Tuesday, June 19, 2007

90s Housing Bust v. Now

UPDATE 1: 'Piece of Cake' Housing Downturn Exceeds 90s 'Depression'
UPDATE 2: 12-Month Price Drop Exceeds Entire 1990s Decline

"We survived the market change of the early '90s, a real depression, so this current one is a piece of cake."
-Tracey Saizan, President of the Sacramento Association of Realtors, Sacramento Business Journal, December 15, 2006

[T]his sagging market isn't much like the 1990s version. Some analysts say the reasons help explain why the present downturn may be shorter and less severe.
-Sacramento Bee, June 20, 2006

Is the current down cycle a "piece of cake" that will be shorter and less severe than the 1990s housing bust? The New York Times recently published a graph showing nationwide home prices falling more rapidly this time around.

How is the Sacramento real estate market faring? Recently, this blog reported that the Sacramento housing market suffered the second largest price drop in the nation, according to the government's House Price Index (HPI). Sacramento's HPI fell 4.4% in the first quarter. Since peaking in the last quarter of 2005, the price index has declined about 4.6%.

The following graphs compare Sacramento's current housing bust with the 1990s bust (peak to bottom). HPI tracks the value of single-family homes and is not adjusted for inflation. The first two graphs show the change in the index relative to their peaks. Click on each graph to enlarge.

Sacramento's previous housing bust took over five years (1991-1996) to reach bottom and over nine years to recover its peak (1991-2000). That housing bust came after an almost eight-year boom in which Sacramento's price index increased by 93%. By contrast, the housing boom which preceded the current bust lasted over nine years with the index rising 195%.

This is a close-up of the first five quarters of each housing bust.

The next two graphs show the year-over-year change in Sacramento's price index.


Gwynster said...

Excellent work Lander

We (sacramento) made the main page at CNN Money today with our foreclosure listings. We're a proud 5 away from being the worst in the nation >; )

Perfect Storm said...

The graphs speak for themselves.

Housing/Mortgage Doom 2007.

Were right on track for a 50% decline by 2009.

buying time said...

Love the data/analysis Lander!

Hate the implications....3 more years of renting (and blogging)...sigh.

Diggin Deeper said...

Interesting graphs...anyone know how long the late 80's-90's boom(?)lasted in Sacramento and what the percentage rise was over that period? Duration and the increase might give us information with respect to how long this one's going to take before it bounces back (if it ever does).

In the 90's bust it looks like Sacto prices head faked in quarter 4, quarter 11, and even quarter 15, only to end up close to zero gain after about 5 years total.

Regarding this bubble, there's not a whisper of a positive blip so far...like a stone falling out of the sky. It'd be crazy to buy this market based on this comparison...at least give us some hope that this thing will bottom!

Thanks for the eye candy Lander...

Diggin Deeper said...

Article found on CNBC's website:

Bear Stearns Funds on Brink of Collapse: WSJ

According to the WSJ, two Bear Stearns hedge funds are on the verge of collapsing.

Hey it only looks like about $8 Bil in loans so what's the big deal?...

This house of cards is about to lose a couple of pieces of siding and who knows how many more are about to crater...Investors will get hammered and more of these hedge funds will show up with empty pockets...

These are systemic problems that are now permeating the financial markets and the implications aren't what you'd call rosey. Look at all the scrambling that Merrill and B of A are doing right now to offset the problem.

Just for fun, add in the numbers for the mortgage app drops this month and the drop in housing starts that came out yesterday and we're brewing some bad tea.

It's looking like there might not be any correlation to the 90's bust as this one's got a personality all its own.

Strap yourself in and get ready for the ride...it's just beginning to get interesting.

Perfect Storm said...

Strap yourself in and get ready for the ride...it's just beginning to get interesting.

Yes indeed, and what a ride it will be.

Patient Renter said...

These graphs are great. I like to use historical references above all else to justify arguments of a price drop. Any thinking that we could have such a runup without a big fall is obviously ridiculous, given history.

# said...

Great graphs lander!

norcaljeff said...

For some reason I hear the song "Free Falling" by Tom Petty playing in the background.

Patient Renter said...

Lander, do you plan to update these for the next quarter? I can't wait to see some updated stuff.

writer said...

I have a hunch the blogosphere is going to be humming at least in Placer County: we just got our re-assessed tax statement. YIKES! Riding this out, I think, will take 16-18 months. And that's if we don't get Hillary in the White House. If she wins, it could get a lot, no wait, MUCH MUCH worse, because the Dems are already eyeing the cap gains margins for tax increases. We shall see

SacramentoCrash said...

Tracey Saizan, President of the Sacramento Association of Realtors is a salesperson.

Not a real urban land economist.

You know smile, dress nice, have a nice leased car, know how to get from point A to point B and you get a huge commission if and when the shack sells.

SacramentoCrash said...

Oh yeah, you are going to see a _____load of Dodge Ram, Chebies and Furd F150 pickups coming on the market.

Sacramento Luxury Cars:

Dodge Ram Truck with full size extended cab jacked up off road style 20 inch chrome rims (dubs) loud FlowMaster mufflers with Country and Western blaring out of the windows. (in the suburbs)

Old Buick or Oldsmobile Granny Wagons with tinted windows and dubs with 200 watt subwoofers in the back deck (in the hood).

Sacramento Luxury Restaurants where you go on your first date:

Logan's Roadhouse
El Novilero

You don't have long enough graph paper to show the downward curve.