Housing Recovery?
March 1, 2010
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Posted by Michael S. Langston
According to many reports from recent “economist” we are on are way. Starting with the “Sage” Warren Buffet (here via Calculated Risk) arguing that supply has dropped below demand, which effectively will balance out the system:
…Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us…
The NY Times (here):
After a plunge lasting three years, houses have finally become cheap enough to lure buyers. That, in turn, is stabilizing prices, generating hope that the real estate market is beginning to recover….
& Our trusted Federal Reserve Chairman Ben Bernake (here via CNBC):
Federal Reserve Chairman Ben Bernanke told lawmakers Tuesday he expects the downtroddenU.S. housing sector to improve by the end of the year, a senator who participated in the closed-door meeting said….
At first, this might seem like some sort of an agreement, however there is one stark difference. Mr. Buffet spoke in February 2010, the NY Times piece is from July 2009, & Mr. Bernake spoke in February 2008.
The timing of the statements is instructive, as each was based upon changes in supply and demand. The problem all had in their given time frames appears to be the same – you simply can’t count on economic activity trending when the growth was due to temporary incentives from the federal government.
As with Cash-for-Clunkers (here), Cash-for-Appliances (here), and recent tax breaks and money for lending, Cash-for-Homes will fail as well. A temporary relief program will only provide temporary relief and is already showing signs of weakness. From WaPo (here):
…Even as the housing market shows signs of improvement, including in new data released Tuesday, economists warn that it could take up to a decade for many homeowners to regain equity in their homes, while some people in the hardest-hit regions of the country may not see a recovery during their lifetime. …
CNBC (here):
The recent slump in housing is making some analysts uneasy about a recovery that many thought sustainable just a couple months ago and comes at a time when the Federal Reserve is nearing the end of a critical, year-long program to support the mortgage market….
& Time (here):
For a while there, it seemed the housing market had made the turn to recovery. Housing sales were up in nearly every month in 2009. But today it looks like real estate is headed back down again…
Delaying the inevitable will just make the pain worse.
Categories: Economics
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Tags: Ben Bernake, Economic Predictions, Economics, NY Times, Obama Administration, President Barack Obama, Stimulus, Vice President Joe Biden, Warren Buffet
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