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."
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