Top of the News: It wasn’t too long ago that housing economists thought that the collapse of the bubble would merely “return the market to normal.” I’m not making this up. Now we know that the economy is going to redefine normal in a host of ways, especially for real estate. As the S&P/Case-Shiller house-price index showed record price drops in January, Seattle was one of 14 of 20 metropolitan areas suffering a year-over-year decline of more than 10 percent.
Seattle came in at a 15-percent decline. Phoenix was worst, again, with a nosedive of 35 percent, while Denver and Dallas did best, with prices falling “only” around 5 percent. Portland saw its house prices drop 14 percent. Admittedly this is a trailing indicator — showing January activity. We don’t know if this is bottom, and if efforts to free up mortgage money will begin a recovery. Working against this scenario are continued high debt levels and job losses, as well as the spiral caused when people get underwater — owing more on their mortgages than the value of the house.
As for Seattle, we’re definitely no longer Teflon — the metro area ranked in the middle of the 20 areas surveyed. The big question is whether the price spiral will get worse.
The Back Story: This economic shock of the Great Disruption will change us. Some early evidence is already in, thanks to a new report from the Brookings Institution based on the analysis of Census and other data. Wanderlust Americans are moving less. Within-country moves have slowed considerably over the past two years. It’s especially evident in former hotspots such as Las Vegas, inland California and Florida. (You can download the full report here).
About 4.7 million people moved across state lines in 2007-2008, down from 8.4 million at the beginning of the decade. Fortunately for the Seattle area, its economy was not based heavily on large increases in population. Brookings data show we remain among the elite metros with what really counts in competitiveness: A heavy concentration of college graduates.
We’re becoming a more diverse nation, although some long-term trends continue. About 80 percent of the U.S. foreign-born population comes from Latin America, compared with 20 percent in 1970. Racial and ethnic minorities comprise 44 percent of the population under 15. And these migrants are moving into the suburbs, as opposed to the old pattern of starting out in center cities. How this composition changes with the recession remains to be seen.
Today’s Econ Haiku:
On a scary ride
The roller-coaster drop stops.
Housing’s still screaming