Tags: merrill | housing | decline

Merrill: Housing to Drop Another 15 Percent

By Julie Crawshaw   |   Wednesday, 18 Feb 2009 11:07 AM

Merrill Lynch economist David Rosenberg says home prices will drop another 15 percent as housing inventories remain double those in a normal market, making a late 2008 economic recovery a pipe dream.

"People would rather rent than take on a mortgage to service a deflating asset," Rosenberg told the Canwest News Service.

He said that housing demand continues to collapse despite the best homeowner affordability ratios in 40 years.

Nor will government stimulus reverse the decline in household wealth brought about by falling home prices and stock market losses.

"In our view, hopes that the economy is going to recover as soon as mid-year are likely to be dashed in coming months," Rosenberg says.

Merrill’s figures show that Americans’ net worth declined last year at a cumulative $13 trillion, an amount unprecedented in the postwar era.

As consumers save more, spend less and unemployment rises, Rosenberg says the U.S. gross domestic product will lose another $1 trillion.

The demand for credit "has scarcely been as weak as today, despite the plunge in interest rates," he says.

According to figures from the U.S. Commerce Department, housing starts plunged 17 percent to an annual rate of 466,000 last month as a lack of credit and plunging sales exacerbated the worst real-estate slump since the Great Depression.

“The past five months have been among the most difficult in U.S. economic history,” luxury homebuilder Toll Brothers CEO Robert Toll told Bloomberg.

Potential homebuyers are worried they may lose their jobs and won’t be able to sell their existing homes, Toll said.

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Merrill Lynch economist David Rosenberg says home prices will drop another 15 percent as housing inventories remain double those in a normal market, making a late 2008 economic recovery a pipe dream."People would rather rent than take on a mortgage to service a deflating...
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