Roubini: "It's Pretty Clear The Housing Market Has Already Double Dipped"
Hopefully today's 4th consecutive decline in home prices, as per the earlier noted Case Shiller October data (and with both mortgage rates and foreclosure inventory surging, we are willing to bet that following the reported November and December CS data, the decline will be for half a year straight), makes it sufficiently clear that housing has double dipped, and that the primary goal of Bernanke, which is not to pad banker bonuses, but to reflate home prices and recreate that mythical HELOC "fake wealth effect" piggybank, has been a complete failure (he sure is succeeding in getting WTI about to soon hit $100/barrel). Just in case there are any doubters left, Nouriel Roubini sat down with CNBC's netnet to confirm what virtually everyone else already knows: "It's pretty clear the housing market has already double dipped," per Nouriel, who recently took advantage of the NYC housing downturn and bought a $5.5MM pad. "And the rate of decline is stronger than in previous months" - precisely what we pointed out a few hours back. In other words, the double dip is accelerating. Today's jump in 10 and 30 Y rates will not help.
Furthermore, another rather obvious observation by Roubini demonstrates precisely why the drop in home prices is just starting to be felt: "The shadow inventory of not-yet-foreclosed homes—due to the moratorium—will surge in the next year." In other words, "Supply will increase, demand will drop."
Also, keeping in mind that there are tens of millions of Americans who are underwater on their mortgages, and thus not incentivized to pay their bills, any ongoing price drops will create a vicious loop whereby more and more people walk away from mortgages, and otherwise stop paying, as a result of which, banks will be forced to REO at least some of these properties (it is well known that banks allow squatters to live under payment delinquency for up to 24 months: where else does America get the money for that 4th Kindle and 2nd iPad?), causing prices to drop even more, and make the Catch 22 even worse. Which means that very soon Ben will again be forced to do a ritualistic killing of the stock market, pretty much as what happened on May 6, to get the population out of stocks again and back into bonds. Because should the 10 Year pass 4%, it is game over for housing, no matter how much Goldman protests, and the Chairman knows it all too well.
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