Pictures of the Real Estate Bubble Bursting
The bursting of the real estate bubble is no longer news. We can watch it unfold before our very eyes, as if we were watching some distant star explode a billion light years away. The three pictures shown below show a snap shot of the real estate explosion and subsequent implosion.
The first chart shows Washington DC housing prices from 2001 through part of 2008. The dates are fixed on all charts. Washington DC was chosen because of its similarities to the national average. You can see the darker blue bars, which represent the national average, are fairly close to Washington D.C.’s figures.
Overall, the nation’s capital had a rather mild expansion and an equally mild crash. Prices were up about 25% at the peak in early 2005, and down less than 20% in the middle of this year.
All charts from the NY Times
A more pronounced bubble is seen in the Los Angeles chart, below. LA prices rose over 30% at their peak (in mid 2004), and have plunged closer to 30% since.
The champion of the bursting bubble, however, is Las Vegas. This is the smallest market to be affected, so larger price swings would be expected. We are not disappointed! Their peak was up over 50%, close to the same time as LA, but much higher in percentage. The fall is equally dramatic, reaching over 30% by mid 2008.
The end of the plunge of prices is not in sight, but you can see from the shape of the bar charts that the pace of the drop is showing a slowdown. Charts do not control the real events, however, so one cannot say that the worst is over. Prices could unexpectedly begin falling even faster than they are now.
There is something of a consensus among real estate specialists that prices will probably continue falling through most of 2009. There are some who feel prices will continue falling well into 2010.
The importance of the turnaround cannot be overstated. Our entire economy is suffering a similar decline, and until house prices stabilize, it will difficult for the entire economy to begin a recovery.
For a more detailed analysis of the current economic crisis, see my most recent article on Seeking Alpha.
