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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: damainman who wrote (24537)2/28/2005 3:49:52 AM
From: Elroy Jetson  Read Replies (5) of 116555
 
If you remember California in 1989 and 1990, the inventory of homes for sale remained extremely thin - until it was obvious that the only homes which sold were those priced substantially below previous sales.

Home prices were weak in the Fall of 1989. Fred Sands, owner of his euphonious brokerage firm, was quoted in the Los Angeles Times that this brief pause in upward appreciation was a rare opportunity for potential home buyers.

By the Spring of 1990, it was clear that prices were falling. Only then did the inventory of homes available for sale start to rise substantially. As prices continued to decline the inventory continued to rise. Once prices declined below the mortgage value of most home owners, the inventory shrank dramatically.

By 1993, increasing numbers of home went into foreclosure and price reductions were now driven foreclosed homes offered by banks. By 1996 virtually all of the homes offered for sale, in the portion of Los Angeles I followed, were foreclosures.

A small number of homes were also offered by families being transferred by an employer willing to subsidize the loss on their home.

Wheat prices may decline only when there is a surplus of wheat for sale, but the market for homes behave differently.
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