Wednesday, July 29, 2009
David Reilly over at Bloomberg tosses some cold water on the idea of a speedy return to a bubbly housing market in this commentary today.
A housing bust is a lot like a tequila hangover. After the most acute signs of distress have passed, it still takes a long time before things start to feel normal again.This is probably not what a lot of people want to believe this week...
So even if housing markets are approaching or have reached a bottom -- a matter of great debate at the moment, especially given yesterday’s release of May home-price figures -- history shows a rebound isn’t likely to be anywhere near as fast or furious as the meltdown it followed.
Sometimes, rebounds don’t happen at all. Not, at least, without a large dose of inflation. And that carries its own risks for the economy and investors.
To see a mirage-like rebound, look at Midland, Texas. That area is still waiting to fully pull out of a housing slump that began in the early 1980s.
Pulling out of a housing slump can take twice as long as it took for home prices to melt down, according to the FHFA. That fact should temper some enthusiasm over recent signs that housing markets are stabilizing.