A tipping point? Housing bears, everywhere

A tipping point? You can't swing a 44-pound foreclosed cat without hitting a profile of an I-told-you-so housing bear in the news today:

Fortune.com posts a long profile of bearish analyst Meredith Whitney (pictured), who in 2005 predicted "unprecedented credit losses" for subprime lenders and now predicts an ugly, 1980s-style recession. CNBC piles on with an interview in which Whitney says housing prices will fall "much more than people expect." Random background: She's 38, a former Fox News commentator, a graduate of Bikini Boot Camp and is married to WWE pro wrestler John Layfield, a.k.a. "the J.R. Ewing of pro wrestling."

The New York Times profiles bank analyst Richard X. Bove: Since 2005, Bove "has gained a certain reputation as one of the few bank analysts to predict the blow-up in the housing market and subsequent problems at many banks." Random background: He's 67, works from his home in Lutz, Fla., and believes some bank stocks are now "too cheap."

Barron's gives the floor to bearish economist Noriel Roubini, who observes, "We are in the second inning of a severe, protracted recession, which started in the first quarter of this year and is going to last at least 18 months, through the middle of next year. A systemic banking crisis will go on for awhile, with hundreds of banks going belly up." Random background: A Turkish native who grew up in Italy, Roubini blogs at REG Monitor.  In September 2006 he told New York Magazine, "...there was a speculative bubble. And now that bubble is bursting."

-- Peter Viles
--Hat tip: Calculated Risk
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo credit: Bloomberg News

Comments

[E]

She caught on a year ago...ahhhh.

How special.

Now quit patting yourself on the back hun.

The bloggers were on to it way before you were.

[MyLessThanPrimeBeef]

Sadly, we live in a sexist world and the prestigious Bikiini Boot Camp admits no male students.

BTW, they can trace back the price history of any cave in Cappadocia, Turkey for thousands of years, probably even before the arrival of Roman Christians fleeing persecution. So I would say, growing up there provides an excellent training opportunity for aspiring housing bubble commentatoors.

[mbob]

Hey Pete

How much is Zell asking for the building where you all work?

[Brian]

So she's hot AND she's been right on housing. That puts her two up on the idiots at the NAR. Is that so wrong?

[Cal]

Peter Hong talked to a couple of housing bulls, the Smiths in his "Is the time to buy" article. They argue in a research paper that there is no housing bubble and in fact homes were undervalued in many areas.

If you go looking for bearish POV, you can find it just as if you go looking for a bullish POV. I find that looking at the data instead is a much more relevant and really cuts through all the haze.

For analysts, the people who get it right get all the press, but you'll notice those people keep changing. That is because most are wed to their ideas (naturally bearish or bullish) and those ideas just happen to coincide with what is going on in the market. The people who are always bearish or bullish get even more press during inflection points since they were "right first". It ignores all the times they were wrong saying the same type of things. There are few analysts with the flexibility of mind to be truely data driven.

Sadly, if you are right to the bearish side as an analyst many times it is to your own deteriment (just ask Ivey Zelman). Bullish analysts have a much longer lifespan.

[OverIt]

"Sadly, if you are right to the bearish side as an analyst many times it is to your own deteriment (just ask Ivey Zelman). Bullish analysts have a much longer lifespan."

Damn straight. You don't EVER want to be the guy who says "hey, whaddabout???". Nobody at any level of corporate America wants to hear negativity especially when it comes to their money.

She may be "late" to the bear party as far as we're concerned but it's one thing to post to a blog. It's another thing to risk your high salary position (not to mention your neck) to state what you believe when powerful people don't want to hear it.

[Mike P.]

So really it's CNBC, Fortune, the NYT, and Barron's (in these examples) who are latching onto a theme they sense will pull in readers. The bears listed above have been bearish for a while now, it's these media outlets who are 'cashing in' on the phenom. This is known as feeding the fear, part of the Fear Stage of a bubble psychology. We can expect the bears to get more traction in the press (just as they were ignored or made fun of during the bubble). It is NOT capitulation by market participants, and therefore, still early in the downward curve.

[pat ruvolo]

Unless you know one helluva lot about derivatives, you oughta listen to the aforementioned bears. You might want to add in Peter Schiff to the group. The mark to market has barely begun.

[tew]

This sort of one sided media coverage usually signals market turning points.

This time may be a little different. We know that "bargain hunters" are likely to provide rising y/y sales comparables and probably some positive y/y and m/m price comparisons sometime during the next six months. However this bubble, as large is it was and forming the final blow off top of a huge secular move (credit, rates, employment, etc.) will probably require another leg down.

The real contrary "media bottom" will come not after a head fake but after a second bottom is hit. With prices down another 15-25% real from here the media will put on talking heads listing all the reasons why real estate is a bad investment - baby boomers retiring, deficits, and a couple other reasons relating to whatever is going on at the time. THAT will be the time to buy!

[Mucker]

So I have a question with the new participatory blog. Where are all the posts from yesterday? I need some info from there and want to pass it on to a family member. Are they archived?

[Joe Shmoe]

Real estate did not implode all over the country at the same time. San Diego was the canary in the coal mine on the way down, Charlotte and Seattle seem to be the caboose on this particular train.

By the same token, we should expect some areas to recover sooner than others. Boston was in the throes of a housing downturn just two years ago, but it seems to be recovering more quickly than other areas. Chicago (except for the south loop area) seems to be stabilizing, and meanwhile there are areas that never really rocketed up (e.g., Syracuse and Rochester). Still other areas declined in spite of never having participated in the run up, largely because of local economic conditions (Cleveland, Detroit).

However, the mentality here seems to be that a "bottom" or a recovery will commence all at once. Clearly, those areas that are overpriced based on the fundamentals will continue to hurt, but other areas will hurt less, or will hurt in spite of never having had bubble conditions (i.e., flippers and multitudes of condo conversions).

[ken burns]

leave this gorgeous lady alone! she needs us more than she needs us!

[Scooter]

"We are in the second inning of a severe, protracted recession, which started in the first quarter of this year and is going to last at least 18 months, through the middle of next year "

So, eeither ROubini can;t do math or does not understand baseball.

Let's do the math...

We are in the second inning of a secession: 2/9 of the way through.
Recession will last 18 months: 2 months per inning.
Recession started 1st quarter 2008.
It is August.
we are in the bottom of the 4th inning. Not the second.

[stan derrin]

There will be no recovery until credit/loans start loosening up.Right now it is getting harder NOT easier to get loans.
When prices are 300k and tightened credit rules and 20% downpayments are required,homes are beyond the reach of a huge portion of your potential buyers.
For housing market to start moving again 1 of 2 things MUST happen:credit becomes looser or housing prices drop to low levels.Right now from the looks of the economy and currency there is no way interest rates are going down.
Me bets housing prices continue their fall.

[puckhead]

Meredith Whitney is married to a WWE wrestler????!!!! I learned something new today. Whitney has been on a roll, she was way ahead and spot on with her Citigroup call. Bove has been around forever and he still makes headlines with his calls. I agree with Bove that some banking stocks are undervalued. All of them are being taken out behind the shed and shot. But some banks will emerge from this credit crisis with added market share and will be bigger and stronger.

E, when people like Bove and Whitney make wrong calls their firms and clients loose millions/billions of dollars. It's a pretty stressful job. When a bunch of yahoos (like me) make the wrong call on a blog, we just keep mouthing off like nothing happened because in reality, nothing did happen.

[Yen]

I'd like to ask Cal to join my dissertation committee...

[LA]

Scooter - in this game, innings are not a measure of time. They are a measure of significant events. This downturn is unfolding in waves.

Barring any major new commercial bankruptcies and bank failures, the next inning begins after Labor Day, when residential real estate enters its seasonal lull. A later inning may begin when the Alt-A resets reach critical mass, possibly next spring.

[Cal]

Yen:"I'd like to ask Cal to join my dissertation committee... "

Sorry, are my posts getting to voluminous again? :-)

[Scooter]

LA - Please point me to the list of significant events (presumably previously defined by Roubini), whether it's nine of them or 18 for each half inning, so that I can keep score at home.