Monday, July 21, 2008

No Bottom

This Wachovia analysis about the housing market sounds a lot more realistic to me.

Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson have suggested over the past year that an end is in sight. But with each prediction, things have grown worse. For many homeowners, the deep housing slump feels like a drop off a skyscraper. Every time another 15 floors have passed, there seems to be more room to fall.

"I don't think we get strengthening in the housing market until late 2011 or 2012," said Mark Vitner, senior economist for Wachovia, the nation's fourth largest bank and one that this month hired the number-two man from the Treasury Department as its new chief executive officer to shore up its own growing exposure to mortgage debt.

Before bottoming out, prices nationwide should fall 22 percent to 29 percent on average from their peak, according to a report that Wachovia released last Monday.

Once upon of time these kinds of price reduction estimates were considered to be crazy talk, and most of the very serious people were talking as if there would be some momentary pause and then home prices would continue to appreciate at absurd rates until the end of time.