[R-G] Dean Baker: "We're Probably a Bit More than Halfway to the Bottom of the Bubble"

[Yoshie Furuhashi]

<http://www.prospect.org/cs/articles?article=the_meltdown_lowdown_062708>
The Meltdown Lowdown (No. 11)
	
Airline CEOs have some odd ideas about customer service, Exxon gets a
break from the Supreme Court, and many middle aged families have very
little savings.
	
Dean Baker | June 27, 2008 | web only

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And the Bubble Keeps on Bursting

The new Case-Shiller housing data showed that prices kept plummeting
in April. Real house prices in the 20-city index were falling at close
to a 26 percent annual rate over the months from January to April.
Since their peak in the summer of 2006, real house prices have dropped
by more than 23 percent. This means that we're probably a bit more
than halfway to the bottom of the bubble.

Prices in the most rapidly deflating markets are dropping much faster.
In the last three months, real house prices in Phoenix, San Francisco
and Miami have all fallen at close to a 40 percent annual rate. The
implications of this rate of price decline are incredible.

Imagine you had paid off 20 percent of a mid-priced home in the San
Francisco area as of January. This would have given you approximately
$136,000 in equity on a $680,000 home. Three months later, that home
is $597,000 and your equity stake is down to $53,000. In three more
months at this rate, you will be underwater. Such are the joys of home
ownership in a collapsing bubble.

Of course, it is not gloomy for everyone. Imagine that you are a wise
renter who was thinking of buying a mid-priced home in the SF area.
You are now $83,000 richer as a result of your decision to wait.
That's not bad -- you get almost $28,000 a month for not buying.