Tag Archives: housing bubble

Another Housing Bear leaves the Woods

Another Housing Bear leaves the Woods

by CalculatedRisk on 5/04/2012  

The list of former housing bears arguing that house prices are now at or near the bottom is growing. Even Professor Robert Shiller – without making a prediction and suggesting prices could “overshoot” – said this week on CNBC that “[house prices] are back to normal levels”.

Even your local Grizzly Bear left the woods earlier this year.

Now from Mark Kiesel at Pimco: Back In

I’m back in. Yes, I’ve finally purchased a house after renting for the past six years. I sold my previous house in May 2006 after nearly a decade of being a homeowner because I was convinced U.S. housing prices were set to fall, and I wrote about it in prior Credit Perspectives pieces, “For Sale” (June 2006) and “Still Renting” (May 2007). Many of my friends, family and colleagues have asked me over the past several years, “Are you still renting?” In fact, that is probably the question I’ve heard most often from clients, consultants and the media over the years.

So, next weekend I’ll be moving into a house. My decision to buy was mainly driven by the improved relative value of U.S. housing. …

Today, however, U.S. housing looks like a decent place to put money over the next several years. I’m not sure if U.S. housing prices have bottomed – only time will tell – but there are many more positives today than there were six years ago when I sold my house

For those of you renting or on the sidelines, I recommend you at least consider getting “back in” and buying a house in the U.S., particularly in an area of the country where supportive fundamentals and policies could cause inventories to fall and job growth to improve.

And from Bloomberg: Pimco Housing Bear Kiesel Says It’s Time to Start Buying

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How the 2007 Housing Bust Stacks Up Historically

HOW THE 2007 HOUSING BUST STACKS UP HISTORICALLY

3 MAY 2012 BY SOBER LOOK

By Walter Kurtz, Sober Look

Goldman recently completed a thorough study on housing busts around the world and throughout history. The study covered the time period since 1890 for some dozen “developed” economies (including for example the US housing bust of the 1920s). The idea was to assemble statistics on the pre and post-bust economic trends. That in turn allowed them to gauge what was or was not typical about the US 2007 housing bust.

In general the study found that after the bust, the economy experiences the following trends:

1. The GDP growth is sluggish for a prolonged period
2. High unemployment and relatively high output gap persists
3. Double-dip recessions are not common
4. The private sector deleverages while the public sector leverage increases
5. Interest rates remain low for a long time
6. Stock returns are modest, consistent with slow GDP growth

Based on these findings, it turns out that in general the US housing bust was severe but not that unusual. The chart below shows the historical distribution of housing market corrections for all the nations and periods included in the study. The 30-35% correction in the US housing market (as scary as the experience has been) is not outside the range of other housing busts (DM refers to developed economies).

Source: GS

There are however two indicators that do stand out:

1. The US public sector leverage increase is sharper than the historical range.

Source: GS

2. As discussed before, the level of real interest rates in the US is completely outside the historical range.

Source: GS

Other indicators for the 2007 housing bust are roughly within the historical range for such events.

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