The Mess That Greenspan Made - Part 416

Goldman, Barclays See a Bottom for Housing

They say that bottoms for long-term cycles are virtually undetectable in real time because they are so long and so flat with most market participants having lost interest in the sector, as was the case for stocks back in the early 1980s. According to two big investment banks, the long awaited bottom for the U.S. housing market will come in the year ahead, thought it’s not clear if anyone will notice. First, from the Wall Street Journal comes this story about the Vampire Squid’s latest thinking on the property market.

Analysts at Goldman Sachs predict in a new report (published late Friday) that the end of the crash in home values is actually within view.

Goldman’s analysts, Hui Shan and Sven Jari Stehn, project that the national S&P/Case-Shiller home price index has 2.5% to fall before it hits bottom next summer. The Case-Shiller index of prices in 20 large cities is likely to fall 3.5% before hitting bottom in the second half of 2012, they say.

According to this Housing Wire report, a Barclays analyst thinks the non-distressed home market may have already hit bottom and that the rest of the market will soon follow.

Barclays Capital analyst Stephen Kim predicts a housing recovery buoyed by improving jobs numbers and the fact prices for nondistressed homes will have stabilized without government support.

“In the absence of a government homebuyer incentives, prices for non-distressed home sales have stabilized for almost a year,” Kim said. “This is the most important trend in the housing industry right now, and we are amazed at how little attention it has been getting from the media and the street. This stability on the part of nondistressed prices has occurred despite a very high share of distressed activity and continued declines in overall prices.”

Of course, freakishly low mortgage rates have had a lot to do with whatever stability non-distressed home sales have seen and, if home prices finally do stop falling next year, it’s hard to imagine they’ll go back up very quickly as lending rates will also be rising.

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The Standard & Poor’s Cattle Prod

Standard and Poor’s has again injected themselves into the middle of the debate about European sovereign debt (and, after two years, the inability of policymakers to do anything about it) by putting 15 eurozone nations on “credit watch negative”. Here’s the latest from Reuters from a gentlemen with a somewhat comforting accent from north of Brussels.

I can’t tell if that’s an Irish accent or one of those Scottish accents that is easily understood. When visiting Scotland a few years ago, we found that, in some areas, the accents are completely incomprehensible to us ‘Mericans. You can pick out a word here and there and try to figure out the rest based on context, but, you have to be able to do that a much faster rate than I was capable of doing. My guess is that he’s Scottish. Anyone?

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Tuesday Morning Links

MUST READS
S&P puts 15 eurozone governments on notice – CNN/Money
Merkel, Sarkozy Unite as S&P Issues Warning – Bloomberg
Germany, France and the euro: Behind the smiles – Economist
S&P Warning Good for Euro Leaders: Schaeuble – Bloomberg
The eurozone’s terrible mistake – Salmon, Reuters
Plan Z: IMF Could Set up Euro Aid Fund with EU Help – Spiegel
Impact of euro collapse would be global, U.S. recession likely – Washington Post
Corzine Tries to Delay Congressional Hearings on Firm’s Collapse – Fox
MF Global’s Collapse Spurs Curbs on Brokers – NY Times
Australia cuts rates, citing global growth fears – MarketWatch
Super Rich vs. 99%: Class war will explode – MarketWatch
The Shortest Quarterly Letter Ever(.pdf) – Grantham, GMO

MARKETS/INVESTING
Oil recovers to above $101 after S&P warning – AP
Gold slips on Europe debt fears, downgrade warning – Reuters
Iran – Possible Implications of an Oil Embargo – The Oil Drum
Vital Signs: North Dakota on Track to Be No. 2 Oil State – WSJ
Just how low can oil prices really go? – MarketWatch
John Paulson’s fund posts another poor month – Reuters
A Fool’s Market Rally Authored By a Very Foolish Fed – RCM
Faber, Rogers Clash Over Commodities, Agree on Gold – lew rockwell
Gold as a strategic asset for European investors – WGC
Indian homes hold gold worth $950 billion – Mineweb

ECONOMY/WORLD/HOUSING/BANKING
There Will Be Blood – New Economic Perspectives
Gauging Holiday Sales’ Impact on GDP Is Tricky – WSJ
Hayek and Modern Macroeconomics – Marginal Revolution
Why More Retail Jobs Won’t Fix Unemployment – Bloomberg
In Ireland, Austerity Is Praised but Painful – NY Times
Eurozone Crisis, Act Two: Has the Bundesbank reached its limit? – voxeu
“Flip This House”: Investor Speculation and the Housing Bubble – FRBNY
Barclays analyst sees housing rebound coming in 2012 – Housing Wire
Goldman: Housing Market Bottom Is Really, Finally (Almost) Here – WSJ
Realtors Report Even Higher Cancellations; And It’s Not Why You Think – CNBC
Evans: ‘Imperative’ for FOMC to Escape Liquidity Trap – Businessweek
Possible Fed Communication Strategy – Fed Watch

 

No, Home Building Isn’t Quite This Bad

Cartoons by Tom Toles used to be a regular feature here, but, for some reason, they’ve appeared here infrequently over the last year or two. This one was worth the wait.

From the Tom Toles archive at the Washington Post.

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