Potentially a Decade of Recovery?
My friend, Mike Simonsen with Altos Research (they provide the charts for my ‘How’s The Market?’ pages) was recently interviewed on the Fox Business Network, along with Anthony Sanders, Finance Professor at George Mason University.
Interesting conversation, but not particularly uplifting. Simonsen indicates that it
“…could be a decade of recovery. Banks have tons of homes on their books and they are reluctant to let them go at all because they have to then start doing things like ‘marking to market’ if they sell them at depressed prices. So they dribble them out, and they may be dribbling them out for 10 years.”
For a long time I’ve felt as if we kicking the proverbial can down the road with band-aid loan modifications (that continue to have high default rates) and artificial stimulus like the Housing Tax Credit. None of these things solve the larger issues of high unemployment, negative equity homeowners, the outstanding loans that are still resetting, and overall poor economic conditions.
When Sanders is asked what do we do to help the housing market, he mentions fixing unemployment, keeping the Bush tax cuts in effect, and
“Government’s got to pull back out of the housing market and let the private sector work. They have done no good whatsoever. Like the ‘Midas Touch’, it’s just the opposite. They’ve got the ‘Medusa Touch’; they touch the housing market and it turns to stone.”
Here’s the full interview. Well done Mike – love the purple tie trio. 
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Linsey Planeta
Hi Linsey – that was a funny conversation, I went in planning to talk how we’re bearish on the next 10 months and ended up talking about how we’re bearish on the next 10 years!
I’m not entirely bearish of course, we’ll have ups and downs along the way. But you’re right we are kicking the can down the road – especially in states like New York and Florida where the foreclosure laws are so heavy that even when the banks want to unload, clear, or otherwise clean the mess from their books it takes years.
California is actually a little better on this front, so that bodes well for a better recovery in this state. Now we just have to fix all the other legal/structural problems with California real estate…
It was a colorful debate. But Americans have to realize that house prices will not return to former levels with the drove of increased and new taxes, fees, etc that the Administration and Congress are putting into place. More taxes + less credit = long recovery.
Throw in the almost 3% Federal home sales tax that is included in the healthcare bill (that will be the beginning of further taxes), and it starts looking ugly.
Thanks Mike!