Thread: Why This Real Estate Bust Is Different

Many many Option-Arm mortgages are about to start resetting in 2010-mostly prime borrowers. Wonder how many of them are dealing with reduced incomes? Sure glad I bought my current house in late 98.

The total projected fall from the Federal Housing Finance Agency (FHFA) “All Transactions Index”, which begins in 1975, shows a peak-to-trend fall of 27%. Since prices are 6% lower by this measure, prices must still fall an additional 23% from today for prices to revert to trend.
The assumption built into these estimates is that prices in the years 1975 to 1999 advanced at a typical rate. A trend line was generated to the present based upon that 25-year period. The chart depicts the divergence of the trend established from 1975 to 1999 and the actual prices recorded from 2000 to 2009.
The FHFA prediction of a total fall of 27% is far less than the total fall of between 49% to 60% predicted by Case-Shiller. Based upon the four data sets reviewed in the last few weeks (see summary below), we can estimate a total fall of between 27% to 60% from the bubble top to the long-term trend. The average of the four indexes projects a total fall of 41% from the bubble high to the trend bottom.
Looking ahead from today, the average of the four indexes predicts that property values will fall [an additional] 26% from our current price levels.

http://seekingalpha.com/article/1729...le_lb_articles