I don't mind dissenting opinions on the state of the housing market but when there are inherent conflicts of interest, the timing of such cheery pronouncements must be questioned. Unfortunately, the mainstream media isn't bright enough to question Harvard's assessment of the potential resiliency of a collapsing market.
"Although housing prices are stretched, it is hard to see the catalyst for a crisis in the market," says Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard. "The overvaluation looks pretty well balanced by longer term supports for house prices, so we may just see a few years with little action. Houses will revert to being something to live in rather than money makers."
It's hard to see the catalyst for a crisis in the market? He can't be serious! Record inventories, interest only loans, foreclosures, appraisal fraud investigations, fraud at Fannie Mae, interest rates rising, Bernanke becoming hawkish about inflation, home builder stocks plummeting...etc.
So why will non-home-owners be deprived of the crash they have been waiting for?
The strongest underlying support for the market comes from accelerating household formation. Demand is being driven not only by population growth but by household fragmentation, as couples divorce or children leave home.
Immigration has been a still stronger force – over the past decade 12.6m new households were formed in the US. Over the next 10 years the pace of household formation will accelerate to 14.6m, according to the Joint Center for Housing Studies.
"Even if America decided to close the borders now, we would still see the lagged effects of previous waves of immigration," said Mr Retsinas. "Many of those that came to America earlier are only now in a position to buy property. As it is, we don't believe there will be any slowdown in immigration."
Translation: The Mexicans will save us...if we don't deport them.
The Harvard study concedes that even a slowing housing market could take a heavy toll on growth, as Americans become less able to use their houses as ATM machines and less employment is created by homebuilding. Provided the slowdown is gradual, as Harvard expects, this could help rebalance the US economy, reducing demand for imports and so stemming the growth of the trade deficit.
Translation: They might be right, provided the slowdown is gradual.
Now why would Harvard stick their necks out and call for calm waters in the housing market? Let's see who sits on the Harvard Joint Centre for Housing Studies. Gee, none of these companies have an interest in the housing bubble continuing.
Policy Advisory Board- Member Companies
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Andersen Windows
Armstrong Holdings, Inc.
Beazer Homes USA
Black & Decker
Boral Industries
The Bozzuto Group
Bradco Supply Corporation
Builders FirstSource
Building Materials Holding Corporation
Canfor Corporation
Cendant Corporation
Centex Corporation
CertainTeed Corporation
Champion Enterprises
Countrywide Financial Corporation
Crosswinds Communities
Fannie Mae
Fannie Mae Foundation
Federal Home Loan Bank of Boston
Fortune Brands - Home and Hardware
Freddie Mac
GAF Materials Corporation
Georgia-Pacific Corporation
Hanley Wood, LLC
Hearthstone
Home Depot
HomeStore, Inc
Hovnanian Enterprises
Huttig Building Products
James Hardie Industries NV
Jeld-Wen
Johns Manville Corporation
KB Home
Kimball Hill Homes
Kohler Company
Lafarge North America
Lanoga Corporation
Lennar Corporation
Louisiana-Pacific Corporation
Marvin Windows and Doors
Masco Corporation
Masonite International Corporation
McGraw-Hill Construction
MI Windows and Doors, Inc.
National Gypsum Company
Oldcastle Building Products, Inc.
Owens Corning
Pacific Coast Building Products
Pella Corporation
Pulte Homes
Reed Business Information
Rinker Materials
The Ryland Group
S&B Industrial Materials S.A.
The Sherwin-Williams Company
Stock Building Supply
The Strober Organization
Temple-Inland
UBS Investment Bank
Weyerhaeuser
Whirlpool Corporation
Financial Waves 1 Harvard 0
