As many HP'ers would agree, Dr. Thornberg and the UCLA Anderson Forecast have been spot-on with their housing bubble reports and reflections, including this extremely insightful presentation on the bubble now available on Google Video.
Dr. Thornberg was kind enough to give a brief interview to Housing Panic on our bubble troubles. Here is the interview in its entirety. Enjoy!
HP: David Lereah and the NAR continue to call the declining home sales and prices, and building inventory underway a "soft landing". Do you feel the landing in bubble markets will be "soft" or something more approaching "hard"? And do you feel David Lereah and the NAR should be seen as a trustworthy source of information on the real estate market?
CT: Actually what we are seeing is a very typical slowdown in the market so far—there is nothing particularly soft about it.
The claim is that because unit sales are falling but prices are still going up that this is an unusual slowing.
The fact is that most breaking markets start with activity, and it takes 3 to 4 quarters for that to take all the wind out of price appreciation.
How hard it will be remains to be seen. Of course they have a biased view—they are paid to be sunny. Caveat Emptor.
HP: Ben Bernanke is faced with what seems to be a tough choice - continue to raise rates to combat inflation and protect the dollar, likely hurting the housing market and home prices, or stop raising rates, and let inflation roar, the dollar freefall and the housing bubble continue. If you were Ben, what would be your action plan?
CT: This is a no brainer. The Fed’s first job is to promote price stability, and its second job is to help the economy through rough patches.
Given a situation where these two goals point in different directions, price stability is the most important factor. So if inflation rears its head, rates will go up regardless of the housing market.
HP: Who was most responsible for the housing bubble - The Fed, Realtors, Mortgage Brokers, Exotic Loans, Human Nature, Speculators, Appraisers, Builders, something else or an equal combination of all of these?
CT: Yes, and throw in China since they have been fueling our spending binge with cheap capital.
HP: What US housing markets do you feel are most at risk of collapse (defined as real median home sale price drops of more than 20% from peak) if any?
CT: Prices fall when you lose jobs. Right now the non-housing part of the economy is picking up speed, thus stabilizing things.
Still, those markets with the greatest level of speculative buying and building (Florida for example) may be most at risk.
May 31, 2006
A Housing Panic Exclusive: An Interview with Christopher Thornberg of the UCLA Anderson Forecast on the Housing Bubble
Posted by blogger at 5/31/2006