Asheville Mountain Real Estate Blog

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Location: Mars Hill, NC, United States

A small, highly personalized real estate firm specializing in mountain homes and land in greater Asheville.

Tuesday, November 04, 2008

Graphically Speaking: Snapshots for the Next President

In this century, housing was first an engine, but is now a drag on the economy. The story is well known.

So, here are a set of snapshots for the next President, and for ourselves, lest we lose sight of where we have been, and where we would like to be.

Basic Supply and Demand
Supply and demand generally advises that markets with rising inventories will experience lower production and eventually, lower prices. This is an an indirect correlation.

Instead, real estate markets during the boom exhibited a direct correlation of rising inventories AND rising prices. As many have noted, this is the illogic of an economic or asset bubble. It is likely a place we would not wish to go again.

Existing home inventories looked like this from Jan, 2001 through Sept 30, 2008:
(Chart Source)
Click here for full size.
New home inventories looked like this from Jan, 1963, through Sept 30, 2008.
(Chart Source)
Click for large view.
Yet, home prices 1890 through 2006 looked like this.
(Chart Source)
Click for large view.

Eventually, the affordability of homes dissipated. (1977-2008)
(Chart Source)
Click Here for large view.

And Sales Plummeted...
Existing home sales look like the bars on this graph: (2004-2008)
(Chart Source)
Click here for large view.

And new home sales look like the bars on this graph. (2004-2008)
(Chart Source)
Click Here for large view.

The Impact on Prices
And no surprise that prices would have to eventually do this. (1988-2008)
(Chart Source)
Click Here for large view.

The Impact of Falling Prices
Prices had to fall, but the magnitude of the correction has begotten all kinds of negative results. Not the least of these is the dramatic rise in foreclosures and the number of US households said to be underwater. But what other effects might be correlated with falling home values?

The NY Times recently noted a milestone for Q3 consumer spending. Correlation does not imply causality, but home values have a curious and direct relationship to consumer spending. (1988-2008)
(Chart Source)
Click here for full size.

And With Job Creation (2000-2008)
(Chart Source)
Click for full size.

And with the DJIA..(Past 12 months)
(Chart Source)
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Bringing us to a silver lining. It is offered here in jest, but does have a basis in reality. It is something we prefer not to see.
(Chart Source)
Click here for large view.

No matter who you support, be sure to vote today.

Thanks for stopping by,
Black Bear Realty Website
828 689 2055
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