BIG DROP in home values as reported by this just released Case/Shiller National Home Price Index. Realtor Coaching Students…expect more negative news over the next 3-4 months….
Clearly, the bubble has far more deflating to go before we finally see any sort of leveling off in home price depreciation.
Q3 2008 using the Case-Shiller National Home Price Index. Thanks to Calculated Risk for this graph.
Click on image for larger graph in new window.
This graph shows the price to rent ratio (Q1 1997 = 1.0) for the Case-Shiller ational Home Price Index. For rents, the national Owners’ Equivalent Rent from the BLS is used.
Looking at the price-to-rent ratio based on the Case-Shiller index, the adjustment in the price-to-rent ratio is probably 60% to 70% complete as of Q3 2008 on a national basis. This ratio will probably continue to decline with some combination of falling prices, and perhaps, rising rents. The ratio may overshoot too.
The second graph shows the price-to-rent ratio for three cities: Los Angeles, Miami, and New York. On this monthly graph, January 1997 = 1.0. The OER from the BLS for each individual city is used.
Some combination of falling prices, and perhaps rising rents, will probably push the ratio back towards 1.0. By this measure of housing fundamentals, it appears that Miami has corrected about 80% or more of the way to the eventual bottom, Los Angeles about 65%, and New York just over 40%.
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