Friday Morning: Has Housing Hit Bottom? A Mini-Debate

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Yesterday’s Sybil-like report on new home sales has sparked a mini-debate: does the month-to-month rebound in sales indicate the housing market is bottoming out? Or does the steep drop in prices mean housing is still in a free-fall? Here a mini-debate:

From the BBC via Patrick.net: ‘The housing market seems to be bottoming out,’ said Mark Vitner, senior economist with Wachovia Securities in Charlotte, North Carolina. ‘The worst is clearly behind us in terms of the decline in home sales and construction activity.’

From LATimes.com: The government report ‘does not jibe with the reality’ in Southern California, said Peter Dennehy of Sullivan Group Real Estate Advisors, a San Diego-based consultant to builders. ‘Sales are what they are and that is they are lower than what they were last year.

From CNN Money: Paul Kasriel, chief economist with Northern Trust in Chicago, equated the strong sales to the strategy of the Detroit automakers, who cut prices and offer other sales incentives to counteract weak demand for their cars and trucks, sometimes taking a loss on the sales.

‘The builders are clearing out the merchandise,’ he said. ‘They’re doing a Detroit here. When you have excess supply, the quickest way to move supply back into balance with demand is to cut the price, and finally they’re doing that. I would not say this is the bottom of the housing recession.’

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