Scary afternoon reading from Merrill Lynch’s North American economist David Rosenberg, who puts paid to those calling the bottom of the housing market after news that housing starts fell 11 per cent to a 965,000 annualised rate in July — the lowest in about 17 years:
We have already seen a near-20% decline in home prices from the peak. However, we anticipate that the sustained supply-demand imbalance in housing, exacerbated by the credit crunch, will push prices lower throughout 2009 – by another 15 – 20%. Keep in mind that in real terms, home prices nationwide are still more than 30% above the levels prevailing just as the bubble took off in 2000. As such, there is still plenty of “air” in residential real estate values, notwithstanding the severity of the bear market thus far. In our view, we are barely halfway through the house price adjustment process.
Calls for a near-term bottom seem to be based more on hope than on any meaningful analysis of how severe the supply-demand imbalance still is.
This is of course the David Rosenberg who last January forecast a US recession towards the end of 2009. Eep.
Related links:
Things really were that good in US housing – FT Alphaville