In a Housing Showdown on Bloomberg TV, Economist Gary Shilling & Mark Kiesel Go Head-to-Head.
Housing bear Gary Shilling and housing bull Mark Kiesel of PIMCO debated the state of the U.S. housing market on Bloomberg Television’s “Street Smart” with Trish Regan and Adam Johnson.
Shilling said that housing prices will decline 20% this year because “there are 2 million inventories, both visible and shadow inventories, over and above normal working levels”, which is “a tremendous overhang.” He went on to say that “excess inventories are the mortal enemy of prices.”
Kiesel justified his bullish stance on the market, saying that, “all inventories you look at, whether new existing or shadow, they are coming down” and “there is only 144,000 new home sales for sale. That’s at a 49-year low.”
Transcript
Kiesel on purchasing a home in California and whether he’s having buyer’s remorse:“No. I will say it is a little chaotic because there are a lot of boxes around. I think after renting for six years, my view is that housing prices have fallen about 35% and the inventories are coming down and banks are starting to lend again gradually. U.S. housing looks very cheap relative to international housing. I feel good about putting some money into housing right now.”
Shilling on why housing prices will decline 20% this year:“Because of excess inventories. We estimate that there are 2 million inventories, both visible and shadow inventories over and above normal working levels. That is a lot. Back in normal times, we built about a million and a half houses a year, so two and a half million is a tremendous overhang. Excess inventories are the mortal enemy of prices. What may happen here is that now that the robo signing flap is settled and the big banks settled for $25 billion with the various state attorneys general and the federal government, they have been holding off on foreclosures because they had enough bad PR. Now they have settled that, I think they will go back to foreclosures. The National Association of Realtors says that when foreclosed houses are sold, they sell at a discount of 19% to existing houses and that drags everything down when you get a big dumping of these houses on the market. I'm looking for another 20% decline and that is what it would take to bring them back to the long-term averages. They go back to 1890 in terms of med