Posted by: jhamon | June 8, 2009

The Pig in the Python: Farther to Fall in Housing

But something is definitely different about real estate. Long declines do happen with some regularity. And despite the uptick last week in pending home sales and recent improvement in consumer confidence, we still appear to be in a continuing price decline.

– Economist Bob Shiller

The Bulge in the Python
The Pig in the Python

A nice short opinion in the New York Times from Robert Shiller (co-creator of the Case-Shiller Home Price Indices) explores the possibility that housing prices have farther to fall.  Click here for the full piece

Surprisingly absent from so many of these analyses is another one of those things that Astro Willie taught me: we are powerless to fight the demographic curve, even with creative financing or government programs.

The Baby Boomers have lurched peristaltically (can you say that?) through the economy for the last 50-odd years like a pig through a python.  Now, as they slouch towards retirement (or at least no kids at home), they will increasingly seek to downsize from their 3BR/2BA homes (or the ridiculous 5BR/3BA McMansions that typified our SoCal boom).  Meantime, the succeeding generations simply don’t have the numbers to sop up this long term supply of housing that will pressure prices for a decade or longer.

Net-net (remember that power term from the 80s?  It went out with yellow ties): farther to fall in housing, continued pressure on consumer spending, and prolonged malaise.

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Responses

  1. Good point. For the sake of being the contrarian, you could also argue that housing boom states like FL and AZ will see significant recoveries over the next decade. A lot of retiring boomers from the northern states will buy winter homes where it’s warm. Of course, that’s assuming that they still have their nest eggs intact…

    • From my admittedly non-scientific sample, Dave, there’s a lotta cracked eggs out there.

  2. this pictures are too amaizing


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