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Wednesday, August 27, 2008

Quote of the Day: Thornberg on Housing

by Calculated Risk on 8/27/2008 12:50:00 PM

"People are saying the reason prices are falling are because of all of the foreclosures, but the foreclosures are happening because the prices are falling. They've got it backwards. The prices are falling because they're too freakin' high."
Chris Thornberg, Beacon Economics, Aug 27, 2008
The above quote is from a Voice of San Diego article by Kelly Bennett: Local Prices Down 30 Percent from Peak

The article notes that there has been an increase in sales recently, but this is probably a "false dawn":
The 10.5 percent [sales] increase in July compared to July 2007 was the first year-over-year increase in more than four years, according to DataQuick Information Systems.
Usually, an increase in sales means a market is recovering, and the bump up in sales has been touted as a potential turnaround for the local market.
But foreclosure sales counted for a large portion of that increase, leaving analysts expecting continued price declines.
"When you see sales begin to increase, that's often an indicator of a market turning," said Chris Thornberg, founding partner at Beacon Economics and former economics professor at the University of California, Los Angeles. "But this is a bit of a false dawn."
And prices are now falling for luxury homes too:
[E]ven luxury homes are now showing weakness. ... That "prestige homes" index found that in the second quarter this year, values on many such houses in San Diego dropped 2 percent from the first quarter and 7.8 percent from second quarter 2007. The average price among those homes has fallen to $2.02 million, from a peak of $2.19 million in the second quarter 2007.
No area is immune. The housing bust is now moving up the price chain.