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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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From: RealMuLan	1/2/2005 6:13:07 PM
	of 116555

From MiTek -- "Summary: I want to give you a “contrarian” outlook for housing and the economy because it is good to get a different opinion. The latest outlook from UCLA’s Anderson forecast (director Edward Leamer) warns that there is a possibility that the housing boom will end next year as rising interest rates and a slowdown in housing knocks U.S. growth down to 2.8% in 2005, compared with a consensus outlook of 3% plus. Leamer - “If the weakness continues into 2006, we could see a plunge in consumer spending on homes and other durables.” Leamer is concerned over the big increase in house appreciation – over the past 8 years, the ratio of median home prices to rent for a 1500 square foot apartment – a statistic he calls the price earnings ratio for homes – has doubled over the past eight years to 25 times. Prices of new homes have risen 33% in the past 5 years. He is forecasting 1.8 million starts for 2005 and 1.6 million in 2006 (NAHB is 1.882 in 2005 and 1.82 in 2006). So, the loss of home appreciation (he forecasts flat home prices over next two years), and related spending it encourages – could cause problems for the economy by 2006. " mii.com

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