Less than a month ago, I wrote a column reporting that home prices in the U.S. were headed towards 2003’s prices. I based my prediction on the action of the Dow Jones U.S. Home Construction Index that was then trading at the lowest level of 2003.
I stand corrected, my dear reader. I need to change my forecast because of unfolding events in the U.S. housing market and the economy.
Housing prices are now headed to the same level they were in 2002!
That’s what the chart of the fastest falling stocks in the world — the largest U.S. homebuilders — now tell us. This widely followed index today trades ever so close to what it did in 2002. In fact, by the time you’ve finished writing this article, the index might have already fallen into 2002 territory.
Imagine living in the year that home prices fall in the U.S. for the first time since the Great Depression. Well, we are living it. What should the poor and obviously misguided National Association of Realtors do? Take back the full-page ads they ran in late 2006 telling consumers it was then the best time in history to buy a house? Maybe one of the attorney general offices should go after them for misleading the public.
The Uncharted waters for U.S. property prices will soon become the Uncharted waters for the U.S. economy. Greenspan’s wrong on his prediction of a 30%-50% chance of a recession in the U.S. in 2008. The chances, according to real estate men like me, are closer to 70% to 80%.
The big question:
Will Bernanke drop interest rates to one percent like Greenspan did to save the U.S. economy again? I don’t think he will because such a move this time could collapse the fragile greenback against other world currencies… something the remainder of the world won’t take very lightly, especially those selling us much needed oil.