Tilson on Housing: We're Only Half Way to a Recovery

Whitney Tilson of T2 Partners has done the most extensive public work yet on the housing crisis. Even better than that, the conclusions he came to over a year ago were 100% accurate.

For those who do not wish to read the whole presentation (I suggest you do), here is the most applicable slides (click to enlarge):

The simple explanation is that we are about half way through this.

We have spoken about housing here before and nothing here changes our outlook, a recovery is a year or more away. Now, by recovery I mean stabilization in prices and sales, NOT a return to prior levels. That type of recovery will take the better part of the next decade.

Whole Presentation:
The Housing Crisis: By T2 Partners

Comments

[Davewmart:]

This of course has massive implications for the banks, which on this ground alone aside from losses from credit cards and Commercial Real Estate are going to need further bail-outs.
More transfers of taxpayers money to bondholders.

Jul 09 04:53 AM

[CautiousInv...:]

As I commented yesterday, we are on track to see home prices decline on average 40% from their peaks in the summer of 2006.

As a result, toxic assets will grow more toxic by the day and bank balance sheets will deteriorate further. And more homeowner will go underwater, growing from 25% to 50% in several years.

It's a downward spiral and, as the author suggests, stabilization will be defined more by prices than unit sales.

Jul 09 05:48 AM

[VennData:]

With a third of homeowners with no mortgage...

www.census.gov/prod/20...

...getting to fifty percent underwater is a huge stretch. Price declines are slowing, with Case-Shiller's Shiller (normally bearish) seeing much less of a decline.

www.bloomberg.com/apps...

... and since RE prices are serially correlated, that means the trend is toward stabilization, defined as moving from one-in-five underwater currently to one-in-four (as a floor number.) With many of those underwater still employed, they won't be moving, and they won't be "walking."

Jul 09 06:10 AM

[CautiousInv...:]

Clarification: 50% of homeowners with mortgages.

Thanks Venn

Jul 09 06:31 AM

[Andrew Butter:]

Thanks for that, very good.

Jul 09 07:20 AM

[theseanman:]

Quoting: "Now, by recovery I mean stabilization in prices and sales, NOT a return to prior levels. That type of recovery will take the better part of the next decade."

You mean "better part of the next century" - right? Okay, I exaggerate slightly.

There's no way peak prices will be reached again for another 20 years at least.

Jul 09 05:53 PM