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Thursday, July 10, 2008

"Worst of Housing Crisis Is Behind Us"

John Berry has a relatively optimistic outlook:

Worst of Housing Crisis Is Behind Us -- Really, by John M. Berry, Commentary, Bloomberg: The intense pain caused by the bursting of the housing bubble is beginning to ease. Really.

That may be hard to believe, given the rapid increase in mortgage foreclosures, big year-over-year declines in home prices and housing starts, and continuing writedowns in the value of mortgage-backed securities.

Yet a close look at the recent flow of housing data provides convincing evidence that the worst of the decline is over. Investors who are fleeing financial-institution stocks -- including those of Fannie Mae and Freddie Mac -- ought to think twice about the housing outlook.

Take sales of existing homes, which account for about 85 percent of all U.S. housing sales. They peaked at an annual rate of 7.25 million in the fall of 2005 and fell to 4.89 million in January. In May, it was 4.99 million.

The recent figures aren't a guarantee that such sales won't decline a bit more in coming months. Still, their relative stability probably indicates that home prices have dropped enough to encourage buyers to re-enter the market. And there's no reason to think the huge drop in sales since 2005 will be repeated.

Sales of new homes, like those of existing homes, have also moved sideways in the last couple of months. They might fall again, though probably not by very much. ...

In other words, the worst is behind us. ...

    Posted by on Thursday, July 10, 2008 at 12:15 AM in Economics, Housing | Permalink  TrackBack (0)  Comments (32)

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