The "Current Housing Recession is Rivaling the Great Depression’s Real Estate Downturn [and] Will Easily Eclipse It In the Coming Months" → Washingtons Blog
The "Current Housing Recession is Rivaling the Great Depression’s Real Estate Downturn [and] Will Easily Eclipse It In the Coming Months" - Washingtons Blog

Wednesday, November 10, 2010

The "Current Housing Recession is Rivaling the Great Depression’s Real Estate Downturn [and] Will Easily Eclipse It In the Coming Months"

Zillow's Stan Humphries said:

The length and depth of the current housing recession is rivaling the Great Depression’s real estate downturn, and, with encouraging signs fading, will easily eclipse it in the coming months.
During the Great Depression, home prices fell 25.9 percent in five years. The U.S. housing market is now down around 25 percent from its peak in 2006.

As housing price expert Robert Shiller pointed out in September 2008:
Home price declines are already approaching those in the Great Depression, when they plunged 30% during the 1930s [i.e. over a 10-year period]. With prices already down almost 20%, it's not a stretch to think we might exceed that drop this time around.
As I wrote in December 2008:
In the greatest financial crash of all time - the crash of the 1340s in Italy .... real estate prices fell by 50 percent by 1349 in Florence when boom became bust.

How does that compare to 2001-2007? The price of Southern California homes is already down 41% [that was before the first-time homebuyer credit, Hamp and other governmental programs temporarily boosted prices]. Southern California hasn't fallen as fast as some other areas, and we're nowhere near the bottom of the market.

Moreover, the bubble was not confined to the U.S. There was a worldwide bubble in real estate.

Indeed, the Economist magazine wrote in 2005 that the worldwide boom in residential real estate prices in this decade was "the biggest bubble in history". The Economist noted that - at that time - the total value of residential property in developed countries rose by more than $30 trillion, to $70 trillion, over the past five years – an increase equal to the combined GDPs of those nations.

Housing bubbles are now bursting in China, France, Spain, Ireland, the United Kingdom, Eastern Europe, and many other regions.

And the bubble in commercial real estate is also bursting world-wide. See this.
In addition, the percentage of Americans who owned houses during the 1930s was much lower than today, which means that a larger portion of the public is being hurt from falling home prices today as compared to the Great Depression.


  1. Thank you for your informative and thoughtful reporting.

    I'm quoting you at my site.

    Again, my thanks!


  2. Thanks for this info. I've read some mortgage rates here in Canada, and I'm surprised to know that the rates are low for the last few months. A Calgary mortgage company is a good example. They are offering the best options for homebuyers. Many Canadians are taking this decline in home start. Mortgage rate is quite attractive for some because of the different and innovative terms in home loans. Alberta is where houses are being sold in very low rates today.

  3. One may mant to observe the fact that the 1340's crash was 50% in terms of gold, while the mentioned 41% California crash is in dollars. Multiply that with how much the dollar fell against gold and you get the real picture. We're in the deepest ditch and we're not done yet. Not by a long shot.

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