NYU economist Nouriel Roubini has been a controversial voice in the debate about the length and depth of the real estate downturn. Roubini has been more pessimistic than many other economists, but his arguments are very compelling. In an interview yesterday on Tech Ticker, Roubini estimated that the national ‘top to trough’ drop in home prices could be 30%, with a bottom not coming until possibly sometime in 2010. (Other economists have weighed in with more conservative predictions of top-to-trough drops in the 15% to 18% range.)
Of course, there will be wide regional variations. Areas that experienced overbuilding and widespread speculation will likely see the biggest drop. (The Case Schiller Index data for April 2008, the last month available, already shows Miami and Las Vegas prices off just under 30% from their peak, with southern California markets not far behind. The New York Metro area, by comparison, is only down about 7%.)
If the 30% top-to-trough number holds true for Sullivan County, that would translate into a bottoming out of the median sales price at $140,000 (from a peak in June 2007 of $201,000) and the average sales price at $176,000 (from a June 2007 peak of $252,000). The June 2008 3 month tally for Sullivan was a median sales price of $163K and an average of $200K, drops of about 20% from their 2007 peaks.
If you accept Roubini’s estimate, as well as the concept of regional variation, the big question is whether Sullivan County has experienced the lion’s share of its hit or has further to go. Pessimists, of course, will jump on the ‘further to go’ bandwagon. But there are some indications of price stabilization — June’s 3 month median sales price of $163K was actually up from the low of $150K in April and May, and its looking like July’s 3 month median will come in about $170K.