The new Case-Shiller housing price data was recently released, and cities like Los Angeles are still reporting housing price declines of 22 percent. Miami is down almost 29 percent.
S & P’s spokesman declared that “we see no evidence that a recovery in home prices has begun.”
These are March numbers, and I’m pretty sure that “popular” economists have been declaring the economy at bottom since at least March. We’ll see what April numbers say, but the enthusiasm over the imminent recovery is perhaps misplaced.
With so few people qualifying for mortgage loans, and with so many people with terrible credit and massive consumer debt, it’s difficult to imagine the scenario that will lead to all the excess housing inventory being mopped up any time soon.
UPDATE: The mortgage bankers association released new data today showing that mortgage defaults are in no danger of going down. As noted in the comments, it is of course a good thing that home prices are going down because that indicates that some of the malinvestment due to the bubble is being repaired. However, the malinvestment has been so incredibly bad, that the continuing decline in prices indicates that we still have a long way to go. As long as prices are moving down, it’s a pretty good indicator that the bubble has still not been repaired and recovery is not on the horizon. What we need is a fast and steep fall in prices, but the bailouts ensure that we’re in for a long, prolonged ordeal instead.
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. . . “popular” economists have been declaring the economy at bottom since at least March.
Economic Wisdom
Wednesday, May 27, 2009
Who Has A Perfect Record Of Economic Forecasting?
“We always know where he stands . . . when he wraps up an interview.” ( http://www.campaignforliberty.com/blog.php?view=18908 )
True.
What a contrast between the amorphous and anonymous poll of economists (mentioned at the beginning of the report) who supposedly say that the recession will come to an end shortly. Who are they? Let them go on record and say “If I am wrong I will admit that I am a quack and never again make the claim that I am an economist!” They would rather remain anonymous!
Then you have the super-quack Paul Krugman (Nobel Laureate of Wackonomics) who, when the economy falls further into the abyss, will claim that it was because no one took his loony advise of exponential Keynesian quackery!
Yes we do know where Ron Paul stands and if you look back in the past you will see that he predicted the mess we are in now. And as a classical liberalism scholar and an Austrian economist he knows exactly where we are going unless there is real change.
For example: If the Federal Reserve is audited and the people demand justice then the future will be somewhat different than if everything is kept as it is. Ron Paul would then adjust his prediction and again be on the mark!
So, 90 percent of economists say they see the end of the recession sometime around the end of the year. My question is this: how do they know this?
Of course there isn’t. The market is still choked with condo’s, townhomes, and half-finished subdivisions and the government won’t let the correction happen. There will be another round of unemployment associated with the bust in commercial RE and retail and their derivative activities. The fundamentals have not changed one iota, and are probably getting worse.
This is actually great news. I heard a news report just last night that first time home buyers are now finding homes they can purchase. The lower prices fall the sooner we will begin to recover. Contrary to what the government keeps saying about stimulating a price recovery we need low housing prices. What else is affordable housing?
Richie,
They don’t know it. I’m guessing some of them actually believe it because they believe that Keynesianism makes some sort of sense, and there’s some formula they can plug numbers into and arrive at a WAG on the date of recovery. As for the rest, it’s a little white lie, told to “restore consumer confidence” in the economy and hopefully spur people to get out there and spend, spend, spend, and stop thinking about what’s going on in DC.
“â€â€â€Dick Fox writes
The lower prices fall the sooner we will begin to recover. Contrary to what the government keeps saying about stimulating a price recovery we need low housing prices. What else is affordable housing?â€â€â€â€
You have not been listening to the government, affordable housing is not housing that people can afford. It is having a crony contractor build a house for $500,000 and then either rent or sell it as though it cost $250,000 and then make others who don’t get to live in the house pay the difference between a $250,000 house and what it actually costs to pay for a house that costs $500,000.
They way you want to do it has people actually paying their own way and buying what they can actually afford. That is considered to be crazy talk in Washington.
The way the government wants to do it opens up all sorts of opportunities for kickbacks, crony deals, special rules for special people which politicians and bureaucrats can used to increase their power and wealth and reward their special friends in “private†business
“S & P’s spokesman declared that ‘we see no evidence that a recovery in home prices has begun.’”
I love it when I hear lines like this. Although most economic “experts” now admit there was a (quasi) housing bubble, that confession is usually followed by something absurd like the above. I wonder what is considered recovery – a return to bubble prices?
Well, before the FR money pumping machine houses in a particular area were on average equal to the average annual pay in an area. Last I checked, the average annual pay in LA wasn’t 300K. Also, typically crashes like this cause things to under-correct. Also, this “stimulus” will probably drive up prices long before they drive up pay, making it harder for people to pay on their already excessive mortgages. Plus most of these mortgages are ARM’s and started out with introductory low interest rates that will jump sharply. So IMHO, we have a long long long way to go before a bottom.
Finally, contrary to myth houses are not like like factories, infrastructure, and R&D. A house is NOT an investment, it is consumption. Getting people to go massively into debt to buy houses is no more productive than getting people to go massively into debt to buy clothes. It won’t end with more prosperity, just more trouble.
I’m not going to be inclined to believe housing correction is over until all the TV shows about “flipping” are off the air. Maybe the whole HGTV network too.
Y’know, it’s interesting that you mention HGTV, ChanceH. I’m in the midst of a basement remodel on our house, and we’re planning a kitchen remodel and an addition to be completed in the future. Our primary reason for the changes is to enhance our own enjoyment of our home, but added resale value nonetheless always figured into the decision. Now, though, the consideration for resale is much less prominent, and it’s kind of liberating to not have think about it so much.
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