Economist Robert Samuelson argues today in the Washington Post that home prices have to fall at least 20%, back to 2004 levels, before sales can start to climb again and the housing-related economy revives.
Such necessary-medicine arguments are tough to make. Especially when you’re talking about people losing their homes through foreclosure. But, as Samuelson notes, home prices climbed more than three times as fast as incomes from 2000 to 2006. That’s unsustainable. A fall back to 2004 price levels would still leave many homeowners with 30% gains over the decade.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.