Wait till 2012/13 to buy your house - PrudentBear

NVDL: A blip in the housing numbers is no reason for optimism. The bottom is a long way off yet.

Martin Hutchinson: The Case-Shiller Index of US house prices announced this week, down 17% in the top 10 markets, was greeted with rapture by the stock market, because its rate of decline had slowed somewhat compared to the previous month.

Reams of analysis were written about how house prices were nearing the bottom, which was taken to be the level at which the ratio of house prices to individual earnings was the 3.2 times average over the last 30 years, rather than the 4.5 times shown at the peak. However, analysts were as usual over-optimistic – haven’t they ever heard of overshooting?

clipped from www.prudentbear.com bear's lair | Martin Hutchinson Wall Street analysts and the media generally have a poor sense of how the business cycle works. There’s no cycle there, it’s just a blip. A moment’s thought should convince us that this trajectory is unlikely. Mortgage conditions are not those in which the long term average was attained. Not only have subprime mortgages as a category disappeared, but so has much of the mortgage securitization market as a whole.