Professer Case: Glass Half Empty or Half Full?

Making His Case – An Conversation with Professor Karl Case – Paper Economy – 1 August 08

For me what is encouraging in the numbers that came out Tuesday was that most states don’t seem to be falling into the abyss. We have at least three stories: 1. simple glut in Florida, Arizona and Nevada. These will simply be written down. 2. A boom that was a bubble in California and to a lesser extent in the Northeast: California has been through this detoxification three times and it seems to survive every time. For many, it is unpleasant, but most who have equity left are back in the game soon.

If you believe the Flow of Funds data, during the period 2000 to 2005 we added $10 trillion to the stock of residential capital valued at replacement cost and land ($5 trillion each). Since 2005 we have added over a trillion more in capital, but we have given back about $1.7 trillion in land value. In addition, our 10 city composite is still 82% above its 2000 value. Is the glass half empty or half full? All I know is that it isn’t completely empty, and when glimmers of hope appear, we should acknowledge them.

Worthwhile reading the entire interview.