Friday, October 09, 2009

Nouriel Roubini still bearish on housing and banks

Nouriel Roubini warns of more downside for real estate and financial markets:
U.S. housing prices may still fall more than 10 percent, killing an incipient recovery, as demand from first-time home buyers fades, leading economist Nouriel Roubini said on Thursday.

Roubini, one of the few economists who accurately predicted the magnitude of the financial crisis, said massive losses in commercial real estate loans will add to the problem, forcing banks to raise more capital.

"The stress is moving from residential mortgages that are still in deep trouble, to commercial real estate, where they are just starting to recognize that they're going to have massive, massive losses," Roubini of RGE Global Monitor told reporters after a presentation for a World Economic Forum report on the global financial system.


  1. My name is Sam and I am going to make a prediction. Housing prices will remain flat for the next seven years. With all of the people who have destroyed their credit profiles, and the tighter lending standards being employed by the banks, demand will be reduced by at least 1/3. Combine reduced demand with the supply of houses on the market, and inevitable future mortgage rate increases--you have a classic flatline.

  2. Based on your reasoning, it seems like you should be expecting continued price declines not 7 years of stagnation.

  3. Nah - the correction he discusses can manifest itself in two ways (1) similar number of transactions but at lesser prices or (2) a much smaller number of transactions, but at similar prices.

    Either way constitutes a major correction - like the last downturn where nominal prices fell in 90, and 91 and bottomed in 1992, but transactions started falling in 1989 but didnt bottom til 1996. Given the decreasing number of transactions we have seen in the 2nd half of 2009, looks like its going to do that again.

  4. Anonymous (4:04 pm, Oct 9), residential real estate prices will remain flat until 2011 and then 2012 will have a slight uptick? That would be one more benefit to President Obama's 2012 campaign. By summer 2012 unemployment should be below 7%.

  5. Newsflash: The Great Recession is over according to NABE

  6. National Bureau of Economic Research (NBER) officially declares the start and end of recessions. NABE's prediction that the recession ended this month may not be that far off from what NBER will determine.