Wednesday, December 3, 2008
How's That House Working Out For You?
U.S. housing prices are down over 20% from the 2007 peak. All of the 20 markets tracked by the Case Shiller index are down, so while there are regional differences, this is not a regional problem. It is everywhere. You probably already knew that.
Superanalyst Meredith Whitney of Oppenheimer and Merrill Strategist David Rosenberg have both come out in the last week and said that there is anther 15 - 20% downside in prices.
These calls caught my attention because, it feels to me, that an awful lot of people were hoping we are at the bottom, while not explicitly calling one. I read both Whitney's and Rosenberg's notes. Both have one of the qualities that I like least about financial research:
In the short term it is more important that something sound like a good idea than whether it is one.
Add to that the fact that a negative argument almost always sounds more intelligent than a bullish one, and you have a big call. I don't believe that housing prices have bottomed, but making a call as precise as calling for 15 - 20% more downside from here is quite a high wire act.