Tuesday, 24 June 2008

Freefalling


US house prices are down 19 percent in nominal terms. As Keith over at Housingpanic observes, prices are down to April 2004 prices. Four years, no nominal gain, and four years of consumer price inflation. In real terms, the crash must be close to wiping out all the bubble gains.

How long will it be before the UK house price indices start to resemble the Case-Shiller index? Not long, not very long at all.

9 comments:

Josh said...

Wow, that decline is steep!

Vodka drinker said...

Just eyeballing the chart, assuming prices are close to 100 in 1987, and around 180 now, US house prices in nominal terms, haven't actually increased that much in 21 years. The chart suggests about 80 percent. How does that compare to the UK bubble?

Alice, any answers on that one?

Credit Derivatives said...

The case-shiller numbers isn't a nationwide index.

Why use only the 10-city index? There is also a 20 city S&P index available. Although, not a national index, it is probably more accurate.

Edward Harrison said...

Alice,

I don't think it's going to be too long. I am in the process of putting together some graphs on the Nationwide House Price Index and comparing it to the Case-Shiller and see what that looks like.

I have three blurbs from my site on this topic to add and a request to you Alice.

1. What about Japan? I have a blog entry which shows an economist article from 2005 that showed the Japanese trajectory vs. a composite UK/Australia/US trajectory.

http://www.creditwritedowns.com/2008/06/naysayers-housing-bubble-was-obvious.html

2. I have a little poll on US house prices I am running this week. The question is how far will US house prices fall from their peak. It will be interesting to see what people say, how that relates to the fall Case-Shiller has shown already and how predictive it is.

3. The third thing is I have been tracking past Case-Shiller and Nationwide press releases and you can get a link to what was said at the time on the following entry.

http://www.creditwritedowns.com/2008/04/housing-prices.html

What I'd like to see from you Alice is similar graphs on the UK market looking at the Halifax's and Nationwide's data.

Also, I'd like to see a poll on your site about UK prices.

And, I'd also like to see your thoughts on what the obvious precedents are for the UK price fall. Japan comes to mind because of the lack of space, the Island geography, etc. But, what are your thoughts there.

Edward

Anonymous said...

There are no precedents for the fall in house prices that is now happening at last in the UK. Except perhaps the end of the South Sea Bubble. The laws of (financial) gravity must be obeyed, as they have always been in the case of bubbles--Gold in the 70s, Nikkei in the 80s, Nasdaq in the 90s. All these bubbles tend to lose c. 50% in 1-3 years before recovering some 25% from the low and then levelling off and continuing on a gentler downward slope for what can be a decade or more (see Japan housing as above). "It will all come down."

Mark Wadsworth said...

What cheers me up no end is that the towns with the biggest falls all have a TV series names after the Case Schiller Index, e.g. CSI Miami, CSI Las Vegas and so on. (as originally pointed out by capitalists@work, I believe)

Budvar said...

With regards to "Japan", Japan is a manufacturing, export driven economy, it has a high rate of savings, unemployment is practically zero and they don't have a welfare mentality. Whereas do we in the west? it's no, no, no and hell no!!

aSteve said...

Did Japan have such an economy in the late 1980s, or has this taken off (relative to other 'economic' activities) since their crash?

Anonymous said...

Japan has quite a strong welfare mentality, they've just disguised it within obscene public sector borrowing. Walk into any Japanese council office and you'll see they are really struggling to find work for all those employed bodies.

Nick