As per the usual, I was listeng to MPR in the shower when Marketplace Morning Report came on. It was about the mortgage crisis (of course), and in almost a passing fashion they mentioned that Moody's was predicting a 30% reduction in home values by 2009.
30%!!!
I'm gonna have to pull out my secret librarian powers and try to corroborate that one, 'cuz it just seems too remarkable to be true. A 30% reduction in home prices would send the Twin Cities market back to some time in 1999 or 2000!
While prices have gone a bit crazy in the last few years, it's hard to imagine that a median home in the Twin Cities is actually only going to be worth about $145,000 in two years. If you imagine that a home should cost about 3 times the buyer's income, that would put the median home at cheaper than the median household income in this town can afford. Now, that just doesn't seem quite right . . . especially since a big chunk of the bottom of the income scale doesn't buy any homes.
And if it were true, we're in for a shaky few years. My guess is that there is a huge chunk of the home-owning crowd who has at least 70% of their home value in the form of a mortgage or other loan. Loosing that much ground would send thousands of people upside down in the lending sense. Would banks foreclose? What a mess that would be.
To be honest, even in the most heated housing markets on the coasts, it's hard to imagine a 30% drop in prices. If you could buy a house in Santa Barbara for $6-700,000 there would be a mad dash - and rising prices once again.
So, I wonder how the other parts of the first world who have crazy housing markets are doing. Do they watch news reports of our downturn and wonder about their own fates? England has already had a run on a bank (how It's a Wonderful Life of them), and Australia's booted their PM. Seems it could just get more turbulent at any moment. . .
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2 comments:
This comment is totally unrelated to the Moody's prediction.
I finally posted a picture from the Orlando airport on my blog. The picture I chose really captures the ugly that was the NWA terminal. Enjoy and link to at your leisure.
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