by John Galt
October 27, 2009
The report today was hailed as good news by the MSM but as usual, the lack of in depth analysis when the initial announcement was made thanks to American’s attention span and the depth of the problems reflected within these reports says much, much more. First, the housing index reflects an approximate return to September 2003 prices not seasonally adjusted:
The key aspect of this report that should catch everyone’s attention is that the declines may have a seasonal pause now, but thanks to the overwhelming shadow inventory and pending or probable foreclosures in the pipeline another 20-25% decline should not shock anyone bringing us down to the 110 range on the index. The condo survey is never highlighted by the MSM nor Bubblemedia but with the current GSE restrictions and unwillingness of the banksters to finance condo mortgages it should be front page news. For the purposes of apple to apple comparisons, I’ve charted the data from September 2003 to date but only used a simple average of the prices from the five cities (Los Angeles, San Francisco, Boston, Chicago and New York; note no Southern Cities) to get some idea of the price situation for these locales.
Despite popular fantasy, there is no reason for those markets to hold their price averages much longer and as we dip into the second wave of resets in 2010 through 2012 I can foresee the average prices moving into the low 100’s without very much resistance as investors attempt to dump these turkeys to stay liquid or escape pending bank actions with negotiated settlements. This will not end well for the Obama administration as the government can not create a demand for housing that the current wages and earnings of the average American citizen can not afford.