The Lex Column
Nationally, home prices have fallen 23 per cent since the July 2006 peak, according to the Case-Schiller index, bringing them back to 2004 levels. Returning to 2001 prices, when the housing boom began, requires a further 25-30 per cent drop. At the current rate of decline, that will take just more than two years, meaning housing is only halfway through its slump.
Such a timescale reflects the long process of cutting Americans' debt. Lombard St Research, in a report for Knight Vinke, calculates that to move the proportion of household income spent on debt (at normal interest rates) from the current 18 per cent back to the long-term average of 15 per cent, may require zero growth in lending for the next three years.