Wikinvest Wire

Greenspan sees another bottom for housing

Wednesday, May 13, 2009

Should anyone be surprised that former Fed chairman Alan Greenspan reaffirmed his "early-2009" housing market bottom call yesterday before the National Association of Realtors?

From Bloomberg:

Former Federal Reserve Chairman Alan Greenspan said that the decline in the U.S. housing market may be bottoming and it’s “very easy to see” financial markets continuing to improve.

“We are finally beginning to see the seeds of a bottoming” in the housing industry, Greenspan said today during a conference of the National Association of Realtors in Washington. The U.S. is “at the edge of a major liquidation” in the stock of unsold properties, which may help to stabilize prices, Greenspan said.
At "the edge of a major liquidation"? What newspapers has he been reading? The headline in my newspaper today says "Foreclosure filings hit record for second month".

Back to the Bloomberg story:
While the housing bottom may not be obvious in prices, it is becoming clear in “significant regional differences,” where some of the hardest-hit areas are starting to show signs of improvement, he said.
While it is certainly true that, in some of the hardest hit areas, home prices just can't go much lower (think Detroit), there are lots of other areas where the descent is ongoing and moving up the socio-economic ladder as Option-ARMs and Alt-A loans sour in record numbers.

Ironically, the realtors' trade group had reported earlier in the day that home prices had just declined by a record amount during the first quarter.

A quick search on housing market predictions during 2008 shows that the former "Maestro" made a few very public calls for a housing market bottom in early-2009, so you'd have to think that, with six weeks left to go, the odds are working against him at the moment.

Despite all the recent cheerleading, it is doubtful that the "seeds" of a bottoming in housing that are now seen will turn into the required "green shoots" in the near-term.

Interestingly, when the NAR joined forces with the former Fed chairman back in November of 2006, this is what they produced:
IMAGE The advice DON'T DELAY was offered two and a half years ago.Wow! Homebuyers who heeded these words back then would be down about 30 percent today, according to the latest data from the Case-Shiller Home Price Index.

4 comments:

dmsteidl said...

Just one more voice from above trying to beat the masses into a false sense of security.

You have Obama talking months ago about stocks being bargains for long-term investors. Bernanke later spewing out his "green shoots" nonsense. The banks passing the not-so-stressful stress tests with flying colors. Not to mention the many Wall Street analysts and such sounding the "all clear".

dangermike said...

He's right, to a degree.

Prices in many areas have fallen to the point where normal incomes can afford them. But there's a major caveat in that interest rates are historically and artificially low, allowing those normal incomes to afford more than they would in a normal market. Just about any foreseeable change in the current market conditions (even the present trends of increasing foreclosures) suggest further downward pressure in the near-term. But adjusting for inflation and looking primarily at sub-prime areas, we're are beginning to plunge below the wage-inflation based price line

marku said...

If Greenspin has any value other than as a contrary indicator, it is not apparent to me...

fish said...

Al will keep seeing bottoms all the way down....eventually he'll get it right!

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