Is The Real Estate Bubble Local?

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Turns out the numbers kind of show that it is.  There’s no doubt the national real estate market is not as strong as it was a few years ago, but just how bad is it?

The LA Times LA Land Blog posted yesterday comparing the Case-Shiller numbers by region.  They found two, what they call, “bubble belts”.  When you look at the decrease in values for Florida and the Southwest (Arizona, Nevada, California), the price declines from last year to now sit near 24% as an average.

How did the rest of the country fare?  They also compared other major market value and found the average value lost was about 8%.  What makes this worse is that the homes in the belts had so much more “correction” due to overinflated prices that the owners lost a lot more.

Case in point:
John Doe Mission Viejo Homeowner:   Buys in 2006 for $625,000 – 24% loss = $156k loss
Jane Doe Chicago Suburban Homeowner:  Buys in 2006 for $285,000 – 8% loss = $22k loss

Along these lines, I heard a great story on NPR two nights ago.  Comedian Jonothan Leigh Solomon, who actually wrote a political piece for Politico,  was discussing whether or not we were in a recession.  All jokes aside, he and the host had an interesting discussion on how much doom & gloom is out there when really there are just certain areas that are getting hit harder than others (especially us Californians).  For some food prices have gone up marginally and the only big difference is gas prices which can be accounted for more readily because those places haven’t lost a quarter of the value of their home.

For what it’s worth to lighten the mood, here are a few of his quips courtesy of Politico:

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  • Condor

    Well Sheila, the homeowners in MV and the rest of the county really didn’t lose all that much. I know CA has higher wages than a lot of the places – but not high enough to finance the bubble prices we’ve seen. So it was free bank money. Free to the borrower, and apparently if our congressional representatives kowtow to the almighty bribes, er, I mean lobbying they’ve received from the banks, free to the lender too! The only one not having a free lunch would be us, the taxpayers.