The housing bears get their due

After years of warning that the boom in housing prices and sales was unsustainable, now many housing bears are getting their due. According to a research note released by Merrill Lynch (which I can't find anywhere on the Internet, so I'd certainly appreciate a direct link), economist David Rosenberg is predicting price declines of 15% in 2008 and another 10% in 2009 (although these are national average and will vary by area).

So what does NAR Senior Economist Lawrence Yun have to say? From a CNNMoney.com story:

By contrast, the National Association of Realtors (NAR) expects housing prices to remain flat in 2008. NAR did cut its home price estimate for the current quarter, however, to a 5.3 percent year-over-year decline, which represents the steepest drop in that price measure on record. But NAR sees an uptick in home prices in the last two quarters of 2008.

"Merrill Lynch's figures are way too pessimistic, and they are unprecedented," Lawrence Yun, the National Association of Realtors chief economist told CNNMoney.com. "There is so much variation in local housing markets, and we see stable price conditions for 2008."

Of course these are the same people who always claim that "now is a great time to buy!"

But for those who think that the worst is over, Merrill Lynch said that housing prices still remain comparatively high. The brokerage believes that home prices are still far above historical norms when compared to other measures such as rent or GDP. "By our calculations, it will take about a 20 to 30 percent decline in home prices to correct this imbalance," said the report.

Merrill Lynch believes that housing starts will most likely slide another 30 percent by the end of 2008 - a historic low.

The report says that the inventory situation only continues to worsen, as homebuilders are now looking at more than a nine months' supply. "The current supply/demand environment does not favor a swift recovery in the housing market, in our view," according to the report.