Home Price Declines Seem to Accelerate - Hyperdeflation?
That is the perception by some recent surveys. Home prices declines could accelerate just like stock price declines accelerate during a crisis.
Prices in areas such as Las Vegas and Miami dropped more than 20 percent, while Charlotte, NC alone stood out with an increase in the top 20 US cities in the survey. But living here in Charlotte, it would appear to me that even the Charlotte hold out is a bit of a fluke. The numbers for Charlotte a month after the survey seemed to indicate that Charlottes hold out increase was more about a delay in change and a slower moving bubble.
That said, this survey and the new idea that home prices could drop this fast is bad news for mortgages. If a property considered ‘real property’ does not have ‘real stable’ value, then as an asset it can not necessarily back itself. That means that the risks that banks take on real estate is actually higher. Higher risk always translates into higher interest rates. That means higher buying prices, slower sales rates and slower demand, which also drives down home prices even more. We are looking at a situations that is almost like hyperdeflation. In the past the Federal Reserve has always tried to put a corset on inflation, but in this situation we almost need a tourniquet on deflation.
