The S&P/Case-Shiller home-price index dropped 10.7 percent from January 2007, after a 9 percent year-on-year decrease through December 2007. The gauge has fallen for 13 consecutive months.

Here’s an inflation-adjusted chart of the CSI:

http://calculatedrisk.blogspot.com/2008/03/real-case-shiller-house-price-index.html

Via John Crudele at the NY Post, serious consideration is being given to Bove’s idea:  give homeowners new mortgages at 1% for 30 years guaranteed by a federal agency, a la Section 8 housing:  “Let’s get back to the simple problem, i.e. too many people cannot pay their mortgages,” says Bove.  “The simple solution is to find a mechanism to pay the mortgages.” Once that happens, he says, the securities these mortgages went into will be able to trade again. And all the other layers of securities built upon these mortgages will also start to regain their value.  What mechanism can be used to pay the mortgages? (more…)

The median price of existing homes in the U.S. dropped by 1.8% during 2007.  This is the first time it has declined in the 40 years data has been kept and likely ever since the Great Depression of the 1930s.  See NAR table of cities: msapricesf.pdf

Dec. 2007 data:  http://bp1.blogger.com/_ym8Q9yxUg34/R5i9pD2bdCI/AAAAAAAAB7c/67o8VtsVV34/s1600-h/ehs1207rollup.JPG

Click  to Bloomberg: http://bloomberg.com/apps/news?pid=20601087&sid=aDBJGL77XCI0&refer=home

HUD is offering at least 120 houses in Cleveland for sale at $1 each.  I don’t think fiscal stimulus will fix this, but it does help to answer the question of how low can home prices really go.

http://blog.cleveland.com/metro/2008/01/the_foreclosure_crisis_what_it.html

Interested in a glimpse of things to come?  Cleveland’s housing bust started early - read here Mother Jones’ “Prime Suspect” — a compelling description of life in Cleveland’s Slavic Village area was already like in 2006.  This may be what neighborhoods all over the U.S. will be like as housing prices decline:  http://www.motherjones.com/news/feature/2006/09/prime_suspect.html

(more…)

Mainstream media reporting via Steven Pearlstein in “Caught in Downdraft and Starting to Panic” (Washington Post) -  we’ve moved through the various stages of economic grief and moved into panic mode?  Hattip Reggie Middleton

• Willful blindness. (“Bubble, what bubble?”)
• Denial. (“House prices never fall. It’s only those speculators in Las Vegas and the Gulf Coast.”)
• Rationalization. (“Maybe subprime did get out of hand, but it’s really a small part of the market.”)
• Fantasy. (“Things should be pretty much back to normal by the second half of ‘08.”)
• Anger. (“If it weren’t for those yahoos up in structured finance…”)
• Capitulation. (“We might as well take these write-downs now and get it over with.”)
• Depression. (“This is going to get worse before it gets better.”)

and then….PANIC..culminating in unraveling of CDO situation.

My comment:  Never fear:  According to CNBC, this is all simply a self-fulfilling prophesy, not reality-based — and all we need is another Wall Street “innovation” like a new kind of CDO! 

The Return of Negative Equity as House Prices Fall Again? « Stop Repossession Org UK