Paulson Weighs In On Housing

Posted In: Housing

Today, U.S. Treasury Secretary Henry Paulson spoke to Reuters about a number of economic issues, including housing. Paulson said the U.S. economy is healthy, despite problems with the subprime mortgage sector. The former chairman of Goldman Sachs stated that the downturn in the housing market is “at or near the bottom. It’s had a significant impact on the economy. No one is forecasting when, with any degree of clarity, that the upturn is going to come other than it’s at or near the bottom.” Beyond subprime mortgage woes, Paulson declared that the financial markets looked sound. He said, “Markets are volatile. I haven’t seen a single thing that surprises me – it’s hard to surprise me.”

There have been a number of stories in the news lately pointing to the end of the U.S. housing slowdown. Newshounds and regular readers of Boom2Bust.com might recall some of the more recent ones:

  • June 18- The Coldwell Banker Previews International Luxury Survey showed more than half of affluent homeowners expect their property value to appreciate at least somewhat during the next year, with one-tenth of respondents expecting significant gains.
  • June 19- Bank of America’s Chief Executive Officer Kenneth Lewis said the U.S. housing market will begin to improve in the next month or two, forestalling a recession. Job growth will lift home prices and reinvigorate construction by early 2008.
  • June 26- A Boston Consulting Group survey revealed that 55% of Americans believe they can sell their house for more now than a year ago. Nearly three-quarters believe they can sell their homes within the next 6 months at a price they set, and 63% feel that real estate is a good or excellent investment.

    • I have a pretty good idea that realtors and others dependent on a healthy U.S. residential real estate market are welcoming such statements. Maybe they’ll back off of real estate columnist Mary Umberger, who said yesterday in the Chicago Tribune that, “Real estate agents complain to me that every time there’s a news story about declining home sales, consumers send up a collective screech and run to the sidelines, further suppressing the marketplace.” Umberger talked about the Coldwell Banker and Boston Consulting Group surveys and had this to say:

    “Obviously, one might point out that a real estate company has a vested interest in promoting positive attitudes about the market, but I’m inclined to believe that both studies do reflect Americans’ conviction that real estate — that is, their real estate – won’t let them down. It’s not unlike the way that every parent of every toddler thinks their little darling is a genius. And it’s why sellers in the last year or so have clung so hard to asking prices that are way too high.”

    While wishful thinkers refuse to lower asking prices, the inventory of unsold homes continues to grow. As prices inevitably fall, so will consumer spending (no more housing ATM) and eventually, the financial markets.

    Surprise, Mr. Paulson!

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