When the world's most respected business publication comes right out and tells it like it is, well, I'd say that trumps David Lereah, the goober at Bloodhound, that LA realtor poster, Bob Toll and all the other housing ponzi scheme purveyors and polyannas.
Yes, being a realist or a truthteller doesn't make you Mr. Popular, but in the end, aren't people better off with the truth? One thing Bush and Cheney should have learned by now with Iraq, or Dusty Baker with the Cubs...
Prepare for the fall folks. This epic credit-leverage-fueled, investor-led ponzi scheme spread to the financially uneducated and unsuspecting masses all over the world, and now it's over.
Hard edge of a soft landing for housing
The world's leading economies have long been given extra impetus by an extraordinary boom in the price of houses. That boom now seems to be coming to an end, but exactly what happens next and what the effect will be on the world's economy is not clear; the risks, however, are substantial.
Naturally, attention is most closely focused on the US market, particularly following the Federal Reserve's decision last week not to raise interest rates after 17 successive rises. That market now looks feeble.
What makes housing prices so imponderable is that they are bound up in the animal spirits of everyday punters. Prices can be pushed higher simply by the expectation that that is where they should go, as buyers scramble to buy what they cannot afford using ever more innovative mortgage products, while sellers hold on to property and sell only with a view to buying something even bigger. A slowdown in these red-hot markets is inevitable. It may be gentle, but it is impossible to rule out a collapse of sentiment and of prices.
Even a soft landing would mean a prolonged period of stagnant nominal prices. Prolonged weakness in the housing market has characterised the struggling Japanese and German economies, which is hardly encouraging. The trouble is that greater housing wealth has encouraged consumers to borrow and spend. If housing wealth stops rising, even if it does not fall, consumer spending, the engine of economic growth in the short term, is likely to stall too. Australia and Britain have both seen this pattern already. If the US consumer were to give up and go home, the effect on the world's economy could be depressing indeed.
August 20, 2006
Financial Times lead editorial: Hard edge of a soft landing for housing - "effect on world's economy could be depressing indeed"
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12 comments:
damn, is hp writing for ft these days? eerie!
it will be more and more obvious to the readers of this blog that the all clear has been given in acadamialand too admit the fact a depression is underway.
yes, the msm and financial press is really starting to report how it really is, versus getting their talking points from the administration and the fed
I guess they didn't see the credit binge when it was well underway. but looking back now they see it as incredibly obvious, and maybe that's stimulating their thinking to what comes after a binge
The Fed has taken the punch bowl away. Everyone got drunk when the Fed lowered interest rates to levels last seen when Eisenhower was in the White House.
"If the US consumer were to give up and go home......."
This guy hasn't been to the mall lately? Better article but
the MSM still needs that one final boot in the but into "its a CRASH, stop dancing around the word and call it like it is"
"depressing indeed"
hmmmm. . .the FT is always the master of understatement, but it seems pretty clear to me this time. . . depressing as in depression??
I stated this in an earlier comment, but it probably fits better here.
I read a serious commentator on banking once who, in reference to the ability of banks to "make money" through the issuance of credit while holding only of a fraction of the initial deposits as a "reserve", referred to our monetary system as not being a reality, but a "shared dream or illusion" of money. In otherwords, people believed that their money was sitting in a vault somewhere and that when they went to withdraw that money it would be there just because there was a positive number in their deposit or checking book. His point was that for all intents and purposes our monetary and banking system was not really physical bils/gold/coins, but a system of contracts or promises to pay. As long as people had faith in those contracts and the promises were beleived in the system worked and there was no panics or runs on the banks. This is what the FDIC was set up to ensure.
What happens to our system if that faith is shaken or the promises doubted or no longer believed in? What happens when the shared dream becomes the shared nightmare? Or more germaine to this blog, what happens when the belief that your house has a nominal value or that a consumer is a good credit risk is shattered? (No matter how many fees a lender rakes in on late payments, at a certain point losing too much of your initial principal to too many people makes you unwilling to lend or unable to sell the loan off for someone else to suffer the loss.)
--Andrew
quacks like a duck - it's a duck
nice
Now that the housing sells are slowing down and realtors's profits are deminishing, realtors have less and less money to spend on advertisement.
Guess what, the statement "Don't bite the hands that feed you" is very true.
Now that realtors can no paid the media at the level of the pass three years, the media is biting back.
Hard Landing For Housing Increasing Possibility
This week has been terrible for the real estate market.
A decrease in supply can be a signal of several problems. There could be a glut of product on the market. This is part of the reason, as US inventory levels are very high. A decrease in supply can also be a sign of little to no confidence in the market's short-term prospects. Considering most major housing companies have lowered their earnings forecasts at least once this year - and several times for a few companies - this decrease in supply is probably also a sign of concern for the market's short and medium term prospects.
http://agonist.org/bonddad/20060819/hard_landing_for_housing_increasing_possibility
Hard landing predicted for U.S. housing market
National Bank Financial economists don't buy the idea that the housing market in the United States is coasting to a soft landing. And they aren't the only ones pointing to the increasingly disturbing statistics on that market.
http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20060817.whousing0817/business/Business/businessBN/ctv-business
Bernanke's hard search for soft landing
http://www.theaustralian.news.com.au/story/0,20867,20077296-643,00.html
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