Following up on Krugman’s pessimism, here’s some housing market analysis from Hal “Bondad” Stewart at 538:
What does all this mean?
1.) The existing home sales market has farther to fall. There is simply far too much inventory on the market for prices to remain stable.
2.) During the recession, the economy lost a total of 7,281,000 million jobs. Of these, 2,102,000 or 28% were construction workers. Given the massive inventory overhang in the existing home sales market it is highly doubtful that we’ll see large construction employment gains in the near future.
3.) Housing wealth is one determinant of consumer behavior. If housing prices continue to move lower, expect lower consumer spending to follow.
This weekend, I talked with someone who works for a big property management firm here in Rochester. He said that lending is still tight, their rental units are full, and his company is building large units (2-3 bedroom townhomes) for rent. I’ve know this guy for years, and I consider his business “smart money”. The smart money in this town is making a long-term bet that more families who used to be buyers will be renters, at least until they save up for bigger downpayments.