Foros de la Plataforma por una Vivienda Digna

[billy]

Worst Housing Recession Ever: No End in Sight

Nouriel Roubini | Dec 28, 2007
Here is the link to the video of my CNBC interview today commenting on the housing and the economy.



The best documentary of the year – filmed by my friend Charles Ferguson – is “No End in Sight” on how the US botched – from the very beginning in 2003 – the war in Iraq. If there is one film you should watch this year that is the one (and a follow-up book will be out early in 2008).

“No End in Sight” should also be the title of what – in August 2006 – this author argued would be the worst U.S housing recession in 50 years; at that time this author predicted that home prices would fall at least 20% from peak, that the housing meltdown would start from the implosion of subprime and would spread to all sort of mortgages and that the financial fallout of this meltdown on the financial system would be very severe.


At that time – at the beginning of the housing bust – such gloomy statements were received with skepticism and derision. Too bad that this author turned out to be too optimistic, not too pessimistic, about the biggest US housing bust ever as the developments in housing, mortgages, and the financial fallout are now even worse than his most dire predictions.

Following the meltdown in new home sales - down a whopping 9% in November alone based on data published today – it is clear that this is not going to be the worst housing recession in the last 50 years as I predicted; it is rather going to be the worst housing recession since the Great Depression or, better, the worst housing recession ever in US history.

At this rate of falling sales (and they will fall much more ahead) housing starts that have already plunged over 40% from peak to a level of about 1.1 million will have to fall another 25% - to a level below 900K – to start clearing the excess supply of unsold new homes that is now at 9.3 ratio relative sales. And even a 20% fall in home prices now looks like too optimistic; the total cumulative fall in home prices may turn out to be closer to 20% with some urban areas of excess (in Florida, California, Nevada, Arizona, etc.) showing even 40% fall in prices.


There is indeed no end in sight to the worst housing recession ever. Compare what happened to housing in the last 18 months to the utter nonsense and self-interested spin that was being spewed by most analysts in the fall of 2006 and into early 2007 about this being a moderate housing “slump”, about the subprime being a “niche and contained” problem that would have no contagion to other mortgages, about housing having no spillovers to the rest of the economy and about the limited financial losses deriving from subprime and the housing recession.


This worsening housing recession, together with the worst liquidity and credit crunch in the last 20 years, oil close to $100, faltering capex spending by the corporate sector and a saving-less and debt-burdened consumer that is on the ropes and stopped spending (in real terms) in December will lead in 2008 to the worst US economy wide recession of the last 20 years. At this point the debate is only on how mild or severe this recession will be, not on whether we will have one.

http://www.rgemonitor.com/blog/roubini/234460
_________________
40 propuestas por una Vivienda Digna