32% of Homeowners Expect Home Prices to Drop Next Year

10-16-2010 • GlobalEconomicAnalysis.blogspot.com

Some will look at the survey results and see a contrarian indicator. I rather doubt it. I do not think we bottom until homeowners sour on long-term optimism. Given current conditions, housing inventory, shadow inventory, another jobless "recovery", and changing social attitudes from younger generations, home prices will likely stay depressed for a while. So instead of the survey being a contrarian indicator, I view these attitudes as part of the recognition phase. Consumers are starting to realize the economic headwinds and what that will do to housing prices in the short-term, even if they have not yet figured out the long-term demographic mess. Time and Price is the Only Legitimate Cure The most encouraging sign in the report is that "a majority of Americans continue to oppose any government intervention in the housing market." The only legitimate cure for what ails housing is price and time. Prices need to fall to the point there is genuine demand. When that happens, the bottom will be in, although appreciation off that bottom will be quite slow.