As it turns out, they were half right.
Darlin put together a good discussion on home prices and the cost of mortgages in the Sunday Business section. Here are my contributions:
“What they are really saying is that it is a good time to be involved in a transaction that generates a commission,” says Barry Ritholtz, C.E.O. and director of equity research at FusionIQ, a quantitative research firm. He’s also author of “The Big Picture,” an irreverent blog on markets.
If agents are always motivated to make a deal, buyers are often asking an impossible question: “Will the price of this house go up?”
Although the National Association of Realtors said for many years that home prices historically don’t fall, actually they do, and sometimes quite sharply. The housing market is complicated, and the future unknowable. Still, for clues to the overall direction of prices, Mr. Ritholtz advises buyers to look at three metrics: the ratio of median income to median home prices, which suggests whether people can afford a house; the cost of ownership versus renting; and the value of the national housing stock as a percentage of gross domestic product.
All those measures were aberrationally inflated during the housing bubble. And they still aren’t back to historical norms. We can get back to the norm in either of two ways, Mr. Ritholtz says: home prices can either drop an additional 15 percent or go sideways for seven years or so, while G.D.P. and income presumably grow.
One small but amusing typo requires mention: In the print edition, that “15 percent” drop actually reads “50 percent” — not 15%. Its been corrected in the online version, but I hope anyone who sees that 50% number realizes the error. I hope we avoid any cardiac events amongst some home owners . . .
Source: Great Time to Buy (Famous Last Words) DAMON DARLIN NYT, March 12, 2010 http://www.nytimes.com/2010/03/14/business/14every.html
Originally published at The Big Picture and reproduced here with the author’s permission.