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Wednesday, July 01, 2009

The housing market works like other markets--just more slowly

A fellow loses his job; he can’t pay his mortgage. The house goes onto the market and pushes down prices. Prices in California are off 30% year-to-year, with the median house at $267,000. In Las Vegas, the median house is only $135,000 with 75% of sold properties coming from foreclosures.

The housing market is slow. But it works like other markets. It reacts…then, it over-reacts. It shoots. Then, it over-shoots. One study we saw said that housing prices were now down to “reasonable” levels. But there’s no law that says they can’t go to unreasonable levels. They were very unreasonable two years ago; they’re likely to be very unreasonable in the other direction before this depression is over. Hold on; maybe you’ll be able to get the median house in California for $199,000.
--from "Die Hard Illusions" by Bill Bonner

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