Just keeps falling doesn't it?

Check out the following graph which charts how much the average sales price of a new home 27 months from the peak in economic activity moves.  As you will notice ( this is for recessions from 1980 on), the average has now fallen more than any other recession previous (well from the 1980's on) as indicated by the dashed black line of death.

The next graph truly depicts the demoralizing collapse in new home prices, while also capturing how over inflated prices really were. Its a sobering picture to say the least.  Notice how prices gave the false sense of rebound and then just kept on falling.  Depression Economics people- if you haven't figured it out already- just assume the worst and your probably right.  This is the type of thing that makes Roubini so freakin popular and prophetic sounding, although any proper student of financial crisis would already know to expect such things. Readers of this blog should have definitely learned to expect such things.

Keep Dancin'

Steven J.

Might as well buy a crib...oh wait I'm broke.

The National Association of Realtors has put out the Housing Affordability Index since the early 1980's. The higher the index value the more able a household earning the median income is able to purchase and make mortgage payments on a home.

Fred provides the following description of the series:

Measures the degree to which a typical family can afford the monthly mortgage payments on a typical home. 
Value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. For example, a composite housing affordability index (COMPHAI) of 120.0 means a family earning the median family income has 120% of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home. An increase in the COMPHAI then shows that this family is more able to afford the median priced home.

As you can see now, the 2007 Recession has clearly brought homes to their all time most affordable levels.  If I had cash I might buy a home right now, but i don't and the 14 million unemployed or so don't either.  Womp.

What a value of around 195 means is that a family earning a median income has 195% of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home.  By historical standards never has it been the best and worst time to buy a home. The best opportunity, under the worst circumstances.  

Keep dancin'

Steven J.