WSJ Opinion: The Housing Crisis Is Over

[El Pinko]

http://tinyurl.com/63gcjo


OPINION
The Housing Crisis Is Over
By CYRIL MOULLE-BERTEAUX
May 6, 2008; Page A23

The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.

Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.

Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what's going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.



:spray: :eyes: :crazy: :wow: :banghead:

[edhopper]

1. Reply from Calculated Risk.

And why he's off the mark;

First, I think any article discussing the housing "bottom" should start by defining what they mean by "bottom". Are they talking about starts? New home sales? Residential investment? Housing prices? Or some other metric?

Most people think of the bottom in terms of price, and in most housing busts, starts, residential investment, and new home sales all bottom long before housing prices bottom. The linked article seems to confuse a bottom for housing starts with a bottom for housing prices, and that is incorrect.

Second, we can write the supply side of the equation as:

Supply = new units added - units sold + existing units for sale. Looking at just housing starts provides only one portion of the equation (this leaves out rental units too - a substitute product).

[AlCzervik]

2. apr mortgages that were gotten in 2005, many of them are probably resetting right now

and imo August will reflect a large number of defaults. The author of that article works for a hedge fund, i'd rather have the information from a economist.

[El Pinko]

3. (GRAPHIC) There are huge numbers of Option-ARM mortgages which will reset in the years 2009-2011

I've posted this graphic quite a few times, and it never fails to hammer the point home that we have a lot further to go before things stabilize.




The bottom-callers are desperate to shore up their own positions and are hoping that ignorance and cheerleading will at least slow the plunge in prices and buying.

Even if buyers were foolish and willing enough to buy right now, the chances are that an awful lot would not be approved for loans at this point.

[KillCapitalism]

4. It's far from over.

Prices are still WAY too high for most people with a median income to afford the average priced home in most markets.

Also, watch home prices in the exurbs REALLY plummet once gas hits $5 per gallon.

[marmar]

5. I think Mariah Carey says it best:

Sweet, sweet fantasy baby
When I close my eyes you come and take me
On and on and on
It's so deep in my daydream
But it's just a sweet, sweet fantasy baby

[notesdev]

6. What a terrible argument

The WSJ is reduced to being a cheerleader for the financial markets.

I've noticed that the more positive someone is about the market these days, the less actual data they refer to in making the case for their point of view.

Let's face it - the data show that the situation is going to get worse - potentially a LOT worse.

I feel sorry for the suckers who take the WSJ's word at face value on this. Those are the buyers for the smart-money sellers.

[edhopper]

7. I think we can see

the first problem with the OP..."WSJ Opinion".