Sunday, May 16, 2021

The Long and Winding Road

by Calculated Risk on 5/16/2021 11:34:00 AM

This is the 17th year I've been writing this blog.  


Starting in January 2005, I was very bearish on housing - and in early 2007, I predicted a recession.

However in 2009 I became more optimistic. For example, in February 2009, I wrote: Looking for the Sun (Note: that post shocked many readers since I had been very bearish).

A few years later, in early 2012, when many people were still bearish on housing, I called the bottom for housing: The Housing Bottom is Here

Then I spent a number of years arguing against the recession callers, and the new housing bubble calls. A few examples:

In 2015, I wrote The Endless Parade of Recession Calls
For the last 6+ years, there have been an endless parade of incorrect recession calls. The most reported was probably the multiple recession calls from ECRI in 2011 and 2012.
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I disagreed with that call in 2011; I wasn't even on recession watch!
And I updated that post several times, most recently in 2019

And on housing, over three years ago, in January 2018, I was quoted in a Bloomberg article:
Bill McBride, who runs the Calculated Risk blog and also called the crash, doesn’t think home prices are inflated this time around. Unlike in 2005, lenders are acting responsibly and the Wild West of real estate speculation hasn’t returned, he said. There is less to speculate on, too. Compared with the overbuilding that preceded the bust, today’s pace of construction isn’t fast enough, he said.

“Lending standards are still pretty good,” McBride said, and he doesn’t expect mortgage rates to “take off” in the short term.
And in December 2018, I disagreed with Professor Shiller A comment on Professor Shiller's "The Housing Boom Is Already Gigantic. How Long Can It Last?". My conclusion:
No big deal, and definitely not a "gigantic" boom in house prices.
And last month I wrote: Is there a New Housing Bubble?
The lack of wild speculation doesn't mean house prices can't decline, but it means that we won't see cascading declines in prices like what happened when the housing bubble burst.
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From a historical perspective, house prices are high. But lending standards have been solid, and we haven't seen significant speculation - so I wouldn't call this a bubble.
No one has a crystal ball, but one thing I've learned over the years is to watch housing inventory. And it is my sense that Existing Home Inventory Might Have Bottomed.   If inventory has bottomed, then the question will be: How quickly will inventory increase?  I don't have an answer yet, but if inventory increases slowly, house prices will continue to rise rapidly, and if inventory increases sharply, house price growth will slow.

Stay tuned!