"Federal Reserve Chairman Ben Bernanke predicted Tuesday the economy will rebound from an anemic performance at the start of the year even if the housing slump continues."
"Economic growth in the first three months of this year nearly stalled, logging just a 0.6 percent pace. It was the worst quarterly showing in more than four years."
"Even with Bernanke's hopeful outlook, the Fed chief did make clear once again that the painful residential real-estate bust, which started last year, "appears likely to remain a drag on economic growth for somewhat longer than previously expected," he said." (AP News)
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David,
ReplyDeleteJust put in a rent offer on a house listed at 690K in La Plata Charles county...2300 and they jumped told us no deposit june free if we wanted...Dr lives in VA didnt want to lose this...
What data do you have on Charles county??????
I have a friend buying his fathers paid for house...Value 400 getting a loan from broker friend 5/15/80 supposedly for 460K so he can remodel.... hasnt started mortgage paperwork yet...has started the remodel...
broker say house will be worth 500 when he finishes work. He cant refi for at least two years though he says...
God I am trying to talk him out of it...praying he cant get the loan.
wish he would listen to others than his broker buddy, his remax buddy, and their appraisor buddy.
he truly thinks they are looking out for him.
Why would Bernake say this?
ReplyDeleteHe couldn't really believe it.
Is he looking to work at the NAR?
How could anybody continue to listen to him?
What is he trying to do?
This is blatant poop.
bernanke really needs to cut rates
ReplyDeleteDavid,
ReplyDeleteyou need to register
LawrenceYunwatch.blogspot.com
STAT!
http://www.msnbc.msn.com/id/19069785/
David,
ReplyDeleteWhen did you say that the recession would start? Or was it a depression?
"the painful real-estate bust"???? Nationwide, prices are off 1.8%. Locally? Depends where you are talking about. Location, location, location. I don't know about other people, but a drop of 1.8% after a 200% run-up does not constitute a "bust", or even much "pain".
I'm certainly not jumping out the windows ala 1929. By the way, RE prices dropped less than 30% in 1929. A similar scenario, which only the most extreme bubbleheads are calling for, would erase 60% of the 200% plus gains.
The CME Case/Shiller index has been trending up for the past 3 months, suggesting a bottom this year. Hope those of you waiting for "blood in the streets" are prepared to pounce. It appears that time may be running out.
http://lawrenceyunwatch.blogspot.com/
ReplyDeleteis already taken by Keith at Housing Bubble Crash
"When did you say that the recession would start? Or was it a depression?"
ReplyDeleteRecession. On Dec 19th 2006, I wrote that "Additionally, an economic recession in very likely to occur in the US within the next 7 months."
The Feds need to raise rates. Inflation is way too high. Real inflation is, anyway.
ReplyDeleteThe "run-up" in home prices was approximately 100%, not 200%. And the 1.8% decline in prices is a nominal one. Personally, I've never even expected home prices to return to pre-boom levels, but instead to the levels that they were at around 2003 or so. That would be a real drop of approximately 30%, and would put homes onto the threshold of affordability.
The Economist has just published a new article about the strength of the U.S. economy and the housing market. They also point out the differences between the OFHEO HPI and the S&P/Case-Shiller HPI. They think the S&P index is more accurate. I do too, which is why I started using it as the preferred source of data on my web site.
ReplyDeleteRegarding the two indexes, they write:
"The difference between the OFHEO and Case-Shiller figures arises largely from the treatment of expensive homes. The OFHEO index includes only transactions involving mortgages backed by the lenders it oversees, Fannie Mae and Freddie Mac, which are capped at $417,000. The Case-Shiller measure has no upper limit and gives more weight to higher-priced homes.
"Since the price of expensive homes, particularly in once-fizzy markets such as California, is falling fastest, the Case-Shiller measure probably paints the more accurate picture. And judging by the price of futures contracts based on the Case-Shiller composite index, investors expect house prices to fall further. "
The Economist's final analysis regarding the U.S. economy is:
"With business on a roll, America’s economy is no longer stalling. But with house prices heading down, neither is it likely to roar ahead."
The Economist's article can be found here: http://www.economist.com/daily/news/displaystory.cfm?story_id=9308187&top_story=1
James,
ReplyDeleteThe Economist article sure doesn't sound like a recession is coming.
__K,
The run-up actually started in 1998 and was 200% or more.
David,
More back-peddling?
"The Economist article sure doesn't sound like a recession is coming."
ReplyDeleteNo, it doesn't. I've been skeptical of the argument that a decline of the real estate market will necessarily lead to a recession. It's possible, but not necessarily probable. Predicting the future of any complex system—like the economy, the weather, or the human mind—is extremely difficult and unreliable. I am always wary of anyone, even a professional economist, who is confident about the economic future.
It is easy to recognize when an asset class—like stocks, bonds, or real estate—is overvalued. Real estate is overvalued. However, predicting when it will go down, how much it will go down, how quickly it will go down, or what effect it will have on the broader economy is extremely difficult.
The run-up actually started in 1998 and was 200% or more.
ReplyDeleteYeah, if one pretends that inflation didn't exist during that span.
__K,
ReplyDeleteHow much inflation 1998 to 2005?
"How much inflation 1998 to 2005?"
ReplyDeleteDude, look here.