Tags: housing | banks | tilson

Experts: Housing Will Hurt Banks Anew

By Ellen Chang   |   Friday, 13 Nov 2009 09:47 AM

Housing prices could fall even further and extend into 2010, says Whitney Tilson and John Heins in their recent column for Kiplinger’s. The men are fund managers as well as financial authors.

“As a result, financial companies exposed to the housing sector will endure substantially higher-than-normal losses for several more years,” Tilson and Heins write.

Although issues stemming from subprime loans are mostly a thing of the past, Tilson and Heins said “the market for midprice and expensive homes, however, is frozen. While foreclosures of lower-priced homes are declining, they’re rising rapidly among homes in the higher ranges.”

Housing prices are being boosted by the government stepping in, Tilson sand Heins said. If the government had not bailed out the sector, more foreclosures would have occurred, they said.

“Despite our concerns, we are not predicting economic Armageddon, thanks mainly to massive government intervention. But we're not out of the woods yet. We experienced the largest asset bubble in history, and it will simply take time to unwind it. Warren Buffett put it best when he said, ‘You can't produce a baby in one month by getting nine women pregnant.’

Tilson and Heins predict “tepid” growth and unemployment remaining high for several years.

“Of course, we hope we're wrong, but this is the big-picture analysis we're employing as we evaluate individual stocks.”

The worst sectors to invest in are regional banks, homebuilders and bond insurers because they will be affected by the housing decline, Tilson and Heins said.

Prices for houses will stabilize by next spring, said Lawrence Yun, NAR chief economist, CNN.com reported.

"We can't underestimate just how powerful a catalyst the first-time homebuyer tax credit has been for the housing sector," he said.

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Housing prices could fall even further and extend into 2010, says Whitney Tilson and John Heins in their recent column for Kiplinger’s. The men are fund managers as well as financial authors. “As a result, financial companies exposed to the housing sector will endure...
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