Pessimistic bankers: Home prices won’t recover before 2020

I saw this article from the Minneapolis/St Paul Business Journal stating that 49% of the risk managers at banks don’t believe that housing prices would recover to 2007 levels before 2020.

The nation’s housing prices are unlikely to recover before 2020, a plurality of bank risk managers said in a survey that was labeled as “decidedly pessimistic.”

About 49 percent of the risk managers said housing prices would not climb back to 2007 levels before 2020, while 21 percent said they would, according to the survey, which was released Friday.

Read Full Article

Let’s keep in mind these are the same bankers that were lending  money to anyone who could fog a mirror contributing to the housing bubble. (It is more complex than that statement, that statement is just for effect.)

I would also like to point out the “wild card” called inflation.  Historically housing has been a nice inflation hedge.  This morning the Monetary Base was updated, from the looks of it we have inflation coming up…  So if  inflation kicks in and  housing prices pace inflation like they have historically, we could see housing prices increase to 2007 levels before 2020.  Okay, maybe that is not fair to take inflation into account… and will it happen with the next 9 years?   I don’t have a crystal ball so it’s anyone’s guess at this point..

What are your thoughts?

Personally, I like the asset of real estate; land, “sticks & bricks”.  But then again I am in the real estate business…

click on chart to view source: St Louis Federal Reserve

The monetary base is defined as those liabilities
of the monetary authorities that households and
firms use as media of exchange and that depository
institutions use to satisfy statutory reserve requirements
and to settle interbank debts.10 In the United
States, this includes currency (including coin) held
outside the Treasury and the Federal Reserve Banks
(referred to as currency in circulation) plus deposits
held by depository institutions at the Federal Reserve
Banks. The demand by the private sector for these
liabilities gives the Federal Reserve leverage to affect
money market interest rates.


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2 responses to “Pessimistic bankers: Home prices won’t recover before 2020

  1. The market will turn around, and then someday we’ll say to our great grandkids; let me tell you about the time you could buy a house for less than they cost to build, and interest rates were below 4%.

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