Krugman: Housing Won't Recover Until At Least 2011
Care for a bitter draught of economic realism to start off your summer weekend?
In his column in today's New York Times, Paul Krugman predicts that the housing market won't begin to emerge from its current slump until at least 2011, and that's because that market will keep slumping for a while. Waiting for a bubble to deflate is the opposite of popping a water balloon -- it takes a while.
And the overall economy? That won't begin its repair until 2010 or later:
It’s true that some prognosticators still expect a “V-shaped” recovery in which the economy springs back rapidly from its slump. On this view, any day now it will be morning in America.
But if the experience of the last 20 years is any guide, the prospect for the economy isn’t V-shaped, it’s L-ish: rather than springing back, we’ll have a prolonged period of flat or at best slowly improving performance.
There is some good news buried in Mr. Krugman's column, at least for Obamamaniacs. Mr. Krugman thinks that the crappy economy makes the Illinois Senator a virtual shoo-in for '08, absent a disastrous scandal.
But not necessarily for 2012:
But what the economy gives, it can also take away. If the current slump follows the typical modern pattern, the economy will stay depressed well into 2010, if not beyond — plenty of time for the public to start blaming the new incumbent, and punish him in the midterm elections.
Have a cheery weekend!
Housing won't recover...PERIOD.
The US is basically bankrupt. You cannot expect to keep borrowing US$2bn per day from the rest of the world. China would have pulled the plug long ago except for the cudos that they hope to achieve from the Olympic Games. Come September TSWHTF. Saudi Arabia has also effectively given Dubya the middle finger for the past year, with only a tiny token gesture to hold him over until 20 Jan 2009.
All the shonky financial shenanigans that have occurred since the 1987 crash have merely served to hide the parlous state of the US economy, whilst failing to remedy the problems that lead to that crash. Replacing one baseless bubble with another is not sound economics.
The combination of the US lead Global credit crunch, Peak Oil, Anthropogenic Climate Chaos, and Human Population Overshoot have now combined to cause a major Homo stupidus crisis.
US imperialism is at an end. Although you still undeniably have the ability to annihilate all life on earth, you have long passed the time when you could qualify as a leader of human civilization. Sadly, the US attempts to become the replacement for the last (UK) Imperial world power have been a total f*ck-up since Suez in 1956. As a new-fangled, jerry-built society, you lacked the background to become an effective controller of world events.
I personally don't fancy the forthcoming Chinese global hegemony, but I suspect that it is inevitable, and marginally preferable to the alternative Sharia Law imposed by the oil-rich Islamic nations of the Middle East.
Perhaps the best that can be hoped for is a limited non-nuclear Israel/Iran war that halves the international oil trade. This just might give us a century of severely localised society in which to contemplate the future without any overpowering economic power screwing the rest of the globe.
Cheers
Merv
Real Estate is prone to bubbles and crashes and it has always done so.
There is one constant in determining real estate prices and that is the rental price of a comparable property. Rental markets are more stable than a real estate market that has slid into a speculative bubble, and are more rationally based upon what people can actually afford to spend on housing.
A Real Estate PE Ratio is based upon a long term trend and has been a faithful predictor of property values for over 100 years.
You can calculate the value of a home using an online calculator - a very simple tool, that will show what a property will be worth after the crash is over.
http://www.howtosellyourhouse.net/value.html
If rent prices are falling too, as they often do during a crash, then the price given by this calculator will be an optimistic one. As it is, it's an eye-opening exercise.
The USA defaulted on its debt first in 1933 - every gold certificate and gold backed bond, was unpaid according to the terms of payment (in gold) Strike one.
Then in 1971, the USA defaulted on every silver certificate and silver backed bond. Strike two.
When the USA defaults for the third time, we're all striking out.
Background:
Experienced 3 hot and 3 cold markets!
Bought 300 properties in the 1992-1999 down market
Sold 200 properties in the 2000-2007 Hot Market
Market DIVE is 2007 to 2012-16 =
Bottom of Market should be about 2013-2018!
Long Wait 2 a Market Recovery!
The monetary and other policies which enabled the VERY short-lived fulfillment of the 'American Dream' for millions of new homeowners, before turning those dreams into nightmares, were not just the result of greedy lenders, greedy appraisers, greedy homeowners (including 'flippers') and a greedy RE industry (and politicians) in general - but the result of the DELIBERATE PLANNING of some of the most brilliant, if evil minds among America's economists, bankers, regulators and politicians. Events as momentous as this ('Financial Armageddon') just can't happen 'by accident', greed or stupidity!
So why did Greenspan & Bernanke (and their masters - NOT Bush!) administer 'Death by 1000 Cuts' to the American economy (and very likely the Global economy)? Why did they so exquisitely PLAN for America to go 'Under' or 'Belly Up'? - including banks, corporations, small businesses and millions of Americans!
This is not just some 'business cycle', doing it's 'thing'. It's a group of like-minded and heartless individuals with an ENDGAME in mind, doing their 'thing'!
Is this event related to anything else that's been happening lately? - like squandering hundreds of $Billions (waging the costly 'War of Terror' and attacks on Iraq and Afghanistan, etc.) and raising deficits and debt (Federal, States, Municipalities, Businesses and Individuals) to astronomical levels? Does 9/11 fit into this Puzzle? Who benefited from all these hair-raising events (and others)?
Neturei Karta True Torah Jews announced (in 1948):
"Zionism is Nazism". Are Zionists really ZioNazis? Can Yahweh's 'Chosen People' be wrong about a matter so close to their hearts? Not likely!
Put together ALL the dots and be prepared for 'Shock and Awe'! (and a New World Order).
Remember what A. Sharon said to S. Peres: "Don't worry about the Americans. We, the Jewish people, control America and the Americans know it".
Do YOU know it???