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Troubled rating agency Moody's, in its most recent Resi Landscape publication, has provided some very brutal projections for the housing market turnaround, which, if true, will promptly make any V-shaped recovery conversation moot. And for all homeowners who are holding on to underwater mortgages hoping for a quick bubble #2 inspired turnaround, you may want to reevaluate: quote Moody's "It will take more than a decade to completely recover from the 40% peak-to-trough decline in national home prices."
From the report:
Even under strong economic and demographic conditions, the demand for homes will increase moderately relative to both, with sales per households lower during the recovery period than the during the first half of this decade. The pace of new and existing single-family home sales will increase to 6.2 million per annum by 2012, well shy of the 7.5 million units sold at the peak in 2005. Similarly, homebuilding will rebound, but a lingering overhang of inventories, combined with consolidation in the industry and caution on the part of both homebuilders and lenders to builders, will keep the pace of construction from reaching the peak it achieved at the end of 2006 of over 2 million units. The overhang of inventories from the earlier construction boom will be drawn down by the end of 2011, bringing the supply and demand for homes in balance.
The reality is that even as the broader economy still suffers under record excess slack, and one could easily disagree with Moody's on their rosy expectations for a broad economic turnaround, even the permabullish rating agency has to acknowledge that there is simply no demand to satisfy the glut of overbuilding seen during the bubble years. Between these two pillars of household net worth: the economy (traditionally manifested in the stock market, although no so much lately) and housing, the US consumer will likely be forced to continue retrenching for decades to come, which makes any talk of a V-shaped recovery, even ignoring for a moment the temporary impact of government stimuli, moot.
Additionally, Moody's analyzes the expected "rebound" by geographic region, with an overall expected return to a "peak" level by 2020.
Hard-hit states such as Florida and California will only regain their pre-bust peak in the early 2030s, well after the nation does. New York will also be a laggard, although its overall decline in prices will be less severe. The main constraint on New York's outlook is Wall Street. In general, the length of the downturn and the length of recovery in a region will depend on the degree of aggressive lending or overinvestment in housing that occurred during the boom. On the recovery side, states with weaker job growth will also take longer to return to peak.
Then again with Moody's unprecedented track record of being wrong on everything, it would not be too surprising to see a compressed housing bubble peaking some time next year, comparable to what has been seen in Hong Kong, where the population has already forgotten about the excesses of two years ago and is bidding up matchbox apartments into the stratosphere. With the US economy now able to sustain only by creating and popping various asset bubbles, perhaps the best thing for America would be to go through one more quick housing ramp, followed by an even quicker crash, which would likely be the last one in the history of this once great country, as it would end with a completely worthless national currency and a decimated middle class.