Bloomberg Radio just interviewed Bob Shiller. Mr. Shiller stated “Prices still have a long way to fall”.
By Daniel at 30 December, 2009, 1:31 am
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Enjoy the Housing Collapse folks.
Skyrocketing delinquencies = skyrockecting foreclosures = more housing price collapse
“Delinquencies are a precursor to foreclosures,” said Cameron Findlay, chief economist at LendingTree.com, in an interview Tuesday. “We’re not seeing any decreases in delinquencies, which is very concerning.”
More strapped borrowers are falling behind on their monthly payments during the recession as unemployment hovers around 10%.
A wave of foreclosures would only add to the inventory overhang of unsold homes and delay a lasting recovery in residential real estate. Home prices peaked in the summer of 2006, before the credit crisis popped the bubble.
Values have rebounded somewhat in recent months, with some economists attributing the bounce to the expiration of the $8,000 tax credit for new homebuyers. The credit has been expanded and extended to spring. ”
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Housing prices will stabilize if employment recovers. Employment will recover if businesses sense demand. And demand will recover if the government continues to stimulate the economy.
There’s the rub.
Increased government spending must lead to either a weak dollar or increased interest rates, depending (in the short run) on Fed activity.
If the dollar weakens, exports become more competitive, the balance of trade improves, and there are fewer dollars in foreign (i.e., Chinese) hands to buy Treasury securities, so interest rates eventually rise. (This is a somewhast non-intuitive and little understood fact, but the Chinese have pointed it out.)
So interest rates must eventually rise. And if interest rates rise, the cost of investment (housing, business investment, etc.) rises, and the “recovery” is halted.
Those home price surveys are total bunk. Foreclosures are rocketing and banks have to unload them. The recovery is not underway and an inflated, overpriced, Ponzi scheme of a stock market is not proof of economic recovery.
Wait until you see all the recent jobless folks who will lose their homes in the near future, due to local property tax increases that they can’t afford.
You ain’t seen nothing yet.
Maybe I’m not clever enough, but I don’t see the way out of this box.
- rationalinvestor
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