More on the Great Housing Recovery Debate

On 12/08/08: I wrote that housing would begin to recover in the "summer of 2009" (that's now!). I reiterated that forecast in April, with some discussion of how low real incomes might back that date up, but still sticking with summer 2009 as a likely possibility.

07/18/09: Professor Krugman writes "Housing Won't Recover Until At Least 2011"

Even though Professor Krugman had 7+ months more additional data to use for his forecast, I still think his forecast is wrong (and mine is the reliable one) because Professor Krugman has not indicated that he has made any consideration of supply or demand.

So let's revisit this disagreement in six months.

Comments

[Can'tSpotAB...:]

There is no freaking debate amongst those who are sane. Housing will NOT recover until there is across the board price reversion to the mean with respect to incomes and inflation.

My criteria for knowing housing has stabilized is the far off day that I can buy a property with 20% down cold, hard cash and turn around the following day and rent said property and have at least $1 of annual positive cash flow after P.I.T.I. and associated expenses.

I'm getting real sick of everyone calling the bottom. I've been hearing it for over 2 years now.

The bottom will not be ascertained until we are at least 2 quarters past it. That day seems far away.......

Aug 16 11:36 PM

[Mudduckk:]

Not!

Aug 17 12:27 AM

[Dave Wrixon:]

Why was this "article" published?

Aug 17 12:52 AM

[Donald Ingram:]

Casey - If you truly believe that housing will recover this Summer... I have some ocean front property in Arizona that is for sale, how about an offer?

Aug 17 02:49 AM

[Tim Plaehn:]

Your purchase rental criteria are easily met in many parts of California and Nevada. California prices have risen for 3 straight months, so if you do not get in now it will be too late.


On Aug 16 11:36 PM Can'tSpotABubble? wrote:

> There is no freaking debate amongst those who are sane. Housing
> will NOT recover until there is across the board price reversion
> to the mean with respect to incomes and inflation.
>
> My criteria for knowing housing has stabilized is the far off day
> that I can buy a property with 20% down cold, hard cash and turn
> around the following day and rent said property and have at least
> $1 of annual positive cash flow after P.I.T.I. and associated expenses.
>
>
> I'm getting real sick of everyone calling the bottom. I've been
> hearing it for over 2 years now.
>
> The bottom will not be ascertained until we are at least 2 quarters
> past it. That day seems far away.......

Aug 17 09:10 AM

[Jimmy K:]

@Dave W

agreed... why was this article written let alone published?

Aug 17 12:21 PM

[mikearden:]

Actually, Krugman's article is from 7/18/08, or six months BEFORE yours.

Aug 17 12:31 PM

[Russ Wetherill:]

The prices have yet to correct to affordable levels in coastal California! Areas of California that have corrected: Palmdale -- really hot in the summer and cold, dry and windy in the winter; Compton, East LA -- enough said.

Santa Monica, Manhattan, Redondo, and Hermosa beach cities are still at 2005 levels. These cities have yet to correct because the various "affordability products" like alternative prime a-paper loans (Alt-A) and Option ARMs have yet to recast. These loans became very popular in the later part of the bubble because that is only way homes could be purchased at 10 to 14 times median incomes. Once these loan products recast and are no longer funded in high percentages a correction is in these cities is a foregone conclusion.

As far as rushing in to buy homes in the depressed cities, what makes you think there is any hurry? Is there another housing bubble in the offing?


On Aug 17 09:10 AM Tim Plaehn wrote:

> Your purchase rental criteria are easily met in many parts of California
> and Nevada. California prices have risen for 3 straight months, so
> if you do not get in now it will be too late.

Aug 17 12:44 PM

[Troyhector:]

U.S. home foreclosure activity galloped to a record in the first half of the year, overwhelming broad efforts to remedy failing loans while job losses escalated.
Foreclosure filings jumped to a record 1.9 million on more than 1.5 million properties in the first six months of the year, according to RealtyTrac.

"Unemployment-related foreclosures account for much of this increased activity, and the high number of borrowers who find themselves owing more on their mortgages than their homes are now worth represent a potentially significant future risk," James J. Saccacio, RealtyTrac chief executive, in a statement.

I think the housing market would not revive until and unless the job market resumes to normal.
Read More:
www.housingnewslive.co...

Aug 17 02:17 PM

[nym:]

Ooo, Casey, you stepped in it this time.

Aug 17 03:01 PM

[swalter:]

If your analysis has taken supply and demand into consideration, it reflects more badly on you. You are creating an absurd record for future analyisi
You must have no concern about your reputation.

Aug 17 05:09 PM