Housing Free Fall Turning into Meltdown

Another person refusing to smoke the good stuff making its way around Wall Street. More warning signs – this time from Nouriel Roubini.rasta.gif

“For the last few weeks and months I have been writing dozens of detailed notes and blogs rebutting the utter nonsense that has been spewed – based on little or no data – on the alleged bottoming out of the housing recession. Even Alan Greenspan – the allegedly careful reader of  macro data – had joined this cheerleading clown show and the National Association of Realtors spin of half-lies that “we are near the bottom of the housing recession”. The actual data that  were coming out of the housing market in the last few weeks were clearly inconsistent with this cheerleading non-sense and spin. So, maybe these delusional optimists will now shut up for a while and listen to the numbers after today’s announcement that housing starts fell over 14% last month and that they are now at their six year low. Even worse, building permits, that are THE leading indicator of future housing activity, fell further by 6.3% and they are now at their lowest level since 1997.

And even at these low levels of permits and housing starts the housing sector is nowhere near its bottom. In previous housing recessions, housing start fells as much as 40% to 50% from their peak; so, with starts now being only 27% down, the housing bust has still a very long and ugly way downward to go. And lower permits today mean lower housing starts ahead, and lower starts mean lower construction and lower construction means much lower construction jobs; expect over 800K jobs to be lost in housing in the next year.

So beware of the new spin that you will hear soon claiming that, with starts now down 27%, the bottom of the housing bust is near; building  permits and housing starts are likely to fall at least another 20% in the next 12 months before any bottoming out of the worst housing bust in the last five decades is reached in 2008.”

There you have it from two different sources, Nouriel Roubini and Peter Schiff, both making the same conclusions.  Real Estate investors be careful.

Nouriel Roubini’s Commentary

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