Great Depression move over. Current housing downturn worse, economist predicts
Our seemingly never ending housing market mess will soon have some unusual bragging rights.
The fourth quarter will see U.S. home prices plunge past the dismal record set during the darkest years of the Great Depression, predicts Stan Humphries, Zillow.com’s chief economist.
After the big run-up in the 1920s, home prices came crashing down to earth amid the global economic collapse from 1929 to 1933, falling 25.9 percent, Humphries notes. (He’s drawing his data from a study Robert Shiller did of the Depression years housing collapse.)
Right now we are at 25 percent, and heading downhill once again, with sales having collapsed from here to California with the end of the home buyer tax credit this spring.
“We will definitely get to that point – we will probably be past that point in Q4,’’ Humphries told me.
Zillow predicts home prices will plummet another 5 percent – for a total 30 percent decline from their bubble years’ peak – before bottoming out.
And we may equal another Great Depression milestone by mid 2011, if, as expected, home prices continue their downward slide.
At that point, home prices will have declined for 20 straight quarters, tying the Great Depression total, according to Humphries.
Of course, there are some obvious, key differences here.
The foreclosure crisis, as bad as it is now, still has not come close to rivaling the Depression, when half of all homes were either facing foreclosure or behind on their payments.
There are some echoes of course, especially with the decision by Cook County’s sheriff to declare Chicago a foreclosure free zone, but so far we haven’t seen armed mobs staring down bankers.
The jobless rate, as bad as it is, has not come close to Depression levels either, when it totaled as much as a quarter of the workforce – and stayed in that range for years.
Frankly, it's hard to compare today's disasters with what the nation saw during the Great Depression, with a dwindling reservoir of living memory of that earlier, global catastrophe.
I count myself lucky to have had parents who grew up during the Depression and World War II, even though I am 43. (My mother, now a relatively spry 84, had me when she was 40.)
But her recollections are scattered – being sent to the door with a loaf of bread when men showed up on the doorstep seeking help. She also recalls her Uncle Joe losing the family farm in Vermont and her grandparents living their last years in poverty, though, given the thin societal safety nets at the time, that might have happened regardless of the Depression.
Her father, a school teacher, managed to keep his job and had enough money to rent a rambling Victorian, though Harold and my grandmother Edith, having come of age as young adults in the more free spirited 1920s, always had a penchant for living beyond their means. (Hence my mother Nena’s recollection of the power being cut off on a semi-regular basis.)
What’s your vote? Is it fair to compare the current housing downturn with that of the Great Depression? Or is this a stretch?
