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No Way Has Housing Bottomed, Says David Levy

Posted Sep 30, 2009 01:15pm EDT by Henry Blodget in Investing, Recession, Banking, Housing
Related: ^gspc, ^dji, l, hd, len, kbh

Bulls are beside themselves about the recent performance of the Case Shiller house-price index: Prices have risen for three straight months! 

This happy (if short) string of data has given rise to the widespread belief that the housing bust is over, that buyers can safely return, that folks who want to sell their houses are smart to "rent for a year until the market has come back."

Keep dreaming, says David Levy, of the Jerome Levy Forecasting Center.  House prices have plenty further to fall.

David's first point is that, like the stock market, house prices don't fall in a straight line.  It won't be surprising to have false downs along the way.

Also, housing "affordability" measures, which bulls point to as indicators of the budding recovery, are too simplistic, David says.

And then there is the shadow inventory issue that we discussed earlier.  Although David thinks Amherst's "7 million units" of inventory that has yet to hit the market might be high, he does see shadow inventory as a problem.

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