Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (14129)	1/28/2002 5:22:53 PM
From: AC Flyer	Read Replies (3) \| Respond to of 74559

The residential real estate slowdown continues - NOT! Part II Here's what Stephen Roach at Morgan Stanley has to say: morganstanley.com "There's little chance for a crash in home prices nationwide, in my opinion. Unlike the past, there's little overhang of supply of either new or existing homes, and a collapse in demand under the circumstances seems unlikely. But local bubbles in some markets probably do spell declines there, adding up to annual increases of 2% to 4% nationwide over the next couple of years." "In my opinion, a favorable balance between demand and supply has lately pushed home prices higher. Strong demographics, still-low mortgage rates, and positive real wage gains have all supported housing demand. More than 16 million immigrants have entered United States in the past 20 years, half again as many as in the previous 30 years. That flow, together with still-solid economic fundamentals, has provided a firm foundation for housing demand, even in a recession. And on the supply side, the capital markets have disciplined builders, who keep inventories lean. Inventories of new homes stand at only 4 months' supply, or just slightly above the all-time low. And the builders complete only one in three homes without a signed contract from a buyer. Likewise, inventories of existing homes on the market are close to all-time lows, at 4.2 months' supply. In contrast, real home prices declined in each of the past two recessions, either because demand collapsed (1981-82) as interest rates skyrocketed or because supply was excessive (1990-91). Inventories of both new and existing homes were twice or three times today's levels in relation to sales in each of those downturns." "Our outlook for 2% to 4% average home price gains nationwide in the coming year thus hides significant regional variation. But overall, it's very much in line with the 2.8% projected rise of Case-Shiller-Weiss (CSW), the home price analysis firm started by Yale Professor Robert Shiller. CSW also sees substantial variation in home price appreciation in the coming year. It expects prices in Washington, DC, to rise by more than 7%, but prices in San Diego to edge up by 0.8%. I'm comforted that Shiller -- long an equity market bear -- sees no bursting bubble in home prices. Bob Shiller knows a bubble when he sees one. After all, he literally wrote the book on irrational exuberance and has written several articles on speculative bubbles in housing and other markets. So in my view, the bears on the U.S. economy are just going to have to find other reasons to doubt the staying power of the current recovery."