Trouble for housing?
Robert Shiller -- yes, of the Case-Shiller Housing Index -- thinks there's more pain in store for housing.
Today, we need to worry about strong headwinds, as the government begins to withdraw its support of a still-troubled lending industry and as foreclosures are dumping millions of homes onto the market.
Consider some leading indicators. The National Association of Home Builders index of traffic of prospective home buyers measures the number of people who are just starting to think about buying. In the past, it has predicted market turning points: The index peaked in June 2005, 10 months before the 2006 peak in home prices, and bottomed in November 2008, six months before the 2009 bottom in prices.
The index’s current signals are negative. After peaking again in September 2009, it has been falling steadily, suggesting that home prices may have reached another downward turning point.
In addition to the government removing the extraordinary supports it put beneath the housing sector when the economy bottomed out in 2008, we're also likely to see interest rates rise over the next few years.
By
Ezra Klein
|
April 12, 2010; 1:02 PM ET
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Posted by: bsimon1 | April 12, 2010 1:14 PM | Report abuse
With all the money being "printed" for gov't stimulus, etc., the usual route is to become inflationary...so...if you can hang onto your house while inflation takes its course, your fixed rate monthly mortgage will go down since everything else is going up, theoretically...happened in the 70s like that anyway. Don't know if that phenomenen would help fuel housing again or not.
Posted by: Texican1 | April 12, 2010 1:39 PM | Report abuse
Once the prices drop another 20% things will turn around.
Posted by: obrier2 | April 12, 2010 2:18 PM | Report abuse
If prices revert to the mean then yes, another 20% drop will probably do it. There's a huge backlog of homes that need to wash through the system. The "second wave" and probably a third wave, too.
Instead of rising wages we got tax cuts and HELOCs. You could take your tax cut and load your leased SUV with made-in-china junk from Wal-Mart and fill up your three-stall garage with it. Makes a person feel downright prosperous, doesn't it?
Posted by: luko | April 12, 2010 2:31 PM | Report abuse
I don't know why this is "trouble" or "pain." Why would a 20-something want housing prices to rise? I'm a homeowner with grown children. I view my house as a place to live, not an ATM. I hope housing prices stay low or fall, because I want my children and their friends to buy houses and raise families in the coming decade.
To me, "trouble" in housing means prices that people can't afford and "pain" means mortgages that eat up all their discretionary income.
Posted by: Bloix | April 13, 2010 11:03 AM | Report abuse
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This shouldn't be a huge surprise. Unemployment is high, wages are flat, mortgage rates are rising. None of those bode well for housing.