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Wednesday, June 23, 2010

A Housing Relapse?

There's a fairly good post over at Calculated Risk about the uptick in inventories shown in recent home sales reports. Additionally, as I have mentioned in the weekly economic updates, the temporary boost that the plethora of government programs has provided to the housing market appears to be giving way with some new price declines possibly setting in.

I would say, as does Bill McBride at Calculated Risk, that a new series of price declines would not be as catastrophic as they were previously. However, they will have a deleterious effect on economic activity and possibly make banks more unwilling to lend. Will it be enough to entirely derail recovery? I don't believe so, but it certainly bears watching.

Further, there is the possibility of synchronized declines with other major markets around the world such as Australia, which appears badly overvalued, and China, as has been previously mentioned. Australia is not a large enough housing market to sink the world, but when the bubble there starts bursting, it will cause some pressure that, if it occurs at the wrong time, could make life difficult.

Anyway, those are just my two-cents.

1 comment:

  1. How about those HAMP and MHA programs, eh? Not that it necessarily affects housing values, but that those federal plans are failing so badly is pretty exciting. Especially at work.