Disappearing now: $6 trillion in housing wealth

[Ex-SD]

L.A. Land: latimes.com
by Peter Viles

A Washington think tank is warning that housing prices are falling at an accelerating level, destroying wealth at a pace that will cost the average homeowner $85,000 in lost wealth this year alone.

The projections by the Center for Economic and Policy Research are based on the numbers in Tuesday’s Case-Shiller home price index, which showed accelerating price declines in most big cities.

The annual rate of price decline over the last quarter was 24.9% in the 20-city index and 25.8% in the 10-city index,” the center said in its Housing Market Monitor today. “At this rate of price decline, the excesses of the housing bubble will have largely disappeared by the end of the year. At the same time, the price decline implies an incredibly rapid loss of wealth. In real terms, the rate of price decline in the 20-city index would imply a loss of almost $6 trillion in real housing wealth over the course of the year, an average of $85,000 per homeowner.”

I’m a so-so student of economic history, but I’d have to bet that, even adjusted for inflation, the only time that many Americans have lost that much wealth in a short period of time would have been during the Great Depression. I’m not even sure it happened during the Depression. (I understand: This hasn’t happened yet; it’s only a prediction.)

Repeating again: The CPER says prices are falling so rapidly that the bubble will be gone by the end of 2008, but the loss of housing wealth will be massive.

[gdcox]

Yeah, but it is not genuine wealth.

Real loss in wealth is what has hit bank shareholder whereby dividends per have have been slashed.

A landlord by contrast is still getting his rents, even if the price of the apartment has fallen by half.

A home owner is still getting the benefits of living in his house whether or not it rises or falls in value.

The only people really hit is the housing sector are those forced out because their debt service rises to affordable levels.

In the depression the income generation ability of business was damaged beyond belief. You can’t compare a house price adjustment with that.

[gdcox]

Yeah, but it is not genuine wealth.

Real loss in wealth is what has hit bank shareholder whereby dividends per have have been slashed.

A landlord by contrast is still getting his rents, even if the price of the apartment has fallen by half.

A home owner is still getting the benefits of living in his house whether or not it rises or falls in value.

The only people really hit is the housing sector are those forced out because their debt service rises to affordable levels.

In the depression the income generation ability of business was damaged beyond belief. You can’t compare a house price adjustment with that.

[gdcox]

Yeah, but it is not genuine wealth.

Real loss in wealth is what has hit bank shareholder whereby dividends per have have been slashed.

A landlord by contrast is still getting his rents, even if the price of the apartment has fallen by half.

A home owner is still getting the benefits of living in his house whether or not it rises or falls in value.

The only people really hit is the housing sector are those forced out because their debt service rises to affordable levels.

In the depression the income generation ability of business was damaged beyond belief. You can’t compare a house price adjustment with that.

[gdcox]

Yeah, but it is not genuine wealth.

Real loss in wealth is what has hit bank shareholder whereby dividends per have have been slashed.

A landlord by contrast is still getting his rents, even if the price of the apartment has fallen by half.

A home owner is still getting the benefits of living in his house whether or not it rises or falls in value.

The only people really hit is the housing sector are those forced out because their debt service rises to affordable levels.

In the depression the income generation ability of business was damaged beyond belief. You can’t compare a house price adjustment with that.

[gdcox]

Yeah, but it is not genuine wealth.

Real loss in wealth is what has hit bank shareholder whereby dividends per have have been slashed.

A landlord by contrast is still getting his rents, even if the price of the apartment has fallen by half.

A home owner is still getting the benefits of living in his house whether or not it rises or falls in value.

The only people really hit is the housing sector are those forced out because their debt service rises to affordable levels.

In the depression the income generation ability of business was damaged beyond belief. You can’t compare a house price adjustment with that.

[desmond]

Please tell this to my mom whom I advised not to buy in 2005. She has not spoken to me since.

[desmond]

Please tell this to my mom whom I advised not to buy in 2005. She has not spoken to me since.

[desmond]

Please tell this to my mom whom I advised not to buy in 2005. She has not spoken to me since.

[desmond]

Please tell this to my mom whom I advised not to buy in 2005. She has not spoken to me since.

[desmond]

Please tell this to my mom whom I advised not to buy in 2005. She has not spoken to me since.

[Diego Mamani]

Desmond,

I pity your mom. I have a friend at work who bought in mid 2005 against my advice. He paid $900K and put 20% down. Now he wants to sell due to a job change, but he’s delusional. He has lowered his wishing price to $800K but even better houses than his are selling in the low $700s. So, the house now sits empty. With HOA, property tax, insurance, etc., his monthly expense is close to $5,000 (pre-tax).

He listed the house as a rental for $3500 but no one wants it. He has lowered his wishing rent to $3300, and I heard that another co-worker has offered him $3000.

Bitter owners, throwing money away on mortgage payments! This guy has lost more than his $180K down payment, and will probably lose more over the next 18-24 months. Of course, I never say “I told you so.”

[Diego Mamani]

Desmond,

I pity your mom. I have a friend at work who bought in mid 2005 against my advice. He paid $900K and put 20% down. Now he wants to sell due to a job change, but he’s delusional. He has lowered his wishing price to $800K but even better houses than his are selling in the low $700s. So, the house now sits empty. With HOA, property tax, insurance, etc., his monthly expense is close to $5,000 (pre-tax).

He listed the house as a rental for $3500 but no one wants it. He has lowered his wishing rent to $3300, and I heard that another co-worker has offered him $3000.

Bitter owners, throwing money away on mortgage payments! This guy has lost more than his $180K down payment, and will probably lose more over the next 18-24 months. Of course, I never say “I told you so.”

[Diego Mamani]

Desmond,

I pity your mom. I have a friend at work who bought in mid 2005 against my advice. He paid $900K and put 20% down. Now he wants to sell due to a job change, but he’s delusional. He has lowered his wishing price to $800K but even better houses than his are selling in the low $700s. So, the house now sits empty. With HOA, property tax, insurance, etc., his monthly expense is close to $5,000 (pre-tax).

He listed the house as a rental for $3500 but no one wants it. He has lowered his wishing rent to $3300, and I heard that another co-worker has offered him $3000.

Bitter owners, throwing money away on mortgage payments! This guy has lost more than his $180K down payment, and will probably lose more over the next 18-24 months. Of course, I never say “I told you so.”

[Diego Mamani]

Desmond,

I pity your mom. I have a friend at work who bought in mid 2005 against my advice. He paid $900K and put 20% down. Now he wants to sell due to a job change, but he’s delusional. He has lowered his wishing price to $800K but even better houses than his are selling in the low $700s. So, the house now sits empty. With HOA, property tax, insurance, etc., his monthly expense is close to $5,000 (pre-tax).

He listed the house as a rental for $3500 but no one wants it. He has lowered his wishing rent to $3300, and I heard that another co-worker has offered him $3000.

Bitter owners, throwing money away on mortgage payments! This guy has lost more than his $180K down payment, and will probably lose more over the next 18-24 months. Of course, I never say “I told you so.”

[Author]

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