No this isn’t news for Vancouver, but it is about ways of predicting the future of the housing market. This MSNBC article talks about some of the different methods of analysing the housing market and how they all end up with pretty much the same view: the largest expected housing declines in the US market will be in some of the markets that were previously the hottest: Miami, San Diego, Las Vegas, Washington D.C. and Boston to name a few.
Mark Zandi, chief economist at Moody’s Economy.com released a huge housing report last week, predicting house price drops next year by as much as 18.6 percent in Cape Coral Florida, a 17.2% decline in Reno Nevada and a 15.7% drop in Stockton California. To conduct his analysis, Zandi looked at the supply and demand of housing, changes in mortgage rates, demographic trends, the job market, and new housing.
The other angle on real estate price prediction comes from the Chicago Mercantile Exchange which began trading futures and options contracts on housing prices in 10 markets across the U.S. in May. Investors are predicting declines in all 10 cities listed on the CME over the next 12 months.
The article points to the way these two approaches to prediction yeild some similar results:
“In the cases where they cover the same ground, Zandi and the CME traders have some uncanny similarities. For instance, Zandi expects San Diego to drop 8.4% through the second quarter of 2008, while the futures market is expecting a drop of 8.2% by August, 2007. In Washington, Zandi expects prices to drop 12% through the second quarter of 2008, and the futures market expects a 7.7% decline by August, 2007.”
It will be interesting to see how accurate any of these predictions turn out to be. On one hand you’ve got an economist who has done a lot of research, and has a single point of view. On the other hand you’ve got a group of people, potentially from all walks of life, putting up money betting against future house prices. Either way it looks like prices dropping across the USA and if that ends up happening this will be first decline in US national house prices since the Great Depression.