Free-Fall Ain’t What It Used to Be (Updated)

Dr. Krugman is concerned about the economy:

Home prices are in free fall. Unemployment is rising. Consumer confidence is plumbing depths not seen since 1980. When will it all end?

Prudently, he corrects himself a little (but safely away from his opening eyecatcher):

Specifically, real home prices, that is, prices adjusted for inflation in the rest of the economy, went up more than 70 percent from 2000 to 2006. Since then they’ve come way down — but they’re still more than 30 percent above the 2000 level.

and goes on to consider the case of Los Angeles. Fair enough. Let’s consider Los Angeles, one of the metro areas most affected by the decrease in housing prices. Here’s a graph of LA home prices:

and, yes, there’s a little downturn there. Down from their peak but still higher than they were in 2004. Here in Chicago home prices have fallen less than 10% over last year. But “housing prices are falling a little” isn’t much to base a call to the barricades on, is it?

I do think that this supports the point I’ve been making here for a while: the effects of the mortgage crisis and, I think, the economic turndown generally are very markedly regionalized. That suggests a highly regionalized solution, no?

Update

Calculated Risk has produced a much better graphic of the Case-Shiller index for Los Angeles and, sure enough, you can see that housing prices have given up their increases since 2004. Does that constitute “free fall”?