By Patrick Barta
THE WALL STREET JOURNAL
Feb. 8 — Talk of a housing bubble is back, and with it, questions over the speed of any economic recovery. This past summer, Wall Street was abuzz with speculation that the housing market, which soared during the late 1990s economic boom, was headed for a crash by year’s end. But low mortgage rates and continued strong demand helped confound the naysayers, pushing home sales to an all-time high in 2001, with 6.15 million homes sold.
NOW, THE DEBATE is heating up again. In recent weeks, a number of Wall Street economists and analysts have issued reports on both sides of the issue.
The reports are surfacing because home prices have kept rising even throughout the recession, which some believe means the recession hasn’t washed out possible excesses in the market. The median price for an existing home rose a stunning 8.4 percent in December from a year earlier, to $151,400.
Advertisement
The price run-up has created “an unsustainable situation,” especially when compared with incomes, wrote Ian Morris, an economist at HSBC Securities USA, a unit of London-based HSBC Holdings. Although Morris’s report raised eyebrows because HSBC is one of the biggest mortgage lenders in the country, Morris says his outlook is based on publicly available economic data, not information from the bank’s mortgage business.
Skeptics such as Morris are very much in the minority. Most economists still think housing is on solid footing, boosted by strong demand from immigrant buyers, low interest rates and a tight supply of homes. The year 2001 “may end up being the high-water mark for some time to come,” says Mark Zandi, the chief economist at Economy.com, a West Chester, Pa., consulting firm. “But the factors supporting housing are still in place. I don’t foresee a broad collapse in prices.”
In a report titled “Housing Prices: A Bubble Ready to Burst?” Morgan Stanley economist Richard Berner said that at a recent meeting with clients, some participants contended the housing market is set to unravel, undermining consumer finances and contributing to a “double-dip” recession.
Berner concedes that home prices have risen more rapidly in the past five years than ever before and, as some bears who track bubbles like to point out, it took more than a year after the peak of Japan’s Nikkei stock market in 1989 before that country’s housing market cracked.
But Berner says he doesn’t believe a crash is coming, though he does expect home-price growth to slow to a range of 2 percent to 4 percent in the next “couple of years,” and he says bubbles could exist in high-priced cities such as San Francisco, New York, Boston, Miami and San Diego. To wit, he notes that based on current sales activity, there is a 4.2-month supply of existing homes and a 3.9-month supply of new homes, extremely low levels by historical standards. “People are saying, oh come on, this shoe has got to drop,” he says, but for most of the country, “the fundamentals still look okay.”
Morris at HSBC, by contrast, is more worried. In a report entitled “The U.S. Real Estate Cycle: The Other Bubble?” he presents evidence in the form of ratios comparing real-estate values to income. That, he argues, is akin to a “price-to-earnings” ratio for the housing sector, giving a good idea of how pricey homes are relative to Americans’ earnings.
By his calculations, one version of the ratio now stands at about 1.6, meaning homes are historically very expensive when judged by how much people are earning. The level is about equivalent to the high reached in 1989, the year before the last prolonged drop in inflation-adjusted home prices. In much of the 1960s and 1970s, the ratio usually hovered at around 1.2.
Moreover, Morris says the high cost of housing today is being masked by extraordinarily low interest rates, which allow consumers to lower their debt burdens and afford more expensive homes than they’d otherwise be able to buy. An uptick in interest rates this year — which he expects — could “cause the housing market to tip over.”
Morris doesn’t necessarily think all parts of the country are in jeopardy. The home value-to-income ratios in some states, including New Jersey, Florida, Texas and Illinois, are relatively low, because incomes in those places have done a better job keeping up with gains in house prices. In other states, mostly on the West Coast and in the North Central U.S., including California, Washington, Oregon, Michigan and Minnesota, the ratios are high.
Among cities, San Francisco, Boston and Seattle appear to be some of the most at risk, while Dallas, Atlanta and Houston appear extremely affordable compared with past years as income growth has kept up better with rising home values. Surprisingly, New York is expensive but more affordable than in the 1980s, Morris says. He also says inflated real-estate values appear to be a bigger problem among high-end properties, including homes priced $300,000 or higher nationwide.
In another report titled “Healthy Housing Boom or Housing Last Gasp,” the investment-research firm Ned Davis Research in Venice, Fla., says its internal computer model that scores the housing market on a scale of zero to 100 recently dropped below 50, meaning the market’s outlook is “unfavorable.”
The firm suggested current activity is probably getting a short-term boost from buyers who want to act now before the Federal Reserve begins raising rates again. Once that demand dries up, activity could slow.
But the firm’s analysts stopped short of predicting a big housing correction. “It looks to us like mild weakness,” says Joseph Kalish, a senior bond-and-economic strategist at the firm. “It’s hard to see that we have a bubble in the sense that we had a technology bubble in 2000.”
More likely, he says, is that housing won’t crash but won’t contribute much to growth this year, either. “To us, that means a less robust recovery,” he says
<center>
<HR>
</center> |
Thread-Ansicht
Mix-Ansicht
Reihenfolge
Thread gesperrt
