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A columnist for MoneyWeek, a financial publication based in London, said the U.S. housing market “is a ‘house of cards’ (pun intended) that could get much worse before it gets better.”
D.R. Barton Jr., the columnist and analyst, also stated that “it’s tough to find unbiased comments about the market — especially when almost everyone has a vested interest in a continually rising real estate market.”
He says this is no ordinary housing boom and bust cycle, citing “two huge mitigating factors”:
- “Not Learning From 1929: Failing to take a lesson from the 1929 stock market crash, regulators have allowed lenders to extend unprecedented leverage to real estate buyers. We have seen what may be only the tip of the iceberg with the problems in the subprime lending market,” and,
- “Public Company Pressure: Because there are a large number of home builders listed on the stock market, these companies have keep chalking up consistently good results — both for the good of the market, as well as their shareholders. And when they can’t (like now), their shares get crushed.”
His tip to would-be real estate investors, “I strongly suggest that you not try to catch a falling knife in the housing market.”
U.K.’s Telegraph newspaper, meanwhile, reports, “America’s housing slump is more serious than widely believed and risks setting off a full-scale global crisis,” according to a Morgan Stanley note to clients.
Teun Draaisma and Graham Secker, two equity strategists for Morgan Stanley’s European operations, stated, “U.S. subprime has the potential to turn into a real financial crisis. We do not make this assertion lightly. While the U.S. economy seems to be slowing down, there has been overheating elsewhere in the world and monetary tightening in Japan, India, China, U.K. and Euroland. These may be the early signs of a classical boom-bust scenario.”
The collapsing subprime market has toppled the “cornerstone” of U.S. housing consumption, the strategists also stated, according to the Telegraph report.
What happened to the “soft landing?” Click here to join the discussion at the Inman News blog.
–Glenn Roberts, Jr., Inman News