Monday, January 14, 2008

US Housing Outlook Report

I just read a January 2008, US Housing Outlook report from Deutche Bank’s Global Markets Research team. The ten page report was complete with a myriad of charts, graphs, analysis, comments, etc. A few relevant snippets are included below.

The opening sentence to this report (pasted below) was spot on!

“The housing correction continues to be like a slow motion train wreck"

But I am a bit more pessimistic than the analyst who wrote the following:

“ Residential investment as a share of GDP has declined from 5.5% at the peak to 4% currently. This has been quite a significant move and the bulk of the adjustment in activity is most likely behind us”

Nah, not behind us just yet—we’re merely warming up…

This comment was a bit closer to reality:

“ For house prices, while the inflation rate has come down a long way from the peak nearly two years ago, it probably has a good way further to run into negative territory. Our own models and the futures markets see home prices declining around 10% over the next two years and remaining depressed for a time thereafter.”

Later the article goes on to discuss a mildly negative consumer wealth effect (due to housing) and the market analysts furthermore contend that as long as the US stock market and employment hold up, US recession will be avoided in 2008.

Personally, I'm much more pessimistic and think (especially with the ongoing credit market problems) we are going to see severe equities problems and a > 10% decline in home prices THIS YEAR ALONE.

As far as the wealth effect and recession are concerned: I believe unemployment will increase dramatically, consumers will pull back and Stagflation/Recession--it has already been baked into the cake.

Oh well, at least these highly paid analysts got the first line of their report correct.

Regards

Randy

4 comments:

Anonymous said...

If you get a chance, check out this new real estate marketplace called UniFersal.com

Anonymous said...

Yes i would have to agree. It looks worst than we expect it to be. Your quick profile mentioned it: what we are seeing now is just the tip of the iceberg. The problem lies in the fundamentals of our country's leadership deficiency.

As lee Iacocca rants, 'where have all the leaders gone?'

Lee. 'I feel you.'

-Joe Salcedo

Anonymous said...

Thank-you.

I'll check it out.

-Joe

Randy said...

Hello Joe,

Thanks for checking in. Yes, I've been following our bubble housing market for years now and it baffled my mind that so few could see 1)that we were in a new bubble and 2) what the eventual outcome would be--devastating.

Problem now: Aside from energy/commodities, there is no new bubble to blow.

What's next?
I expect (in the not too distant future)we will start to experience massive consumer inflation (due to falling dollar)coupled with declining asset values and high unemployment rates. The consumer will sharply pull back and we will experience a long-term GLOBAL RECESSION.

I agree we have major leadership deficiencies--mainly because of their kowtowing to corporate/globalist interests... Aside from a vote that can be manipulated, we the people no longer matter much.

Additionally, our leaders' complete ignorance of economics, the process of money creation, and the absolute control that our (non)federal reserve banking system has on those who walk the halls of US power will eventually cause us to degenerate to a 3rd world economy.

Thanks for posting up
Randy