Merrill Lynch: House Prices May Fall 30%
Jan 23rd, 2008 at 9:35 am by Susie
And that’s only what they’ll admit. But hey, they’ve been so straight with us until now, why shouldn’t we believe them?
HONG KONG (MarketWatch) — Merrill Lynch forecasts nationwide U.S. home prices could decline 25% to 30% over the next three years, as new supply and weak demand weigh on the market. “This sounds dire… but would only reverse part of the unprecedented 130% price surge from 2000 to 2006,” wrote economist David Rosenberg in a research note released Wednesday. Rosenberg added the S&P 500 may decline an additional 20% to 25% to breach the 1,100-point level if the market follows historical precedents at times when the U.S. economy is in recession.
Now, as tough as this will be, it will restore some level of sanity to housing costs and that will ultimately be beneficial to everyone - except the vultures who encouraged this mess.
That sounds about right. Krugman and Calculated Risk have looked at prices versus rents and figured a 20% - 30 % decline to bring prices back to historical ratios with rents.
Of course, that’s nationwide. Some areas are more out of wack (California, Florida) and others not so out of wack.