regarding the next manufactured rally. I am already in ahead of the herd.

  31. cvienne says:

    @lefty

    Remember the other week when you were talking about long Treasuries I said it looked like you could cop a FREE RIDE on the TLT from $91-95?…That move finished yesterday…

    Here’s hoping for a retrace back down to $92-ish so I can load up the truck!

  32. I-Man says:

    OT: Re: Market Manipulation…

    @ Ahab, Left, CV, DH, et al.

    I-Man had a vision last night… I was walking down a street of pure gold.

    Just kidding. Thats a quote from a great reggae song from long ago. Kudos to whoever can nab that one.

    But really,

    I and I have overcome the frustration with respect to market manipulation and tape painting chicanery… and wont let it bother me personally, or cloud my trading.

    Let it happen. I am going to ignore it henceforth and not let it occupy my brainspace.
    I think we should all do the same.

    Call it a Tyler Durden overdose if you will, but the manipulation, tho blatant, and diametrically opposed to all fundamental basis… is something that has always occurred. Reading some old Wyckoff last night, he dropped a quote that went something like this:

    “The true tapereader doesnt occupy himself with the moves of manipulators, and seeks to only view the tape for what it is in the here and now.” (that’s a paraphrase, dont have the book handy but its from “Studies in Tape Reading” circa 1910.)

    There is some guerilla warfare esque spirit to this mindset when you think about it. Elephants leave big footprints and move slow. Easy to track and hunt.

    Just thought I’d share.

  33. I-Man says:

    Oh… and Steve Barry:

    Great chart!

  34. call me ahab says:

    observation-

    Re planned layoffs @ 15 month low-

    doesn’t it come to a point that a business can no longer let any more people go and still be a going concern?- that if they let any more people go it would mean going out of business and not layoffs?

  35. Steve Barry says:

    @super trooper:

    I leveled it off at 110 or so as my “best case”…it is very possible it could drop further, but we are in unchartered waters.

  36. cvienne says:

    @I-man
    “Let it happen. I am going to ignore it henceforth and not let it occupy my brainspace”

    You said it yesterday too…[That you were curiously in favor of everything inching higher]…

    I keep looking at the VIX (which is now down around 25)…Puts are getting cheaper, & cheaper, & cheaper…Let the band play on!

  37. leftback says:

    “There is some guerilla warfare esque spirit to this mindset”

    The mindset of the small successful trader. Target weakness and complacency. Strike quickly, decisively and firmly, without fear or pity, then melt back into the night before the big army can retaliate.

    We are homies, dude.

  38. call me ahab says:

    I-Man Says-

    “There is some guerilla warfare esque spirit to this mindset when you think about it. Elephants leave big footprints and move slow. Easy to track and hunt.”

    good point- and I agree-

    was only trying to point out that the market prices are set by the market makers and have little to do with the general public buying into the rally- mentally or literally-

    the question is out- if the public will follow- lemming like- the market makers

  39. cvienne says:

    @lefty

    “Strike quickly, decisively and firmly, without fear or pity, then melt back into the night before the big army can retaliate”

    OK – here’s a bet…When FCX hits $56, all of a sudden some news will come out that the manufacturing demand in China will turn out to NOT be as robust as they have been talking about for the past few months…Copper prices take a hit, commodities hit…first straw to break the “nonsense” about a turnaround…

  40. cvienne says:

    @lefty

    “Strike quickly, decisively and firmly, without fear or pity, then melt back into the night before the big army can retaliate”

    OK – here’s a bet…When FCX hits $56, all of a sudden some news will come out that the manufacturing demand in China will turn out to NOT be as robust as they have been talking about for the past few months…Copper prices take a hit, commodities hit…first straw to break the “nonsense” about a turnaround…

  41. leftback says:

    Speaking of guerilla warfare, Zero Hedge and Karl Denninger are having at it with Dennis Kneale, who has been attacking “cowardly bloggers” for ridiculing his “end of recession” call.

    I will come on your show Dennis, and I will call you the dumbest a**hole of many dumb a**holes on CNBC. Furthermore I will point out that your “buy calls” have been a disaster for millions of investors. If I was as dumb as you I would have to kill myself.

  42. ben22 says:

    Steve,

    Nice chart. Looks like your original has proven to be accurate. You’ve made many great calls on here over the last two years.

  43. EricTyson says:

    I’m sorry but this chart is nonsense. Any decades long observer and investor in real estate can tell you this chart is utter nonsense no disrespect intended to its creator(s).

    http://www.erictyson.com/articles/20090327

  44. ben22 says:

    @LB,

    I think on his show last night, Kneale called the readers of ZH “dickwads”

    Have people noticed the latest spin today? It’s the “we just had one of our best quarters in years!” talking point.

  45. call me ahab says:

    b22-

    pretty sure it was dickweeds- not sure of the distinction between the two

  46. call me ahab says:

    this was posted by Simon on a previous thread regarding the Tyler Durden,Dennis Kneale throwdown-

    thehttp://zerohedge.blogspot.com/2009/06/dennis-lets-zero-hedge-have-it.html

  47. Bruce N Tennessee says:

    If you killed yourself, Lefty, er…who would get the twins?

    Just wondering…

  48. leftback says:

    Yes, it was dickweeds. Dennis will probably regret this, it’s only a matter of time before The Great CNBC Sucks reveals his not-so-latent but highly obvious homosexual tendencies (Dennis’, I mean) to the greater blogosphere.

    It is obviously silly season if this is the best thing we have to comment on. You are correct, ben, the InvestTools are lapping up the Q2 returns, it will be the talk of the July 4 barbecues. See that rally? Q3 funds flowing in.

  49. Transor Z says:

    Anybody else see David Rosenberg backing off of his call for a retest of 666 by October?

    http://www.zerohedge.com/node/11791

  50. pmorrisonfl says:

    @EricTyson “I’m sorry but this chart is nonsense…Any decades long observer…”

    I read your linked post. (I read your books by the way, and found them helpful, so don’t take the following as coming from someone predisposed to dislike you). I didn’t see evidence for your claim.

    I do think it’s funny that you should talk about long time observers while restricting your view to the last 35 years, compared to the last 100 as with the ‘nonsense’ chart. I suspect if you chose a longer term comparison, you’d find much more agreement between ‘nonsense’ and your alternative charts. Alternatively, if you replotted the above data for last 35 years, you’d see much more agreement with your charts. Would they then be nonsense as well?

  51. manhattanguy says:

    This rally will fizzle. Oil is already weakening. S&P have a tough time breaking 930.

  52. karen says:

    Paul Kasriel is someone I always sit up and pay attention to, so his comments on being objective about the increase in Fed’s balance sheet deserve more than a second thought. And, perhaps this was the point Andy was trying to make yesterday…

    “The point I am attempting to make in this commentary is that the increase in the Fed’s balance sheet in the past year is not currently inflationary and need not lead to higher future inflation. Whether the Fed has the will or the skill to prevent the current increase in its balance sheet from manifesting itself in future higher inflation also is a different issue.”

    and on banks cleansing their balance sheets he notes: “Whether toxic assets remain on the books of banks or are sold at a loss to other entities is not the point. The point is whether banks have enough capital to resume the expansion of their balance sheets, i.e., create new credit. ”

    http://www.safehaven.com/article-13774.htm

  53. Thor says:

    ZH? Hah, that’s a great site to read for entertainment purposes. If you can wade through the hundreds of “you’re an idiot” “Obama is a communist” “The market is manipulated” and “GS is the anti-christ” comments to the posts that is.

    OT – I used to be bummed that I always joined the conversation 3 hours late here on the West Coast. Now it’s fascinating to see how the conversation evolves. Morning folks!

  54. EricTyson says:

    @pmorrisonfl

    You raise a valid point and thanks for your kind words regarding my books. But, the last several decades in the chart above is off as well.

    I’m actually doing some analysis of some of Shiller’s long-term real estate charts…it seems to me he’s had this view that real estate basically treads water over the long-term. I guess he’s never looked at the Forbes lists of wealthiest folks and doesn’t realize how much wealth has been built over the long-term in real estate.

  55. EricTyson says:

    P.S. Here’s a shorter piece which discusses some macro problems with Shiller’s index

    http://www.erictyson.com/articles/20090224_1

  56. ben22 says:

    http://en.wikipedia.org/wiki/Dickweed

    http://en.wikipedia.org/wiki/Dickwad

    As for the nonsense chart, well the December chart has proven to be much less than nonsense, the slope was projected quite well as a matter of fact.

    Eric seems to be in the Green Shoots brigade judging by the headlines on his website.

  57. ben22 says:

    Was it wealth being built in Real Estate or was it credit that helped inflate the prices?

  58. pmorrisonfl says:

    @EricTyson
    “Shiller… real estate basically treads water over the long-term. ”
    vs. “I guess he’s never looked at the Forbes “lists of wealthiest folks”

    To me, that seems to confuse average with maximum. It’s like me saying average height hasn’t increased much and you saying “I guess you’ve never seen LeBron James”.

  59. [...] Barry Ritholtz’s reader Steve Barry has updated the New York Times chart of Case Shiller housing prices to account for the latest data (Apr…. [...]

  60. Steve Barry says:

    No index is perfect…I’m sure people were scoffing at the chart in July 2006, saying RE was going even higher. The chart has had some use since 2006 and I thought it might be revealing to keep updating it….the original stopped in 2006, just when the collapse started. If you saw this in 2004-5, you should have been very wary of investing in RE.

  61. Transor Z says:

    @Eric Tyson:

    Eric, there’s a good case to be made that RE (both CRE and RRE) developer wealth has been Ponzi wealth since the late 90s. Certainly there can be no argument that homeowner wealth has been thrashed by the bubble collapsing. Not too many ordinary homeowners on the Forbes list, so not sure I follow you . . .

    The point has been made many times in the last few years that homes-as-high-yield-investments (e.g., “Flip that House!”) is a very recent phenomenon. Wealth creation in RRE has always been about homeowner equity in property that holds its value or gains slightly over time.

  62. EricTyson says:

    National real estate data is just that – national. An investor SHOULD ALWAYS do local analysis and do a rent versus buy comparison for a given property as well as plenty of local economic analysis. Some markets and property types were clearly overpriced several years ago whereas others were not and are not now.

  63. EricTyson says:

    National real estate data is just that – national. An investor SHOULD ALWAYS do local analysis and do a rent versus buy comparison for a given property as well as plenty of local economic analysis. Some markets and property types were clearly overpriced several years ago whereas others were not and are not now.

    @pmorrisonfl – I know plenty of average or non super wealthy folks who have done very well with real estate over the long-term as well.

  64. karen says:

    Oh, Bruce you just reminded me.. In large white lettering on the back of a pick up truck window in Orange County, CA, yesterday:

    GOT TWINS?

  65. Thor says:

    What I don’t see anyone mentioning are the long term benefits to owning your home in terms of taxes. I know my paycheck would be an appreciable amount less if it were not for being able to write off the interest on my mortgage.

    Has anyone seen a study on the investment payoff of a home when you factor this in? Years ago I read an article that somewhat touched on the topic. The article was about the ‘real’ cost of owning a home when you factored in a low interest rate, inflation, and the tax benefits. . . .

  66. pmorrisonfl says:

    @EricTyson National real estate data is just that – national. An investor SHOULD ALWAYS do local analysis

    We can certainly agree on that, and your point in the post discussing the ISI chart is excellent and valid… area prices should be compared to area incomes.

    I’m biased on this ssue; I happen to live in South Florida where house prices tripled while incomes stayed flat. The fact that they’re now at ‘depressed’ levels compared to four years ago has to be compared to the fact that prices are still in many cases 50% or more above what your books would suggest is affordable for people who live here.

  67. [...] again. And if you think the housing market will recover anytime soon, check out the chart below.(http://www.ritholtz.com/blog/2009/07/update-case-shiller-100-year-chart/) [...]

  68. leftback says:

    Manhattan Guy said: “This rally will fizzle. Oil is already weakening. S&P have a tough time breaking 930.”

    Agreed. The distillate stocks have been rising for weeks and it is only a matter of time before $wtic follows $gaso south, and therefore I really like the DUG as a short play this summer.

    The Twins are at camp now, and LB is free to enjoy a bachelor existence without concern for guardianship duties.

  69. call me ahab says:

    Thor-

    dude- you need to get up at 4:00 PST to get in on the early action-

    also- as far as ownership- you have to weigh the interest deduction and any appreciation against the maintenance and taxes-

    a home is much more costly to maintain than many people realize and often requires longer commutes

  70. Mannwich says:

    Most, if not all, real estate “wealth” over the past 10-30 years was induced by easy ponzi credit, period. Sure, many non-wealthy people made out just fine playing this little game. Can’t we say the same about folks in the ponzi stock market? Many do very, very well. Others? Not so much.

  71. Mannwich says:

    @ahab: Those “little” expenses sure do add up, don’t they? It’s something no real estate shill will ever mention. Makes me sort of long for the days of renting and calling the Super in to fix the things that break.

  72. leftback says:

    Read David Rosenberg in Think Tank. Excellent stuff. But Dennis Kneale said the recession was over… assclown!

  73. Mannwich says:

    @leftback: Hhhhmmm, who to believe, Dennis Kneale…..or David Rosenberg? Hhhhmmm, tough one. I’ll think it about and will get back to you.

  74. leftback says:

    Oil is melting….

  75. super_trooper says:

    @EricTyson “One of the downsides of the Internet is that some folks love to post provocative graphics to generate hits and attention on their website.”

    How about the gigantic downside of blog comment whores who just love linking things to their own homepage/blog to increase their exposure.

    “I’m sorry but this chart is nonsense. Any decades long observer and investor in real estate can tell you this chart is utter nonsense no disrespect intended to its creator(s).”

    How about backing that up with FACTS, rather than just make a childish comment.

  76. Mannwich says:

    I would love to see more perma bulls and shills come out and post here at TBP. Then I’ll know for sure that this puppy is headed downward. Bring it on folks. Come out, come out, whereever you are.

  77. Thor says:

    Ahab – Good point about the expenses of owning a home, mine is 85 years old and it’s cost me some money over the years I’ve lived there. Could never get up at 4am – I could possible stay UP that late though.

  78. super_trooper says:

    @call me ahab, owning a house is often, for the general citizen a lifestyle chose, rather than an investment, considering that 1 in 6 Americans move every year

  79. Mannwich says:

    @Thor: Same here. Our home was built in 1921. Love the house but it’s been quite the pain in the neck to maintain. I probably wouldn’t buy an older home again for that reason. You’d never hear about these hidden costs (which, trust me, DO add up over time) from the likes of Lawrence Yun or even Eric Tyson.

  80. leftback says:

    I propose that BR expel Eric Tyson from TBP – judging from the posts he may well be a real estate pr*stit*te.

    “Could never get up at 4am – I could possible stay UP that late though”

    UUP? You can be long the dollar at 4am, Thor, it is a 24 hour market.

  81. Bruce N Tennessee says:

    http://finance.yahoo.com/news/Govt-wont-fund-GM-after-July-apf-859854758.html?x=0&sec=topStories&pos=7&asset=&ccode=

    Gov’t won’t fund GM after July 10, official says\

    “We have no intention to further fund this company if the sale order is not entered by July 10,” Harry Wilson, one of the Treasury Department officials overseeing GM’s restructuring, said while being cross-examined by an attorney for a group of GM bondholders opposing the sale.

  82. leftback says:

    We just added trailers on all our remaining long positions (COP, VLO, BMY, MRK).
    LB is now more bearish than ever.

  83. Bruce N Tennessee says:

    Lefty…how does that work, about GM I mean? You fund them for over 50 billion, but now you are tired and have decided to go home? What if the sale doesn’t occur for another 8 weeks….?

    Has anyone now in Washington ever run a business? Ever seen anyone run a business and taken notes? Maybe you did make the wrong decision about supportly viability, but does anyone know the definition of “half-ass effort”?

    …Just wondering..

  84. Thor says:

    LB – “UUP? You can be long the dollar at 4am, Thor, it is a 24 hour market.”

    I don’t know nearly enough about the stock market, forex, or any other market to start trading yet. I’ll eventually take the plunge and start reading some books on the topic. Until then, whenever you, karen, ben, cvienne, etc start talking stocks I get that “peanuts” teacher moment – waa waa waa waaaaaa ;-)

  85. call me ahab says:

    mannwich-

    agreed- those little costs do add up (not so little)- like new furnace, new roof, new flooring, exterior painting, etc, etc, etc

    supertrooper-

    you’re right- although I think anticipated appreciation was always part of the purchase decision- if you knew going in that there would be zero appreciation- then it may alter the decision away from ownership- especially knowing that interest on a amortizing loan is front loaded and very little principle will be paid in the first several years of ownership and then knowing that you will have to pay a nice 6% commission to a RE agent to sell your home- may make a person think twice about ownership

  86. leftback says:

    B in T: The ENTIRE problem with Govt intervention is that there is usually no plan to decide when to un-intervene. This movie reminds me of British Leyland. It was a very long and depressing movie, Bruce.

    My feeling about Gubmint here is that they cannot marshal Congressional or public support for more bailouts. They will therefore wait until the fall, for Crash the Second, the Hunt for Red October™ redux, and then when stocks, corporate bonds and munis crash and panic reaches its height, will enact more spending, stimulus, bailouts etc…

  87. Onlooker from Troy says:

    And those costs re: houses also applies to investing in real estate and landlording. All too often they are not taken into account by those who aspire to being real estate mavens. It didn’t matter in the flipping days because they didn’t hold it long enough to really be a landlord, but it will reassert itself in the reality that is coming back.

    How many of those amateur/newby RE investors out there that think they’re going to get rich buying “cheap” houses in this market are going to be very disappointed with the result after a few years. Dropping rents and vacancies are a real bitch too in a glutted market.

  88. Mannwich says:

    @leftback: I’ve been thinking that very thing for a while now. The feds are completely and utterly trapped and will thus never un-intervene until the whole house burns down, meaning some “unforeseen” event (the real Black Swan) makes them do so.

  89. Onlooker from Troy says:

    The govt is like a push over parent at this point who has made numerous empty threats. “This time I REALLY mean it!” But the kid knows they won’t kick them out or really follow through, so it matters not. GM knows they’re long past the point where we’ll actually just cut them off. So they’ll say all the right things to keep the pressure off, but the govt has made it very clear that the jobs program that is the remnants of the auto industry is more important than anything else.

  90. Transor Z says:

    I’m starting to feel like the libertarian/liberal debate is a red herring when it comes to government intervention in the financial industry.

    The drafters of legislation (often lobbyists, as everybody knows) are always thinking a few chess moves ahead of us little brains. You get loopholes like GE qualifying for bailout funding because they own two S&Ls in Utah. Who has the time to scrutinize bills for shit like that?

    And then you get the murkiness of “emergency Executive powers” and Paulson and GS connections and the rest of that crap.

    “Intervention” nowadays really means injecting trojan horse language into the morass of laws and regulations that will benefit (if only by providing safe harbor cover loopholes for otherwise questionable/illegal activities) the groups connected to the drafting process.

    Laws and regulations have become a black box and only a select few have the decoder rings to understand the ramifications.

    Cheerful thought for an overcast day here on the east coast.

  91. Thor says:

    Super trooper makes a good point – for many, (including myself) owning a home is a lifestyle choice, not an investment. I’d had my rent go up far too many times over the years to want to be bothered. Never mind the two times I was forced to move because the apartment I was living in went condo. I own my home for piece of mind it gives me. Well, as much piece of mind as a person living in CA can have these days!

  92. dead hobo says:

    EricTyson,

    I read your longer article and it supports my intuitive belief about real estate prices at this time. The different growth rates in different areas appear to reflect the Crazytown effect as I imagined it. Some areas were more strongly affected than others.

    Regarding real estate as an investment, everyone has to live and work somewhere. Nobody wants to pay too much for their real estate, but there are enough uninformed and uneducated buyers who will always make bad decisions, particularly when they think they are getting something for nothing. I’m sorry for their problems but I didn’t cause them nor was I a part of their poor decision.

    I recently paid off my house and it’s still worth more than I paid for it. I would have happily borrowed against it in except for the fact the loan would have had to be paid back. My expert skills at foresight decided to avoid the payback by avoiding the loan. Comparatively, I must be a fucking genius.

    Regarding fortunes in real estate … yes they are possible but only if you don’t pay too much; like everything else.

  93. cvienne says:

    @Thor

    Maybe when your property tax bill comes due you can send them an IOU…

  94. Thor says:

    Cvienne: Hah, Wes mentioned that the other day. They have substantially reduced my property tax bills the last two years so I suppose I should do my part and pay them with real money.

  95. Mannwich says:

    This doesn’t look too green shooty to me. Tell me again why SRS continues to shit the bed? I’m confused….

    http://www.calculatedriskblog.com/2009/07/report-as-many-as-one-in-five-us-hotel.html

  96. call me ahab says:

    mannwich-

    you from Boston originally by chance?? Had a buddy in the Navy from Boston who always said “shit the bed”-

    have never really heard it since

  97. cvienne says:

    @Manny (1:19)
    “I’m confused….”

    Credit Suisse

  98. Mannwich says:

    @cvienne: I’ve hear that, but how long can they continue to beat the crap out of SRS until fundamentals (I know, don’t laugh) catch up to it? How long? Should I take the summer off and come back in Sept?