According to Marketwatch yesterday, "Greenspan sees U.S. house price hit bottom in 2009". I think he’s seeing things. [Thanks L!]
U.S. home prices will likely bottom out in early 2009 after the market absorbs excess inventories, former U.S. Federal Reserve Chairman Alan Greenspan told audiences in Asia Wednesday, according to news reports. Greenspan, who spoke by video link to audiences in Hong Kong and Singapore, said the current pace of liquidation will accelerate, but excess supply won’t be eliminated until early 2009.
According to data from the NAR, existing home inventory is up 6.6% year-over-year, and months’ supply is up 32%. Existing homes aren’t going anywhere fast. The National Association of Homebuilders is reporting a 15% drop in inventory year-over-year, but months’ supply is also up 32%. At this rate, how will all the excess supply be "eliminated" by early 2009?
L’s comment:
Ah, Magoo, you’ve done it again!
That I can see.
Alan Greenspan
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Mr. Magoo
Hey everyone, I’m on the road again.
I was back in Austin bright and early yesterday, and now I’m headed out bright and early today to spend a couple of days in Kentucky and Tennessee. My internet access will be limited, so my apologies in advance if Igor gets unruly and it takes me awhile to rescue your comments!
I think what he meant to say was that inflation and the sinking dollar will absorb the excessive part of house prices. Of course Americans still won’t be able to afford these houses because our wages won’t keep up with inflation, but someone out there will.
See previous headline “The reality fairy has left the country”. This guy is such a joke.
Greenspan obviously isn’t looking at the big picture as your inventory data shows. I think the FEDs/Bush admin are aware of this, but they are trying to inject confidence to the consumer. If this trend continues, I think we could see another Bear Stearns. There are economist who are saying that if consumers start to save (stop spending) too quickly, our economy will go into shock. I think we are just prolonging the inevitable.
How about this alternate headline:
“Economist who failed to predict housing bubble or recession now predicts it will be over far more quickly than economists who saw it coming”
OK, too wordy.
He was talking to an Asian audience. He is trying to calm their fears so that they will keep buying our debt.
Tobby…ok, thanks for the context. Now that makes sense. You have to wonder how many foreign investors are getting snookered into buying out toxic debt. So much the better for us. To an extent, they have to help keep our economy afloat so we can continue to purchase their goods. China needs our consumption. My personal feeling is that we just bite the bullet, let 30% of the banks fail, file for BK with our foreign debt and live off of our oil reserves for the next decade. Our national debt would be totally gone. Yeah, we would have to start manufacturing our own goods, but this would produce jobs. We would hurt for the next few years, but somewhere along the line we have to pay the piper anyway. Might as well be now.
Oil reserves? Do we really have 10 years worth of oil stashed away? I thought it was more like a month or two of reserves, and some senator the other day was even talking about raiding those.
uuuthe,
Back to the Future. I like it. As the bread basket, we could pull it off. I’ve been wondering myself if this Global Economy is all that it’s cracked up to be. I’m more of a conservative type but I do like the idea of going back to a national economy. It’s all about food and oil, though. Do we have both?
TC, We have around 11 years worth according to Wiki. http://en.wikipedia.org/wiki/Oil_reserves
I believe that the declines in the housing prices will accelerate the 2nd half of year due to loss of jobs, tighter credit, increased foreclosures and subsequently higher inventories. However, I still do not believe that it will be the bottom as far as prices are concerned.
freemonster,
I think in many ways we could pull it off, and in some ways we couldn’t. In our present economy, we don’t produce anything like we used to, so in many ways, we are dependent on foreign trade. If we cutoff foreign trade, many people would be out of work…..TEMPORARILY. We would have to start building factories, which would create jobs in the long term. Of course, the cost to produce those goods would be higher, because our wages are higher, so we would get some inflation. However, we would get some very skilled jobs back to the US, like information technology, support center, etc.
As far as oil, we have 11 years of reserve at current consumption. If mandatory rationing were put into affect, we could probably stretch that to at 15 years or longer. I really believe that we could come up with a solution in that amount of time. Yes, I know some businesses would suffer somewhat due to people not traveling as much to drive 5 miles to get their starbuck’s coffee in the morning, but that’s life. Yes, I know that the 100 pound women would be pissed because they can no longer own a 10 mile per gallon SUV to pick up their 70 pound little girl from soccer practice. Gee…life’s real though.
Well, it’s all interesting talk, but even if it COULD work, it would never happen. Big corporations demand larger profits. Let’s face it, why would you pay an American IT engineer $90K per year, when you can have an Engineer from India do the same work via T1 line for $20K per year? Big businesses will not allow our gov’t to stop exporting those high paying jobs overseas. In the long run, yes, we could do it. We wouldn’t die, but it would be painful. But…like I said, it won’t happen.
Try this headine…
“If a discredited economist speaks, does anyone listen?”
Per wikipedia, our (production) reserves are 11 years at 5 million barrels a day. But we consume 21 million barrels a day. So we would have to pump out the oil 4 times faster, and then we would be out of oil in less than 3 years. We would be crippled if we cut off imports, and if we keep trying to inflate our way out of this mess by bailing out the banks, we will be hobbled by the price of oil soon enough anyway.
I thought you all were talking about the strategic oil reserves where they put oil in old salt mines.
Igor is being mean today.
However, we would get some very skilled jobs back to the US, like information technology, support center, etc.
With no disrespect to hard working folks, I wouldn’t call a support center a “very skilled job”.
Also, your fact about 11 years of oil reserves is correct, but only if we drastically cut production. I know the peak oil folks won’t like this, but I just don’t see a big problem (yet - it’ll come, but probably not for decades). Inventories are higher than last year and production is still increasing linearly (as it has been for a long time). What we have is a commodity bubble that is inflating just like tech in 2000 and RE in 03-05.
Sandman,
I guess “call center” is very generic, so I will say Tech support agent. I good tech support agent for a larger company can pull in over 50K. Of course there are those who make half of that as well. I’m not referring to the $10 per hour jobs. Still though, I don’t see how losing even a $10 hour job overseas is a boost to our economy.
Regarding oil, you hit it on the head. There are many who say we really don’t have an oil shortage. I’m not claiming to know for sure, but my gut feeling is that we are not as bad off as the general media says we are. It my true belief that the US could be a pure national economy if we really wanted to. We wouldn’t all die, and in the long run, we would have plenty of jobs and would prosper in the long run. In the short run, it would be ugly. Ultimately, we could drill Alaska and other places if it came down to it. We would have plenty of time to produce more economy hybrid cars that get 3 times more mileage than an SUV.
Corporate greed is what ruined the greatest nation on this planet by loaning out money that people should not have qualified for…and greed will keep us in debt.
Don’t worry. Greenspan will be tried for economic crimes–and executed.
Rubin, too!!
throw Bernie in with Greenie and Rubie and you got a trifecta. At least Bernie and Greenie.
The “months of supply ” number
is a pretty bad statistic
because it over-accentuates
the current trend.
The stat is computed as:
number of houses for sale
/ number of sales last month
Specifically, when there is a
month of low sales, this stat
can grow alot even if the supply
of houses for sale decreases.
A better stat would be either:
(1) number of houses for sale
(2) number of houses for sale
/ Average number of sales over the
last year.