Laissez Faire Club Blog

Home Prices Still Falling

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The WSJ reports that: “prices in nine cities hit their lowest level since the housing bust…. areas hard-hit by the housing downturn, like Atlanta and Las Vegas, continued to struggle. Atlanta’s annual decline of 17% was the largest year-to-year drop for any city in the history of the index.”

This whole fiasco has to be one of the great failure of macroeconomic planning since…the last great failure of macroeconomic planning. The planners were going to stop the fall, boost prices, and thereby restoring fun and joy for everyone. It didn’t happen. The effort prolonged the crisis.

As of February, average home prices across the U.S. are back to the levels where they were in late 2002 for the firm’s 20-City composite and to early 2003 levels for the 10-city composite.

The picture at the right I took yesterday. The owner claims to be selling “below market,” but evidently it has not been below market enough — although it is hard to know what the market would be in this case since no exchange has actually taken place. Markets consist of real trades, not just offers that go untaken. Regardless, the owner has changed his mind again, and is now happy for any offer.

  • Doug Obey

    The housing market will continue to fall and even when it finally bottoms out and the economy starts to recover and more people find jobs, interest rates are likely then to rise, stifling any increase in prices as homes are tied to interest rates based on the affordability of mortgages. If mortgage rates rise, people won’t be able to afford as high a price, keeping prices week for the next decade even in the face of inevitable inflation. One piece of the solution would be to repeal the law that eliminates student loans from bankruptcy and allow students to go bankrupt on them like every other debt. Why are student loans protected. The adverse effects of that law has been the proliferation of loans that have allowed universities to just continue increasing tuition costs. Eliminating this flaw in bankruptcy law and more young people would be able to afford their first home in their 20′s like in years past instead of living at home until well into their 30′s. More first time buyers would drive demand and prices up for starter homes and get people trading up again breathing new life into the real estate sector and the economy as a whole as new families buy furniture, appliances and everything else needed to set up house. One simple fix, letting the free market be free again and the benefits could be a stronger economy sooner and greater GDP. Feel free to let me know where my thinking is off.