I came across an article about housing prices and the possibility that the decline could be worse than the great depression. There are two things that strike me about this brief article.
First, it hints that we may be near the bottom as far as the decline in home prices is concerned. While it does say that we could drift down some more, it gives us an indication that the crash, and the most difficult decline, is over. It does dispel the myth that prices will jump right back up. The rate of increase in housing prices in a normal market is slow and steady. As we proceed through the cycles we have adjustments (most not as severe as this one) but historically, real estate is a slow and steady march upward. When we hit the bottom, it will take several years for prices to start going up and they will not recover all of their losses for many years.
Second, even though prices may have plunged on a level equivalent to the great depression and our debt ratio is so extremely high (which is a concern for the overall economy), we still haven’t had a repeat of the changes in the landscape of the American public like we did in the 20′s & 30′s. We don’t see the Joad family. We don’t see millions of people crossing the country looking like the Beverly Hillbillies searching for that elusive job. Yes, we see millions losing or giving up their homes, but the impact has been different. These people have shifted from owning to renting. They have shifted from spending lavishly to being forced (largely by not having access to enormous amounts of credit) to spend conservatively. They have shifted from one income to two and not raised their nose at that minimum wage job that the business owner had trouble filling a couple of years ago.
Yes, the housing correction has been extremely painful, but more and more indicators are that the worst is over and while the glory days will not return in the near future, we do know that they will return. They always do.