Our local newspaper, the San Diego Union Tribune, has a big article this morning on the housing market. Among other things, this features some thoughts from yours truly and a foray into multimedia publishing.
The main points I made will be familiar to regular readers of Econbrowser:
- The prime driver of both the earlier housing boom and the current housing downturn has been interest rates.
- The decline in the 30-year mortgage rate from 6.80% in July to 6.18% last week should help arrest the current housing slide, and there are some indications that, as far as home sales are concerned, the worst may now be behind us.
- Even if home sales have indeed stabilized, the inventory of unsold homes means that hard times will persist for homebuilders. Falling construction spending and employment will continue to exert a drag on the national and local economies for a significant period.
- The main downside from here is whether foreclosures on subprime loans and a new market psychology based on fears of price depreciation might introduce some new unfavorable dynamics.
On that last point, the fact that the Union Tribune is now running prominent stories like this one may be a signal that a broad recognition is now settling in on the magnitude of what is going on, and with it the widespread recognition that the era of big price appreciation has come to an end. The next few months will probably prove critical in determining how much those changing perceptions might influence what happens from here.
Unlike my typical interview, in which I yak for 30 minutes and they use a 30-second bite, the entire interviews with me and four others can be downloaded as audio files. If interested, go here and click on your favorite mug.