Housing Bottom? Depends Whom You Ask
Need some advice about where housing is going? Ask the experts -- but don't be surprised if you get very different perspectives. Two senior economists argued over the home-building outlook, on "Power Lunch."
Richard Iley, senior North American economist at BNP Paribas, sees "no evidence whatsoever" that the fundamental supply/demand imbalance is being worked off by the market. He warned of a "major problem" with overbuilding, calling for an annual equilibrium number for housing starts at about 1.5 million -- but says actual annualized completions are running at 1.7 million.
Stephen Stanley couldn't disagree more: he slammed Iley's 'absolutely wrong interpretation," and pointed out that inventories of unsold homes have come down, housing completions have declined -- and housing starts have come off 30% over the last year. He opined that it "will take time" for builders to regain control over their inventories, but maintains that 'all the right things are happening."
Iley counter-attacked, declaring that Stanley is "in danger of a naive assessment": assuming that a steep market drop automatically implies a bottom. Iley believes that the market equilibrium needs housing starts to slide to 1.1 million -- and stay there for three years.