Death of Housing
So it looks like we are in the beginnings of a real US housing downturn. I have suspected this for a while now, with the cover story that came out in BusinessWeek kind of marking the fact that things had already begun to go sour without everyone taking notice. Many people pointed to prices still increasing, year over year, when in fact the quarterly figures were dipping.
So now here we are a couple of months later. And it is obvious that housing has taken a turn for the worse. Makes me wonder if the market here in China will sour anytime soon. I sure hope so, maybe I might consider buying a place then (not really).
Home builder stocks are about 50% of their all time highs reached less than a year ago. However, in spite of them being priced at value prices in relation to forward earnings (which are admittedly well below current earnings) even after earnings revisions, housing stocks are still a not so safe place to be, at least in the minds of this investor.
Housing prices way too high
The reason? Housing prices have been on a bull run like we have not seen since the end of World War II, and mortgage debt is at an all time high. I don’t think housing has anywhere to go but down from here, and I would guess that housing stocks will continue to fall through all of this, perhaps to levels we wouldn’t imagine them falling to at the moment.
Hopefully all of this will crescendo at the point I make it back to the states and have enough money to put down on a house that has declined by 50% in value… that would be great for me but horrible for the economy and the American people as a whole. On second thought, hopefully things will not turn that dark. This, however, is not a given. Better pray that the current account deficit that looms so large won’t sink us all.
And better hope that people can afford to pay off their ARMs and jumbo mortgages.
Buying in China
I know that the housing market in Shanghai declined fifty percent in real terms at one point during the 90s. Let’s hope that happens sometime soon… I would like to get a place in here in China, and quick! Heh… that’s a lie.
