Tuesday, April 29, 2008

Headline: Home values up 31% since 2000.

And that includes the 12 percent drop since last year this time. The increase is far greater than 31% in some areas such as Miami and Las Vegas. Here is a graph of home values for Las Vegas over the past 10 years: Notice the modest appreciation during the 90's and early 2000's, followed by a sharp (around 200%) jump. The slump that follows looks like a modest correction to that unrealistic jump. Even the endpoint on the graph is higher than the value the homes would have if you extrapolated the modest appreciation from the 90's to the current year. So I ask: Why is everyone so shocked and acting all doom and gloom about the housing market? If something goes up astronomically in value for no good reason, its going to come down. Shocking. Yes yes yes, I know some people now owe more than their home is worth. Guess whose fault that is? (Answer: Theirs). Yes I know that it spills over to other areas of the economy. I just don't understand all the news articles that express shock and disbelief over the modest correction we are having right now. Every news article has a title like: "Largest decrease in home values since great depression!!!!!!!!!" (punctuation included), but they never say anything like: "Largest decrease in home values since great depression, which follows largest increase in home values ever".

The big economic news story that gets buried because of this non-story is how "green" subsidies for ethanol are driving up basic food prices, driving millions around the world into poverty and starvation. Thank you Mr. Gore for your benevolent service.




9 comments:

Amy Jean said...

yeah, easy for you to say. You didn't buy your house at the peak of value, nor want to sell it at the valley that is now here. (although I know it is our fault)here's to our zipcode with the highest foreclosure rate in the country! I think we will be staying put for awhile.

Cabeza said...

Isn't Bush the one who put in the big push for ethanol funding and research? Gore alone is not to blame.

Nick said...

Indeed Bush shares some blame. As are lawmakers in both parties trying to pander to the environmentally conscious. (Conspicuously absent from the ethanol craze: John McCain. I checked Obama's website, and ethanol subsidies is the #1 thing he would do for clean energy. Boo!)

I blame Gore more because he is one of the ones responsible for putting us in a state of green hysteria such that we are blind to the problems caused by our "solutions".

There are far more worthy green technologies that we should be investing in, that don't cause hunger and poverty. Nuclear, oil shale, photovoltaics, hydrogen production. But ethanol?

JonnyF said...

Be careful interpreting that graph. I assume that is an average or a median home price graph. Either way, it is not for a constant set of homes. In other words, the set of homes in 2007 is probably significantly different from the set of homes in 1998. Without more information, I can't say more about possible distortions.
I agree that many of the headlines are unnecessarily alarmist. My favorite are the ones that have percentages like "Foreclosure actions soar 66 percent". My question is always: 66% of what? It's generally explained in the article, but even then I have no way of gauging the importance of a significant percent change from a base on which I have no contextual knowledge - and that information is rarely included in the article.
Does anybody remember a couple of years ago? There were occasional articles about how home prices were too high and that many potential homebuyers were either priced out of the market or waiting for home prices to fall because they didn't want to buy when they thought homes were overpriced. Now some of those people are buying homes, including some good friends of mine. I haven't seen any feel good articles about how the bursting of the bubble is a good news for these people.
As for the green subsidies driving up food prices. I have, perhaps remarkably, seen a lot of coverage on that.
On a mostly unrelated note: the odometer on our white Toyota Camry(Mr. Miyagi) just rolled past 2,000,000. It's 19 years old. Also, it get's about 34 mpg on the highway, so I roll my eyes when American car advertisers sound so impressed with themselves when they advertise 32 mpg for a compact. I sometimes yell, "Big deal! Toyota beat that 20 years ago with a midsize sedan!" Talk about a day late and a dollar short.

Alien Master said...

That graph looks about right for a lot of places. We bought this home in Edmonds back in 97 and it went up modestly during the end of that decade and early part of 2k but over the last few years we have seen the value of a home we paid 179k go up to a high of 380k and now slump back down towards where it should be, though it's still over valued I think. Personally I think someone in Government had a light click on thinking "hey if we over inflate the housing market, we can bilk millions more from our overtaxed people from property taxes."

Cabeza said...

That would be quite a Government conspiracy, seeing as how the federal government doesn't collect on property taxes. Those are usually county-imposed. I'm picturing this clandestine meeting held in a giant underground cavern. The enormous round table is lit in just a few select spots, leaving the darkness to our imagination. And seated around that enormous round table is every county commissioner in the United States, nodding their heads in approval of the new plan to drive up home prices so that they can collect more property taxes. Mwa-ha-ha-ha!

Nick said...

In your description of the dark cavern with the table, I immediately pictured Mr. Burns, Ranier Wolfcastle, and the rich texan.

apyknowzitall said...

That's funny so did I but I thought of the stone cutters singing about how they made Steve Guttenburg a star.

Julie C said...

In agreement with alien master - I love how property taxes still go up when your house prices don't.