Monday, February 23, 2009

Dow Plummets to 7,114: We're Back to 1997

The Dow dropped another 250 points today on concerns of bank nationalization (deepening recession, mortgage bailout, more Citi handouts, more AIG handouts, etc.). Call what's coming "receivership," "preprivatization," "temporary," "stakeholder," etc., but we're guessing that by a week from now the entire banking landscape is going to be trasformed.

Before the latest cliff diving, the Fed called the gain in "family wealth" a "mirage," according to

[T]he Fed found that the median net worth of American households increased by a seemingly healthy 17 percent between the end of 2004 and the end of 2007.

But the gains were wiped out by the collapse in housing and stock prices last year. Adjusting for those declines, Fed officials estimated that the median family was 3.2 percent poorer as of October 2008 than it was at the end of 2004.

So now how much poorer is the median family? A number of economists and analysts have suggested the housing bubble won't truly be over until prices are back to 1998 levels. Ditto the stock bubble. The market has achieved the number. How long will it take national housing prices to follow?

To see the Four Bad Bears graph in larger format, go to Calculated Risk or To remember 1997 (or learn about it) go to The Big Picture.

There's more bad news coming this week: the Case Shiller Price Index, New and Existing Home Sales, GDP report. The home sales will be bolstered by foreclosure sales in the West and Florida....


downtownenvy said...

Well, it looks like the hits just keep coming. Luckily, we live in Charlottesville. Just keep clicking your heels together and repeating, "There's no place like home, there's no place like home." That's what everyone else around here seems to be doing.

Do you suppose that even though our fair city is home to SNL that most of the greater real estate community, other than a choice few, just ignores financial news feeds?

real world said...

Come on! It's a great time to buy!

Buy your house at a high price! Then sell low!!!