Scratch That: Rosenberg Doesn't See a Green Shoot

David Rosenberg says in his market letter Wednesday that his use of the phrase “green shoot” in yesterday’s letter may have been the “wrong choice of words.” He had rejoiced over the month-to-month increase in the Case-Shiller home price index but it wasn’t seasonally adjusted “and that is really the only way to look at the data sequentially.” On that basis the month-to-month change was -0.2%

Still, it was an improvement in the second derivative. The only problem, says Rosenberg, is that it may have been helped a lot by a measurement error – i.e. shift in foreclosure sales toward high-end homes.

Moreover, the banks are sitting on a record number of foreclosed units that have yet to hit the market (don’t forget that the government-imposed moratorium just terminated). And once these homes flood the market, we may well get another big leg down in the price data,

writes the noted bear from his lair at Gluskin Sheff + Associates Inc.

Other points from Rosenberg:

• There are more than 800,000 to 900,000 vacant residential housing in the U.S., “not a backdrop for anything but lower home prices”

• Residential real estate still comprises over 30% of the household balance sheet, which remains high

• The rental vacancy rate is now at a new all-time high so rental accommodation remains competitive with owned accommodation

• The U.S. homeownership rate has another three percentage points to fall before the cycle runs its course

• University of Michigan and Conference Board surveys indicate that home buying intentions are rolling over again

• "When bubbles get expunged, the mean-reversion process means that you” fall below the mean; to erase the insanity of the 2001-2006 housing mania would suggest that home prices could indeed go down another 25% from where they are.

Wednesday's post: David Rosenberg Sees a Green Shoot!

Comments

[ksmithdc:]

poor_street - lol. Well said, sir.

Jul 30 12:48 PM

[Mad Hedge F...:]

Thanks. CNBC held a dynamite interview with David Rosenberg, former Merrill Lynch chief economist and current strategist at Gluskin Sheff, who offered the kind of big picture, 30,000 foot view that I love. We are well into an epic post bubble credit collapse. Deleveraging in the private sector is dramatically overwhelming any fiscal stimulus Obama can throw at it. The $50 trillion US household balance sheet is shrinking at an unprecedented rate. The unemployment rate will easily sail through 10.8% to a new high and spill over to a higher foreclosure rate. We’ve had two decades of baby boomers living beyond their means, and it is now time to revert to the mean. The stock market has already priced in an earnings recovery which we won’t see until 2012 at the earliest. Bull markets move in perfect 18 year cycles, and we are only half way through a generational washout in equity ownership that started in 2000. “Buy and Hold” is dead. An S&P 500 trading around a 13 multiple means will be stuck in a 650-950 range for years, and that’s being generous. Rent, don’t own stocks. The one place to be is commodities, because they will be underpinned by the undeniable demand coming from Asia, and have benefited greatly from consolidation. The big “Tell” here is that in last year’s huge sell off , they all bottomed at the previous cycle’s peak prices. It’s nice to hear someone reading from the same sheet of music as I. Too bad Merrill Lynch didn’t listen to David. Wow, do you think I should be selling rallies here at 893?

Jul 30 01:01 PM

[LKofEnglish:]

love the line where "you" meaning YOU "revert to the mean." taint easy being a pessimist when they point the cannon at you, is it? so let us rejoice at being fired and going hungry. in the meantime please send your paens to AIG which wondrously celebrated the bailout business. Something strange about Barak Obama masquerading as Richard Nixon though. It just doesn't feel "true to self."

Jul 30 01:08 PM

[RJMoran:]

<<<"There are more than 800,000-900,000 vacant residential housing in the US, 'not a backdrop for anything but lower home prices'.">>>
HUH?
I've been reading that there are an estimated 18.9MILLION vacant homes in America today... Both figures can't be right!?

Jul 30 01:39 PM