Despite a little bit of second-derivative good news on the housing market, there’s still very little reason to think that home prices are stabilizing. Plus, between spiking interest rates, and a torrent of fresh foreclosures hitting, it appears that supply and demand will continue to be highly unbalanced.
In a NYT op-ed, Yale housing guru Robert Shiller says the decline could play out for a long time, noting that Japan saw 15-straight years of year-over-year home price declines.
The issue, says Shiller, is that the market is just inherently slow moving. Would-be buyers, scarred from watching others lose their shirts, may decide to be renters and not revisit the situation for years. Even sellers who expect further declines may not sell unless they actually have reason to lose their house. All of this stands in marked contrast to a stock, where if people suspect a decline will happen, they can register their sale immediately.
The bottom line is that home prices aren’t the seemingly random walk stock prices are. Sometimes, you can just know that declines are in store year after year.