Too many homes for sale
For Shilling, it's all about inventories: He estimates there are upwards of two million homes on the market that people want to sell but can't. That's deflated new-home sales, which now stand at about a third of their normal 1.5 million a year.
From a high 6.3% of GDP in the fourth quarter of 2005, residential construction now represents only 2.2% of GDP. Not only is that a half-a-trillion-dollar gap; housing's volatility makes it an important force in a cyclical recovery, said Shilling, and the paucity of home building has clearly taken a toll on this one.
A further 20% decline in home prices would raise the percentage of homes worth less than the value of their mortgages to a stunning 40%, from the mid-20% range now. Shilling estimated it would also cut homeowners' equity to a mere 8% of total home values, from 19% now and 50% in the early 1980s.
Lenders have foreclosed on 3.5 million American homes since 2007; Shilling expects millions of more foreclosures in the years ahead.
If this happens, "you know what that will do to consumer spending," said Shilling. "That's a recession — an easy forecast."
And once housing markets hit bottom, it can take a decade for them to recover, as in Texas after the oil bust or Southern California after the end of the Cold War. That could mean subpar growth — average annual GDP gains of 2% — for years to come, he predicted.
The government and the Federal Reserve have thrown everything at the economy, with minimal results. The Fed's quantitative easing programs did little except boost commodities prices and stimulate the stock market, he said, and he thinks the commodities mini-bubble already has burst.
The Obama administration's own attempt to "fix" the housing market — the Home Affordable Modification Program (HAMP) — was, in Shilling's words, "a miserable failure."
What's ahead
But slow growth will get politicians of both parties antsy to "do something" in an election year. "If the economy is still weak going into next year, we could have fiscal stimulus," he told me. Politicians do not "want to face voters with a weak economy," he said.
As for investing, Shilling has returned to an old favorite: the 30-year Treasury bond, which is currently yielding around 4.21%. "I think they're going to 3%," he said. "I think [the 10-year is] going to 2%." The 10-year Treasury note was yielding near 3% Wednesday. Take that, Bill Gross!
Naturally, Shilling's not looking for much from equities, and he recommends only blue-chip dividend-paying stocks.
Shilling's not infallible, of course. He has been predicting deflation since the late 1980s and in earnest since 1998. We've had two potentially deflationary episodes, in 2002 and after the financial crisis, but the Fed was able to dispatch them.
He also was very bearish on stocks, expecting new lows in early 2009 and pretty much missed the recent bull market. So, he's not the guy who's going to call bottoms or identify bullish inflection points.
And I think we'll probably get by with slower growth but without a new recession, based on strong overseas business and spending by affluent consumers here. Recent strong reports from companies like FedEx and CarMax show the economy may not be nearly as bad as Shilling thinks it is.
But I hesitate to second guess him on housing, where his track record has been stellar. That's why his predictions should be sobering indeed for homeowners, investors and policymakers alike.
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狗仔卡
发表于 2011-6-24 09:09 AM
发表于 2011-6-24 09:09 AM
发表于 2011-6-24 09:12 AM
