Forgive them, for they know not history nor statistics

Southern California is a sunny, optimistic place. I guess that's why people here keep thinking that the bottom of the real estate market is just around the corner.

DataQuick analyst John Karevoll interpreted the prices and sales as a sign that San Diego real estate may be nearing the bottom of the post-boom period.

“Most of the declines in San Diego have happened,” Karevoll said. “Now it appears to be re-establishing a balance that we have yet to see for the (Southern California) region.”

Can't blame people for hoping, but this just goes to show how short our memories are. For example, take a look at this graph on San Diego residential real estate prices. It compares the 1987-1996 cycle (whith a peak in July 1990) with the current one (peak in November 2005) using the Case-Shiller price index.



Cycles are never identical, but they sure do seem similar so far! In the 1990's the peak-to-trough price fall took six years to be completed, so it's quite likely that the downward part of this cycle still has quite a ways to go.

P.S.: I promise that there'll be no more snarky biblical-themed titles!

Thou shalt not lie: NAR edition

I've heard the meme that "house prices are falling for the first time since the Great Depression" quite a few times recently (examples here and here). The source cited is the National Association of Realtors (the phrase appears in many of their documents).

I'm not sure how these folks came up with it, but its clearly nonsense. We only have to go back to.....1991 to find widespread falling real estate prices. The Case-Shiller indices, probably the most realiable data around, show that nationally prices fell 6.8% between the peak in October 1989 and the trough in February 1994.

Ironically, the NAR has been parroting this line for quite a while now, obviously expecting people to believe that home values hardly ever drop and only do so in the most extreme circumstances. Well, the lie has come back to bite them in the ass. Nowadays, it's more likely to inspire (unwarranted) panic than confidence.