Looking at the basic precepts of residential real estate valuation, there is no real reason why prices should not continue falling. As indicated in the Bloomberg video below, nearly every factor that you can plug into the valuation equation is negative. In addition, the recent fraudclosure issues significantly exacerbate the problem. Here, you have the most recent snapshot of the Case Shiller index. As you can see, it is the quintessential picture of a bubble gone bust. Notice the upticks throughout 2009 and 2010, the results of incessant .gov bubble blowing. Many truly believed that was the marked turnaround in the real estate market. Those who believed so did not study their history nor their spreadsheets. Plug in the numbers, and you will see that there is no empirical reason for housing prices to go up when they are still too richly priced to begin with.
Please take into consideration that I believe things are actually going to get worse, for the shadow inventory buildup has been exacerbated by the foreclosure issues. All paying subscribers should review Foreclosures & Shadow Inventory. Shadow inventory not only hides the true condition of the housing market, it allows banks to hide the true nature of profits from said housing stock. More on that in our next post which will contain a current update of the shadow inventory and foreclosure backlog numbers.
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