Despite hopes that this year the United States would see the end of the
housing crisis, recent reports reveal that housing prices in 20 major
metropolitan areas fell between September and October (the most
recently-recorded month). Economist Gary Shilling
shares a number of graphs at Business Insider today to explain his
prediction that price drops will continue. Bloggers react to the news
and attempt to explain how this happened and how it will impact the
future of the economy.
- 'A Big Drag on the Economy' The Washington Post's Ezra Klein refers to Shilling"s aforementioned overview as "the clearest most comprehensive I've seen. It's also the grimmest." Klein tries to assess where the housing market will go from here:
If Shilling is right, this'll be a big drag on the economy in 2011. And it helps explain why House Republicans are rapidly backpedaling from their once-cavalier confidence that Fannie and Freddie can be swiftly privatized and spun loose. Where the housing sector had a lax -- and occasionally fraudulent -- attitude toward lending and appraisal in the run-up to the bubble, they've tightened considerably since the bust. So considerably, in fact, that basically the only mortgages that are moving are those that Fannie or Freddie are willing to buy.
- We're Not Totally Doomed Daily Intel blogger Chris Rovzar notes that some economists see the September to October drop as a sign that the "rock bottom" prices of April 2009 or even lower are not far off. But Rovzar looks for the silver lining:
This doesn’t spell doom for the entire economy--there’s good news on the retail front, and manufacturing and exports are expanding...And then there are those stimulative tax cuts that we all will continue to get, along with the yearlong payroll tax holiday. Those signs point to growth. But as far as the average consumer's confidence goes, it's hard to look at anything except housing prices and unemployment--which is at a nineteen-month high at 9.8 percent and could end up looking worse as new numbers are released next week.
- Attempting to Keep Prices High Will Just Bring Them Down Jeffrey Miron at Libertarianism offers an explanation for the continuing drop: "Housing
prices are falling because they soared to ridiculous levels during the
bubble. Any policy that attempts to keep prices high--or,
equivalently, that attempts to prevent foreclosures or juice housing
construction--is fighting a crucial market adjustment to past
- This Will Effect Other Parts of the Economy At the National Journal, Clifford Marks's own prediction counters Chris Rovzar's positive take on the economic situation. "The drop risks smothering the broader economic recovery because continuing losses in housing wealth tend to sap consumer spending," he notes. "The decline also eviscerates the construction sector--once a source of economic growth."