Home Prices Seem Far From Bottom

While those declines have been painful to homeowners in those cities, economists said the quick decline might help the markets reach bottom faster than in previous housing cycles, said Edward E. Leamer, an economist at the University of California, Los Angeles. In a previous boom, home prices peaked in the Los Angeles area in 1990 but did not hit bottom until 1996. Prices remained near that low for more than a year before starting to climb again


Higher interest rates result in bigger monthly payments, pricing some potential buyers out of the market. For example,
monthly payments are $2,700 on a 6 percent 30-year, fixed-rate loan of $450,000.
If the interest rate rises to 7 percent, those monthly payments jump to $3,000.
All things being equal, when rates rise prices generally fall.

Single-family home prices in Las Vegas have already fallen 34 percent from their peak in the summer of 2006, according to the Standard & Poor’s Case-Shiller home price index. Prices in San Diego have fallen 31 percent since late 2005.

Is it about halfway far? That's about where we are. The problems are well known, but let's list the specifics anyway, for the sake of the perennial housing bottom callers:
asr: sarcastic , author means not bottomed yet

• Home prices remain elevated by traditional metrics;

• Inventory continues to increase

• Income is not rising, and in many industries is falling;

• Mortgage rates have been going higher;

• Nationwide unemployment is rising

Other than that, Real Estate is terrific. Here's the required NYT excerpt:

"One reliable proxy of housing values — the ratio of home prices to rents — indicates that in many cities prices are still too high relative to historical norms.

In Miami, for instance, home prices are about 22 times annual rents, according to analysis by Moody’s Economy.com. The average figure for the last 20 years is just 15 times annual rents. The difference between those two numbers suggests that a home valued at $500,000 today might be worth only $341,000 based on the long-term relationship between prices and rents.

The price-to-rent ratio, which provides one measure of how much of a premium home buyers place on owning rather than renting, spiked across the country earlier this decade.

It increased the most on the coasts and somewhat less in the middle of the country. Economy.com’s calculations show that while it remains elevated in many places, the ratio has fallen sharply to more normal levels in places like Sacramento, Dallas and Riverside, Calif.

The current housing downturn is much more national in scope and severe than any other in the postwar period, partly because of the proliferation of risky lending practices. Today, foreclosures are running ahead of the downturn in the economy, a reversal of previous housing slumps
asr: meaning in previous housing slump ( LA 1989 time?), first came 'downturn in economy' then 'housing slump'. This time it is reverse firt 'housing slump'
."