My Prediction on U.S. Housing Market and Prices

This year will mark the worst for the U.S. housing market, as foreclosures rise and prices fall. But don’t expect prices to climb back up anytime soon.

Let’s start by looking at the stark facts:

About seven million mortgages in the U.S. are now in the “late payment” phase—a delinquency rate of eight percent. Some 30% of all mortgages in the foreclosure pipeline have not made a payment in more than 24 months (source: Foreclosure Backlog Rises as Federal Aid Fails 3/30/11, HousingPredictor).

The S&P/Case-Shiller index of property prices says that property prices in 20 major American cities dropped 3.1% in January. According to RealtyTrac, foreclosure filings will jump 20% this year, marking a peak in foreclosures for the housing market.

Looking at the Dow Jones U.S. Home Construction Index, we see a bleak future for housing. While the broad stock market is up almost seven percent this year, the housing stocks are fighting to stay above their opening 2011 levels. It’s a bold prediction, but I wouldn’t be surprised to see the Dow Jones U.S. Home Construction fall to a new two-year price low later this year; about 15% below where it stands today.

Should I buy real estate now? If I need to buy a house, the later I waited until in 2011, the better deal I would get. More foreclosures coming onto the market and rising interest rates are two factors that the housing market cannot escape and that will keep prices low.

Where are property prices headed? I’m continuing with my prediction that U.S. residential home prices will fall between 5.0% and 7.5% this year.

If I were an investor, and there are plenty of them jumping into the U.S. real estate market, unless I have an exit strategy, I wouldn’t expect property prices to rise for years to come. If I’m correct and we are at the onset of new long-term trend of rising interest rates, U.S. real estate prices will remain depressed for years to come.

Michael’s Personal Notes:

Car sales are booming again. General Motors (NYSE/GM) posted a 9.6% increase in first auto sales, while Ford Motor Co. (NYSE/F) posted a 16% increase in first-quarter 2011 auto sales.

Unfortunately, the stock market doesn’t share this enthusiasm, which throws up a red flag for me. Ford is enjoying brisk sales, having outsold GM in the first quarter (for the second time in 13 years), but Ford stock is down 20% from its January 2011 peak. GM stock is down 18% from its January 2011 price high.

The stock market isn’t buying the run-up in auto sales, which is an area of concern. As a leading indicator, the stock market is looking out six to 12 months and saying it doesn’t like what it sees for the auto sector, an industry very dependent on consumer spending. This bodes well for my theory that all we have been witnessing since March of 2009 is a bear market rally and economic peril still lies ahead. Best stock advice I can give: avoid the auto stocks.

The auto sector is very sensitive to interest rates. Simplistic as it sounds, as interest rates start to rise this year, consumers will find their monthly payments for new vehicles rising, which could hamper demand.

Where the Market Stands: Where it’s Headed:

The Dow Jones Industrial Average opens this morning up 6.9% for 2011. The bear market rally in stocks that started in March of 2009 remains intact. However, the easy profits in this rally have been made. While I expect stocks to continue trending higher, the upside for investors is limited at this point in this rally’s life cycle. The market has already discounted much of the better-than-expected first-quarter corporate earnings results.

What He Said:

“I see the coming recession being deep and difficult because U.S. consumers do not have the savings to spend their way out of the recession. The same thing happened in Japan, The Japan example proved that, when consumer confidence is shattered, even zero percent interest won’t spur consumer spending. The same thing could happen here.” Michael Lombardi in PROFIT CONFIDENTIAL, August 23, 2006. Michael started talking about and predicting the financial catastrophe we started experiencing in 2008 long before anyone else.

Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter

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Broke in America: The Housing Meltdown Continues

03/30/11 Los Angeles, California – She likes the free, fresh wind in her hair
Life without care
She’s broke, and it’s “oke”
Hates California, it’s cold and it’s damp
That’s why the lady is a tramp

Well, it’s not cold and it’s not damp. Instead, LA is warm and sunny, with springtime flowers popping out all over.

And yesterday, the Dow rose 81 points, while the price of gold slipped a little.

So what else is new?

We never thought we liked LA. But we may change our mind. Daughter Maria took us around yesterday. We wandered around Venice Beach and then through Hollywood. The town is much nicer than we remembered it. Many of the houses, shops and apartment buildings are getting a makeover. They remind us of the Soho area of Buenos Aires – young, hip, and lively.

“This isn’t like the rest of America,” Maria explained. “Just drive an hour to the East and you’ll see what we mean. That’s the real America. Here, the town is full of immigrants…pretty girls who want to hit it big in Hollywood…Russians, French, English…all sorts of girls. And there are a lot of men…you know, men who take a little too much care of themselves. You see them at parties. They also have a project. They always have contacts. They always have a cell phone and spend a lot of time talking. But nothing ever happens.

“But I love LA. I don’t know if I could live anywhere else.”

There are a lot of girls with the fresh wind in their hair here…

And a lot of people who are broke. Whether it is “oke” or not…we don’t know.

But here’s the latest on America’s housing meltdown:

AP – Damage from the housing bust is spreading to areas once thought to be immune.

In at least 14 major US metro areas, prices have fallen to 2003 levels – when the housing bubble was just starting to inflate. Prices will likely drop further this year, making many people reluctant to buy or sell. That would push down sales and prices more.

The depressed housing industry is slowing an economy that has shown strength elsewhere. And it’s starting to hurt those who bought years before the housing boom began. In some cities, people who have paid their mortgages for a decade have little or no home equity.

Prices have tumbled in familiar troubled spots, such as Las Vegas, Cleveland and Detroit. But they’re also at or near 10-year lows in Denver, Atlanta, Chicago and Minneapolis – cities that weren’t as swept up in the housing boom and bust.

“It’s been tough on the lower class but it’s filtering up,” said Paul Dales, senior US economist with Capital Economics. “It may be only a matter of time before it hits the wealthy.”

Just about the only major market weathering the second wave of the housing downturn is Washington. Home prices there have risen 11 percent in the past two years.

A Daily Reckoning note: the zombies are doing just fine, thank you. It’s the rest of the nation that suffers. Money flows from the people who earn it to the protected financial sector…and to the feds themselves. Is it any wonder that profits in finance are back to their 2007 level? Or that, overall, debt is now even higher? Or that people in the zombie capital are actually richer today (thanks to automatic wage hikes in the federal government, plus property value increases)?

But people in LA? In Chicago? In Dubuque or Baton Rouge?

They’re broke.

Bill Bonner
for The Daily Reckoning

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning . 

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Just When We Thought Housing Couldn’t Get Worse

The number of nails needed for the housing market’s coffin box has yet to be finalized. Consider just some of these startling numbers and trends:

The median price of a resale home in the U.S. fell 5.2% in February 2011 to $156,100 (the lowest level since April 2002) from $164,600 in February 2010, according to the National Association of Realtors. Some other interesting facts reported from the association:

• Purchases of homes fell 9.6% in February to an annualized rate of 4.88 million.

• Cash purchases accounted for 33% of all transaction in February, as homebuyers continue   to experience difficulties in obtaining mortgages.

• The number of resale homes on the market rose to 3.49 million homes. Based on the current sales rate, it would take 8.6 months to sell these homes.

Other startling numbers, this time from RealtyTrac Inc.:

• Homes in the foreclosure process sold at an average discount of 28% from the foreclosure price in 2010, with properties in distress accounting for about 26% of all home sales.

• Foreclosure filing will rise 20% this year.

The new home market is in worse condition than the resale market:

• In 2010, new home buyers purchased the fewest number of homes in 47 years, according to the U.S. Commerce Department.

Where are property prices headed? I believe home prices will drop between 5.0% and 7.5% this year. It’s no longer a case where property prices had gotten too ahead of themselves and needed to come down. The problem now is that the high unemployment rate is making it difficult for homeowners to keep up with their mortgage payments. One in five homes in this country is worth less than the mortgage on it.

Should I buy real estate now? The year 2011 may be the best year ever to buy a second home or a rental home, because prices have fallen so low, but here is my caveat: don’t expect housing prices to rise for years to come. Just when we thought housing couldn’t get worse, the housing market now has the added stress of rising interest rates to deal with.

For months, I have been writing about why I expect interest rates to rise (as support for the declining greenback and an incentive for foreigners to buy U.S. Treasuries, and to offset rising inflation). Unfortunately, the coming high interest rates are the last thing the housing market needs—the final nail in housing market coffin.

Michael’s Personal Notes:

Effective tomorrow, the world’s second biggest economy will require its banks to set aside even more cash before it makes new loans. It is the third time this year that China has asked its banks to increase their reserve requirements. Starting Friday, reserve requirements for China’s biggest banks will rise to 20%.

Consumer prices rose rapidly in China in February, up 4.9% on annualized rate, well above the government’s target rate of 4.0%.

Raising the reserve requirement of Chinese banks is usually a preceding move to higher interest rates. The one-year lending rate in China (its benchmark) sits at 6.06%, having risen three times in six months. I expect the next interest-rate increase to be announced in April.

Must be nice; a country where you can increase bank cash reserve requirement and interest rates aggressively and the country still continues to boom. Unlike North American governments, China’s leaders are proactive, not reactive. The balance of economic power is shifting. While economic and social risks remain very high in China given its accelerated rate of inflation, I’m continuing with my prediction: By the end of this decade, by 2020, the Chinese economy will be equal to and maybe larger than the U.S. economy.

Where the Market Stands; Where it’s Headed:

In the immediate term, stocks are headed higher. The bear market rally in stocks that started in March of 2009 has yet to complete its work. While the short- and long-term outlook for stocks is negative, I continue to expect higher prices in the immediate future.

The Dow Jones Industrial Average opens this morning up 4.4% for 2011.

What He Said:

“Recipe for Catastrophe: To me, the accelerated rate at which American consumers are spending, coupled with the drastic decline in the amount of their savings, is a recipe for a financial catastrophe.” Michael Lombardi in PROFIT CONFIDENTIAL, September 7, 2005. Michael started talking about and predicting the financial catastrophe we started experiencing in 2008 long before anyone else.

Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter

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Just When We Thought Housing Couldn’t Get Worse

The number of nails needed for the housing market’s coffin box has yet to be finalized. Consider just some of these startling numbers and trends:

The median price of a resale home in the U.S. fell 5.2% in February 2011 to $156,100 (the lowest level since April 2002) from $164,600 in February 2010, according to the National Association of Realtors. Some other interesting facts reported from the association:

• Purchases of homes fell 9.6% in February to an annualized rate of 4.88 million.

• Cash purchases accounted for 33% of all transaction in February, as homebuyers continue   to experience difficulties in obtaining mortgages.

• The number of resale homes on the market rose to 3.49 million homes. Based on the current sales rate, it would take 8.6 months to sell these homes.

Other startling numbers, this time from RealtyTrac Inc.:

• Homes in the foreclosure process sold at an average discount of 28% from the foreclosure price in 2010, with properties in distress accounting for about 26% of all home sales.

• Foreclosure filing will rise 20% this year.

The new home market is in worse condition than the resale market:

• In 2010, new home buyers purchased the fewest number of homes in 47 years, according to the U.S. Commerce Department.

Where are property prices headed? I believe home prices will drop between 5.0% and 7.5% this year. It’s no longer a case where property prices had gotten too ahead of themselves and needed to come down. The problem now is that the high unemployment rate is making it difficult for homeowners to keep up with their mortgage payments. One in five homes in this country is worth less than the mortgage on it.

Should I buy real estate now? The year 2011 may be the best year ever to buy a second home or a rental home, because prices have fallen so low, but here is my caveat: don’t expect housing prices to rise for years to come. Just when we thought housing couldn’t get worse, the housing market now has the added stress of rising interest rates to deal with.

For months, I have been writing about why I expect interest rates to rise (as support for the declining greenback and an incentive for foreigners to buy U.S. Treasuries, and to offset rising inflation). Unfortunately, the coming high interest rates are the last thing the housing market needs—the final nail in housing market coffin.

Michael’s Personal Notes:

Effective tomorrow, the world’s second biggest economy will require its banks to set aside even more cash before it makes new loans. It is the third time this year that China has asked its banks to increase their reserve requirements. Starting Friday, reserve requirements for China’s biggest banks will rise to 20%.

Consumer prices rose rapidly in China in February, up 4.9% on annualized rate, well above the government’s target rate of 4.0%.

Raising the reserve requirement of Chinese banks is usually a preceding move to higher interest rates. The one-year lending rate in China (its benchmark) sits at 6.06%, having risen three times in six months. I expect the next interest-rate increase to be announced in April.

Must be nice; a country where you can increase bank cash reserve requirement and interest rates aggressively and the country still continues to boom. Unlike North American governments, China’s leaders are proactive, not reactive. The balance of economic power is shifting. While economic and social risks remain very high in China given its accelerated rate of inflation, I’m continuing with my prediction: By the end of this decade, by 2020, the Chinese economy will be equal to and maybe larger than the U.S. economy.

Where the Market Stands; Where it’s Headed:

In the immediate term, stocks are headed higher. The bear market rally in stocks that started in March of 2009 has yet to complete its work. While the short- and long-term outlook for stocks is negative, I continue to expect higher prices in the immediate future.

The Dow Jones Industrial Average opens this morning up 4.4% for 2011.

What He Said:

“Recipe for Catastrophe: To me, the accelerated rate at which American consumers are spending, coupled with the drastic decline in the amount of their savings, is a recipe for a financial catastrophe.” Michael Lombardi in PROFIT CONFIDENTIAL, September 7, 2005. Michael started talking about and predicting the financial catastrophe we started experiencing in 2008 long before anyone else.

Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter

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It’s All About Housing

03/23/11 St. Louis, Missouri – As I was sitting here looking at the calendar, I noticed that next week brings us to the end of March…and then it dawned on me that we’re already staring at the end of the first quarter. Simply amazing, where does the time go? It was a fairly uneventful day as there wasn’t much in the way of data to interpret or any market moving events, so most assets remained in a relatively tight range. I guess I should quit stalling and jump right in.

While only a handful of the major economies had any economic reports hit the airwaves yesterday, the US only had a couple of minor events. As I mentioned yesterday, the FHFA house price index (Federal Housing Finance Agency) was expected to re-affirm housing data that we saw a couple of days ago that didn’t show any bright spots. We saw the same disappointing data as prices came in below expectations by falling 0.30% from December and 3.9% from this time last year.

This data measures transactions of homes financed with mortgages backed by Fannie Mae or Freddie Mac. It was the same old rhetoric as to the cause, which would be foreclosures remaining at high levels that add to the already high supply of homes in the market. The fact that about 23% of homeowners with mortgages had negative equity in the fourth quarter acts like concrete shoes that’s keeping housing submerged. That is awfully close to 1 in 4 mortgages being underwater.

We also had manufacturing in the Richmond Fed district slow quite a bit more than expected, down to 20 from a figure of 25 back in February. Manufacturing has remained one of the few bright spots here in the US, but I guess last month was tough in that region. Maybe it was the weather, but in either case, this can be a volatile report so no need to spend much time on it.

We have a couple of things to look at this morning as weekly mortgage applications and new home sales are released. The mortgage application report can be all over the place and is highly sensitive to interest rates, so looking back to where the 10-year yields were trading, I would say look for a higher figure. While this does provide some insight as to expressed demand for a refi or purchase, there are many other reports that provide better data.

One of those reports would be the new home sales figures that we’ll also see out this morning. Again, same old story. Mounting foreclosures are causing problems as cheaper priced distressed homes that have been previously owned detract from sales of brand new homes. Builders have also cut back on the new home supply so home construction should remain on the low side. I think the majority of homebuilders aren’t very hopeful that 2011 is going to turn out much better than 2010.

The best performing currencies on the day were again the commodity currencies. While gold and silver didn’t do much of anything, they did stay on the high side as gold was trading around $1,425 and silver around $36.30 when I was packing my things to go home last night. Any increase in the Middle East tensions would look to be short-term price drivers.

Moving over to oil, we did see this commodity move higher on the day. While we currently have two cooks in the kitchen, which would be the tensions in Libya/Middle East and events in Japan giving direction, prices ended the day at $104. Increasing optimism out of Japan sent oil higher, as the markets looked past current events and more toward the rebuilding stages, which would boost demand for many commodities. Reports are also out that Japanese refineries are processing more oil that previously expected.

The dollar index traded in a tight range as it remained in the mid- to low-75 handle, bouncing from the low of 75.25, and held steady at the lowest levels since December 2009. Since the euro (EUR) accounts for a big proportion of the dollar index, the exchange rate hovering around 1.42 was certainly a contributor. Since risk tolerances have been rising, it looks as though the markets are seeking higher yielding currencies or economies where rates are at least in a position to rise.

One of the other nations that had some economic data to talk about was South Africa, whose rand (ZAR) appreciated the most on the day. Its 0.70% rise against the dollar was due to the fourth quarter current account deficit falling to the lowest level in seven years. The deficit fell to 0.6% of GDP from 3.1% in the third quarter and has narrowed from a figure of 7.1% in 2008. This has been a point of contention along with an overall unstable fundamental base as a whole for investors for quite some time.

I guess the big question mark now deals with the sustainability of this going forward. A closer look at the numbers show us that export volumes actually slowed in the fourth quarter, but its value rose by 5.5%. Couple that with import volumes shrinking for the first time in over a year as economic demand slowed, and we get the significant move that we saw. While it was positive news and is better than the alternative, we still see too much risk associated with the rand.

While the Australian (AUD) and New Zealand (NZD) dollars finished in second and third place respectively, the other currencies that did end the day on the positive side were all lumped together. Moving on to the United Kingdom, we saw inflation surprise on the upside and the pound (GBP) trade up to 1.64 for the first time since January 2010. The higher inflation has investors speculating as to when the BOE will finally raise interest rates. Economists were starting to price in a rate hike as soon as July instead of the previous estimate of August.

The CPI for February rose to 4.4%, which was higher than the estimate of 4.2% as well as the January figure of 4%, and represents the fastest pace in over two years. Consumer inflation is now more than double the government’s 2% target, and with commodity prices continuing to rise, there doesn’t seem to be much relief. Retail price inflation, a measure of the cost of living used in wage negotiations, rose to 5.5% and marked the fastest rise in almost 10 years. The UK is in a tough position because something has to be done about inflation but the economy isn’t exactly in a place to deal with higher interest rates.

Looking at one of the currencies that actually lost on the day, the Canadian dollar (CAD) had mixed results from their economic reports yesterday. We saw February leading indicators surprise on the upside by rising 0.8% to a nine-month high which was led by higher stock prices and manufacturing. The disappointment was the result of January retail sales as the aggregate figure and the measure less autos came in lower than expected.

If we take automobiles out of the equation, retail sales actually broke even from December, but it was still disappointing. The fact that oil was higher on the day helped limit the loss yesterday to around 0.25%. As I mentioned at the beginning, most of the currencies remained in a tight range all day, so I think investors will want to see more reports to get a better gauge of where the Canadian consumer actually stands.

Other than that, we had some trade figures from Switzerland that came out as well. The trade surplus widened to $2.8 billion in February as exports rose 4.2% due to higher demand from Europe and the Asian economies. As always following a positive report, we had the SNB making statements that downplayed the economy in an attempt to bring less light to the situation and hopefully make investors think twice about buying the currency. I wouldn’t say it’s working very well as the franc (CHF) trades at 7-year highs.

As I came in this morning, there really wasn’t any direction either way in overnight trading as everything is sitting where I left them last night. The Swiss franc has seen about a 0.50% gain and has risen the most against the dollar, so it looks as though risk aversion might pick up today. Other than that, the pound sterling is bringing up the rear so far today as the BOE minutes were released from their last meeting and showed policy markers voted 6-3 to keep rates on hold so thoughts of an imminent rate hike have subsided for the moment.

To recap… We had more housing figures yesterday, which was yet another report showing a decline in home prices, and we get to see the colors of February new home sales today. The commodities, led by oil, continued to pull the currencies along for a ride and the dollar index traded in a very tight range. The South African current account deficit narrowed by the most in 7 years, British inflation now lies at more than double their target, and Canada has mixed results.

Mike Meyer
for The Daily Reckoning

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Housing Prices Still the Bane of Economic Recovery

03/18/11 Baltimore, Maryland – Whoa…this looks bad too.

In the housing sector, the fed’s ultra-low interest rates are supposed to make it easier to refinance…which is supposed to help firm up prices. But prices haven’t firmed. They’re still giving way.

The latest numbers show prices falling, hitting post-bubble lows in 11 cities. Of the 20 major cities in the survey, only two of them had positive price movements last year. No surprise, only one – Zombietown itself, Washington, DC, home of the feds – showed an increase of more than 2%.

Worst hit were the sunshine states – California, Florida, Nevada, Arizona and Georgia. Along with Michigan, more than a third of homeowners in these states have negative equity in their houses…with 70% of them underwater in Nevada.

Wealth effect? Not in housing. According to the Case/Shiller numbers, homeowners saw their net housing wealth decline by $650 billion in the last quarter of 2010. And since many more households own houses than stocks – 66% are homeowners – falling housing prices has a much bigger effect on the economy than rising stock prices.

And it gets worse. The big wave of resetting (and recasting) ARM loans begins to crash into the housing market next month. There are about $700 billion worth of loans in this group. Many will not be successfully rewritten. Falling housing prices will make it impossible. Homeowners will prefer to walk away, rather than be shackled to a long-term mortgage 30% to 50% higher than the value of the house.

Says housing expert Robert M. Campbell:

“I continue to believe that the second downward leg in house prices that began in 2010 will likely take US housing prices to a point that is 15% to 20% below current levels.”

Bill Bonner
for The Daily Reckoning

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning . 

View articles by Bill Bonner

The articles and commentary featured on the Daily Reckoning are presented by Agora Financial.

Sign Up for The Daily Reckoning e-letter and receive a copy of our newest report How to Survive the Fall of Social Security… at NO CHARGE.

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