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The Next Leg Down in Housing

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By Barry Ritholtz - June 23rd, 2010, 9:30AM

I guess we shouldn’t be surprised about what economists think regarding residential Real Estate. After all, most of the profession missed the housing boom & bust in real time. Too many of the dismal set are still wed to the incorrect idea that we had a housing bubble when the evidence is overwhelming that we had a credit bubble. They misunderstood the impact of the housing boom & bust on the economy, and completely missed the the impact of subprime lending.

Based on that, I do not what to make of the latest, belated downturn in RE expectations by economists. 56% of the 106 economists and analysts surveyed expect home prices to decline this year. That’s up from 40% a month ago. (Data from Professor Robert Shiller’s monthly housing survey, of which I am a participant).

I’ll have more on this tomorrow morning . . . for now, New Home Sales are due momentarily. . .

PERMALINK
Category: Economy, Psychology/Sentiment, Real Estate.

Comments

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “The Next Leg Down in Housing”

  1. call me ahab Says:
    June 23rd, 2010 at 9:50 am

    I’m safe- my house is on the Potomac-

    also- new home sales this morning should be a bright spot-

    ok, ok- I’m full of shit

  2. call me ahab Says:
    June 23rd, 2010 at 10:08 am

    New Home Sales Down 32.7 Percent in May

    the good news just keeps rolling in-

    my opinion- we may have been through the worst of this if the USG stepped aside and let the markets do their thing-

    but no- the USG is always at the ready- able and willing to slop shit up

  3. RandyClayton Says:
    June 23rd, 2010 at 10:14 am

    About a year ago (July 1, 2009) TBP published the 100 year Case Shiller chart and projected a return to the long term trend range of 100 to 110. The original C-S papers show essentially no long term inflation adjusted gain in house prices. So another 20% down seems about right.

  4. Mike in Nola Says:
    June 23rd, 2010 at 10:27 am

    Barry, what do you mean about being a participant in Shiller’s survey? His survey seems one of the few objective yardsticks.

    I’m expecting further declines, which causes those who hear my opinion to shake their heads sadly while pitying my stupidity, or getting mad because a further decline will hurt their pocketbook and my opinion somehow makes that more likely. My wife’s coworkers give her the business because we haven’t bought a new house since selling our old one while they mostly own houses purchased during the bubble with God knows what kind of mortgages.

  5. Hugh Says:
    June 23rd, 2010 at 10:28 am

    Reinhardt & Rogoff suggest that it takes about 5-6 years for housing to recover after a major financial crisis based on historical data from many countries.

    It appears that the US will not be the exception that proves the rule….

  6. Mike in Nola Says:
    June 23rd, 2010 at 10:51 am

    Hugh: don’t ya know this time it’s different?

  7. Despite Low Mortgage Rates, New Home Sales Crash to Record Low | Mortgage Rates & Trends: Mortgage Blog From Total Mortgage Says:
    June 23rd, 2010 at 11:37 am

    [...] including Barry Ritholtz of the awesome blog The Big Picture believe that we are in the midst of a second leg down in the housing market.  If this is the case, we can probably expect to see more price adjustments and weak economic [...]

  8. ewmayer Says:
    June 23rd, 2010 at 11:39 am

    The phrase “economists’ expectations” recalls for me what my Dad used to say about opinions:

    “Opinions are like a**holes – everybody’s got one, but some are more full of sh*t than others.”

  9. Bruman Says:
    June 23rd, 2010 at 12:02 pm

    Which “economists” are we talking about?

  10. Ted Kavadas Says:
    June 23rd, 2010 at 12:14 pm

    Barry,

    Thanks for the post. I find this new MacroMarkets RE Survey to be of great interest.

    I am somewhat surprised that (assuming I am interpreting the results correctly) that you are only forecasting an 8% cumulative decline through 2014 in real estate prices.

    I expected you would forecast a larger decline, based upon your recent commentary…IMHO an 8% decline from these levels (and given the historical price movements) is rather inconsequential.

  11. adamsvictor Says:
    June 24th, 2010 at 2:36 am

    In San Diego where I live , realtors tell me that the market “has stabilized” but only at the low end (under $250k). They also tell me that asking prices have come down to BELOW replacement costs overall. So, what gives? are house prices to low or construction costs too high?

  12. A Closer Look at the Second Leg Down in Housing | The Big Picture Says:
    June 24th, 2010 at 7:16 am

    [...] This is known, or at least should be by those who have looked at the data. I cannot explain why some economists still have not figured this out. [...]

  13. Wealthy: Most Likely to Walk Away from Underwater RE | The Big Picture Says:
    July 9th, 2010 at 10:16 am

    [...] is more ammo for my longstanding thesis that we are looking at another leg down in Housing . . [...]

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