Wednesday, August 02, 2006
Estate sales.
Dean Baker says the housing market is crashing.
We have enough data at this point (lower sales, rising inventories, falling median prices) that I feel confident in saying that the crash has begun. We don't yet know the speed of the decline or the full repercussions in terms of the financial havoc or the extent of the economic downturn.
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It'll be interesting to see how this plays out. It's interesting that Baker sees the housing bubble as encompassing ten years, rather than four, although presumably the historically-low interest rates four-to-five years ago (in his eyes) propped up the market during the recession.
And how will a housing slump differ from one market to another?
Ultimately I think the desirability of a market and the number of people in that market who are forced to sell due to ill-considered mortgage choices five years ago will dictate how badly a market slumps. My guess is that all of this will play out over the next three years. If mortgage rates level off (which may be a big 'if'), the slump might actually end up being more of a retrenching similar to what we saw around 2000-2001.
We shall see.
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And how will a housing slump differ from one market to another?
Ultimately I think the desirability of a market and the number of people in that market who are forced to sell due to ill-considered mortgage choices five years ago will dictate how badly a market slumps. My guess is that all of this will play out over the next three years. If mortgage rates level off (which may be a big 'if'), the slump might actually end up being more of a retrenching similar to what we saw around 2000-2001.
We shall see.
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