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Mort Zuckerman: Housing Crisis is Getting Worse

Mort Zuckerman, editor in chief of U.S. News and World Report writes at ft.com:

America’s housing crisis has not gone away. If anything, it is getting more severe. Today, median single family house prices nationwide are down by slightly more than 30 per cent from their early 2006 peak. Fusion IQ, the research group, estimates that excess inventories will push prices down by a further 10 per cent. This is a critical issue because home equity was for years the largest asset on the balance sheet of the average American family.

Zuckerman estimates that it would take another $1 trillion of government money to stabilize house prices by matching mortgage balances to market values.  He feels that if foreclosures soar, house prices will crash.

My personal belief is that the best way to resolve this problem is to focus less on supporting house prices and more on increasing employment.  Then the prices of houses will reach a market clearing level without a crash.

But, barring a dramatic economic recovery, housing prices will definitely reach a lower bottom than has been seen so far.  We can only hope that it is within the 10% lower window projected by Fusion IQ and not the crash level that Zuckerman fears. 



Disclosure: No stocks mentioned.