Home Values
Sob stories about the decline in home values fill the media until I'm running out of Kleenex. Not. What a crock. I can remember a time when people who sold their house and got back what they'd put into it felt like winners for having "lived for free" during those years. Nobody expected to walk away with a fat pile of profit, and unless some commercial developer wanted the property for a shopping center site, they very rarely did. Somewhere along the way, houses became commodities on a national real estate exchange, and everybody knows the risks of commodity trading, especially when you're trading in a suddenly hot, get-in-get-out commodity. If they didn't, they do now.
Joel Stein gets it right in his article I Bought an Expensive House. My Bad, Not Yours. But first some data:
Below is a table from A Look at Case-Shiller Numbers, by Metro Area showing the value of a typical home in each of 20 metro areas as of a couple of months ago (Dec 2008), compared with that value back in January of 2000. The January 2000 value is indexed at 100, so if the Dec 2008 figure is 153 (Boston), it means that the typical home appreciated by 53% in those eight years. That's an average appreciation of a little less than 6% per year, compounded, and this is after and including all the catastrophic declines in home values we've been hearing about. Home owners in LA, NYC, and Wash DC have done substantially better than that, while only homes in Detroit have actually lost value since 2000.
What this means is that with few exceptions the people who have seen their home values drop are people who bought at or near the height of the housing bubble. So what have we discovered? We've discovered that highly leveraged buying near the top of a valuation bubble is a very risky investment strategy. Whoa! Hold the presses!
(I've got some stocks and mutual funds that are under water, so I think the rest of you taxpayers should bail me out. We're all in this together, right? Of course if we all bail each other out, it's like taking in each other's laundry. But fortunately we can solve that problem by borrowing the bail-out money from the Chinese and having our kids and grandkids pay it back, with interest. That might sound like intergenerational theft, but, see, they can just roll it over onto their own kids and grandkids! Whoopee!)
Byron
Source: Standard & Poor’s and FiservData
Joel Stein gets it right in his article I Bought an Expensive House. My Bad, Not Yours. But first some data:
Below is a table from A Look at Case-Shiller Numbers, by Metro Area showing the value of a typical home in each of 20 metro areas as of a couple of months ago (Dec 2008), compared with that value back in January of 2000. The January 2000 value is indexed at 100, so if the Dec 2008 figure is 153 (Boston), it means that the typical home appreciated by 53% in those eight years. That's an average appreciation of a little less than 6% per year, compounded, and this is after and including all the catastrophic declines in home values we've been hearing about. Home owners in LA, NYC, and Wash DC have done substantially better than that, while only homes in Detroit have actually lost value since 2000.
What this means is that with few exceptions the people who have seen their home values drop are people who bought at or near the height of the housing bubble. So what have we discovered? We've discovered that highly leveraged buying near the top of a valuation bubble is a very risky investment strategy. Whoa! Hold the presses!
(I've got some stocks and mutual funds that are under water, so I think the rest of you taxpayers should bail me out. We're all in this together, right? Of course if we all bail each other out, it's like taking in each other's laundry. But fortunately we can solve that problem by borrowing the bail-out money from the Chinese and having our kids and grandkids pay it back, with interest. That might sound like intergenerational theft, but, see, they can just roll it over onto their own kids and grandkids! Whoopee!)
Byron
Metro Area December 2008
Atlanta 113.87
Boston 153.05
Charlotte 122.41
Chicago 137.16
Cleveland 105.21
Dallas 115.63
Denver 125.74
Detroit 80.93
Las Vegas 131.40
Los Angeles 171.46
Miami 165.01
Minneapolis 127.00
New York 183.50
Phoenix 123.93
Portland 158.50
San Diego 152.16
San Francisco 130.12
Seattle 160.19
Washington 176.34
Source: Standard & Poor’s and FiservData
posted by Byron | Wednesday, February 25, 2009
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